An Industry Primer on Carbon Capture for Investment Professionals

1. Executive Summary

1.1 The investment thesis for carbon capture

Carbon Capture, Utilization and Storage (CCUS) is a critical and fast growing component of the international climate strategy. For those industry sectors with inherently unavoidable process emissions - cement, steel, chemicals - and to abate emissions from existing asset power generation infrastructure, carbon capture is one of the limited viable paths to decarbonization. This necessity informs the main investment thesis: a large, non-discretionary, addressable market driven by national and corporate net-zero goals. The sector is currently at a critical inflection point, from a niche, economically challenged sector into an emerging growth sector, supported by significant policy incentives, technological maturation, and accelerating private sector demand for tangible decarbonization solutions. For investors, CCUS provides long-duration exposure to existing energy transition solutions through investments in critical infrastructure, proprietary technology, and the emerging carbon management services market.

1.2 The carbon capture industry in one paragraph

The carbon capture industry consists of a multi-faceted value chain designed to capture carbon dioxide (CO₂) emissions at point source or remove CO₂ emissions directly from the atmosphere, thereby ensuring CO₂ does not enter and contribute to climate change. The carbon capture process has three main categories: Capture where CO₂ is separated from other gasses, Transport where CO₂ is compressed and transported by pipeline, ship or truck; and Storage or Utilization, where CO₂ is either permanently sequestered into deep underground geological formations, or used as a feedstock to produce commodities like synthetic fuels, chemicals, or building materials. The carbon capture market serves three different types of carbon emitters - hard to abate sectors, and as a means to generate high-quality carbon removal credits to offset their residual emissions.

1.3 Key metrics snapshot

While the CCUS market is set for major growth, the current market size estimates vary based on the scope and methodological framework. Market estimates for 2024 span from approximately $3.4 billion to $8.6 billion. It is expected that growth will be dynamic - various analyst outlooks include projections for 2030 that estimate the CCUS market will be between $9.6 billion to $51.5 billion, or growing at a compounding annual growth rate (CAGR) of 16% to over 24%. Further afield and at large, total global capture capacity is also expected to ramp significantly. Current estimates of capacity stand at approximately 75 million tonnes per annum (Mtpa) and is projected to exponentially grow to well over 2,000 Mtpa by 2050 in response to global decarbonization efforts.

1.4 Three things you need to know about the carbon capture industry

1. Policy is the leading economic driver: The commercial viability of most current CCUS projects relies heavily on government incentives. Policies such as the Section 45Q tax credit in the United States that grants 180/ton from Direct Air Capture, are critical as a way to de-risk a project and to entice private capital . Any investment thesis will need to assess these policies from a standpoint of stability and evolution.

2. The Value Chain is complicated and interrelated: Carbon capture is not a single technology but rather a multi-stage process (capture, transport, and storage). Capture is typically the most technologically advanced and capital intensive value chain . Bottlenecks in even one segment, such as a lack of pipeline infrastructure or available storage sites, can impede the maturity of the entire sector.
3. Two fundamentally different approaches exist: The industry is bifurcated into point source capture, which captures concentrated CO₂ from industrial facilities or power plants, or Direct Air Capture (DAC), which captures diffuse CO₂ from ambient air. Point source capture is more mature and cheaper, whereas DAC is still early-stage, has significant energy intensity, and needs credit pricing of ca. $600/tonne to have commercial viability .

1.5 How to use this primer

This primer is intended to provide investment professionals with a robust understanding of the carbon capture industry from a foundational standpoint. It is presented in a manner to incrementally build knowledge, starting with the fundamental aspects of the industry and extending to the economic, competitive, and external factors within it. Subsequent sections will provide a pragmatic framework for investment analysis including valuation approaches, due diligence priorities, and key return drivers and risks. Whether you are a generalist investor looking to understand a new asset class or a specialist who will review specific opportunities this document will serve as a reference for understanding and navigating through the complexities and potential of this important emerging industry.