What do we use our captured CO2 for?
What do we use our captured CO2 for?
A deep dive into the status quo of carbon valorization & utilization.
I spent this past weekend diving into International Energy Agency (IEA) reports on Carbon Capture, Utilisation, and Storage. Originally, I wanted to understand what we do with our captured carbon to understand the status quo of carbon valorization. However, the deeper I went into these reports, the deeper the rabbit hole went.
Quick Recap on Carbon Capture
Imagine if we could pluck CO2 molecules right out of thin air, like extracting gems from a stream. That's the promise of carbon capture. It's like having a supercharged environmental filter that snatches CO2 right out of the atmosphere. Think of it as a method to reverse some of the damage we've inflicted upon our climate.
While carbon capture takes many forms, the form that I care the most about is Direct Air Capture (DAC) where you intake a stream of atmospheric air and extract the CO2 directly. This is because DAC is the only method of carbon capture which actively reduces the amount of CO2 in the atmosphere.
Alternative carbon capture methods like point capture are used to capture the emissions at the point of emissions. For example, you would have a point capture plant capturing the carbon emitted from a steel plant so that no additional carbon is emitted.
With this captured carbon, it’s either stored permanently to draw down atmospheric CO2, or it’s applied industrially.
Point capture allows industrial plants to be net-neutral, while DAC allows us to be net-negative.
What happens to the captured CO2?
That’s the question that has been on my mind for a couple of days now. Reading through these IEA reports and analyzing their datasets, I think I have a compelling answer.
Around 45 Million tons of CO2 are captured to be stored in the ground, often as basalt rock. Think of this as returning the carbon back to its proper home. My opinion is that we should do this, but this isn’t how we scale up carbon capture.
I believe the way that we will scale carbon capture is through carbon valorization, where you take the captured CO2 and turn it into feedback for different products or into a new product entirely.
Below are old numbers but they still paint a picture of where our captured carbon is used.
Most of the CO2 is used for Urea, which is a direct input for fertilizer.1 Carbon capture plants would directly use CO2 as a feedstock for Urea production.
The second largest user of captured CO2 is Enhanced Oil Recovery (EOR), where oil companies inject the CO2 into deep oil reservoirs to push the oil closer to the surface for easy extraction. We are literally capturing carbon to just emit more carbon.
The other minor uses for CO2 are to carbonate water, and to create dry ice. Nobody really cares about these applications.
Interestingly, the other category has the most novel uses for captured CO2 that I’ve seen yet. There are companies creating synthetic fuel, concrete, plastics, etc. using CO2 as a feedstock and it’s incredible!
The scientific progress in this sector is so exciting, that I was wondering why we don’t use carbon-neutral synthetic fuels, concrete and plastic to reduce our environmental impact. This excitement led me to my next question.
Why don’t we scale these applications of CO2?
The issues are primarily with the unit economics of each product and the potential value creation there is for CO2.
Storing CO2 as Basalt Rock doesn’t make economic sense as you spend 180/ton of CO2 just to bury it in the ground. To hit the IEA’s target of 10 billion tons of CO2 captured yearly, you would spend $1.4 trillion yearly just on carbon capture. As there’s no inherent economic incentive, I don’t think this is how we’re going to hit our targets.
Looking at Urea, there isn’t a major profit yield for the work that you’re putting in. You need 0.75 tons of CO2, among other inputs to potentially profit $50 per ton of Urea.
At $180/ton of CO2, it just isn’t worth it to scale it up to millions of metric tons of urea production using captured CO2.
Enhanced Oil Recovery is out of the question as it’s obviously terrible for the environment, and it incentivizes further fossil fuel consumption. You also don’t even get paid much for EOR, it’s a lose-lose.
Food & Beverages don’t make sense as the global need for carbonated water and dry ice isn’t that high. So if we want to capture 10 billion tons of CO2 yearly (IEA’s goal), selling dry ice wouldn’t be the path to that massive scale.
Other uses of CO2 are currently far more expensive than the market rate. For example, synthetic fuel made from CO2 is 5x more expensive than fossil fuels.
While there would be an inevitable green premium at the debut of these products, 5x is insane as I’m sure you could imagine. A common point is that once the cost per ton of carbon comes down, then so will the costs of these products.
However, if there aren’t any profits to reinvest because nobody will buy your synthetic fuel, how will your cost of carbon capture go down?
There isn’t an easy answer to any of the questions that I’m asking, but I want to still have these conversations so that we can all figure out how to do this together.
After looking at these data points, I started to wonder what else could we do with CO2.
What else could we use CO2 for?
In the IEA’s report, Putting CO2 to Use, they actually outlined some pretty interesting applications of CO2 that I don’t think are exhaustive but a great place to start.
Fundamentally, you can rearrange the atoms within CO2 to create anything else as carbon is the building block of nature. If you paid attention to Organic Chemistry then you would know that there’s pretty much an endless array of possibilities to rearrange (and name) different hydrocarbons.
Although I would love to dive deep into the more promising applications of CO2, I think that most applications deserve their own article as the ins and outs of them are complex + the economics need to be modelled.
That being said though, I believe that the most promising applications (and the ones that I’ll write articles on) are the following:
CO2 → Carbon Black (Pure Carbon)
CO2 → Algae → Gen 4 Biofuels
My reasoning behind choosing these applications is that I believe all of these have:
The potential to be profitable businesses if the unit economics work out
Room to scale up to hundreds of millions of CO2 captured for feedstock.
The potential to replace large emitters while still maintaining a low green premium.
Additionally, when converting CO2 to cheap products like cement or gas, it becomes really hard to compete with the unit economics of fossil fuels. Humans have flourished under fossil fuels for a reason, it is still one of the best and cheapest sources of energy that we know of.
I think that in order for carbon valorization to work, you need to compete with more costly products such as carbon black or carbon fibre as the unit economics become easier to deal with as now you aren’t competing with an average of $0.70/L for aviation fuel.2
What’s next for carbon valorization?
These problems are hard, but that’s why I enjoy looking at them. There are several carbon capture companies in the works that I think are building really interesting products.
One of them is Twelve who is building several different products using CO2, ranging from jet fuel, to sunglasses, to car parts.
If anything, these people will be paving the way forward for carbon valorization and I encourage you to take a look at what their building. I’ll likely write an article on them as well.
Key Takeaways
There was a lot that I talked about in this article, so to quickly summarize:
Point capture allows industrial plants to be net-neutral, while DAC allows us to be net-negative.
Currently, we store most of the CO2 that we capture, and use the rest to create fertilizer, or extract oil.
For carbon capture to scale, we need to use the captured CO2 and convert it into another useful product to create a sustainable source of revenue. We call this carbon valorization
I believe that in order for carbon valorization to work, we need to look at high-ticket items like Carbon black or Carbon Fibre and work with those unit economics rather than compete with fossil fuels.
twelve is a company that is leading in the carbon valorization space.
Thank you so much for reading all the way through, please don’t hesitate to contact me if you disagree with me or just want to jam on carbon capture.
—AK
I believe since 2015 the current largest user of captured carbon is EOR.
If you think that I’m wrong on this, please respond to this email, or email me at ahnaafk@gmail.com. I want to have more conversations about this.