G20 Endorses Circular Carbon Economy: But Do We Need It?

G20 leaders projected at the historic site of al-Tarif on the outskirts of Riyadh ahead of the G20 virtual summit in Saudi Arabia in November 2020. Photo: Getty Images.
G20 leaders projected at the historic site of al-Tarif on the outskirts of Riyadh ahead of the G20 virtual summit in Saudi Arabia in November 2020. Photo: Getty Images.

The leaders of the G20 have endorsed the concept of the ‘circular carbon economy’ (CCE) as a way to promote economic growth and manage emissions in all sectors.

Championed by Saudi Arabia under its presidency of the G20, the CCE is framed as an extension of the circular economy and adds a new category – remove – to the established principles of reduce, reuse, recycle (the 3Rs) referring to removing carbon dioxide (CO2) both at the combustion stage and directly from the atmosphere.

Removed from reality?

The CCE purports to include a wide range of technologies, but at its heart, the CCE agenda is a renewed push for technologies to remove and store CO2, and to turn that stored CO2 into value-added products. These technologies range from carbon capture and use/storage (CCUS), to negative emissions technologies (NETs) such as bioenergy with carbon capture and storage (BECCs) and direct air capture and carbon storage (DACCS), as well as natural climate solutions such as reforestation and afforestation.

Despite the prominent role that CCUS plays in almost all Paris compatible pathways, its deployment continues to lag behind expectations. This is largely due to its costs: while reported CCUS costs vary considerably, the higher energy needs of CCUS consistently translate into higher operating costs, as well as higher consumer costs. For gas-fired power in the UK, for example, CCUS could increase costs by between 35 to 237 per cent.

CCUS is also water-intensive and there are legal and regulatory challenges around the safe underground storage of CO2 – all of which further complicate deployment. Meanwhile, other NETS, such as BECCS and DACCS, remain largely untested and come with their own land and energy implications.

There also remains no real market for the use of CO2 at scale. One area where CCUS has made business sense is within the oil industry for enhanced oil recovery (EOR) where the reinjection of CO2 into some reserves can help increase oil production. Even here, though, the recent closure of the flagship Petra Nova carbon capture plant in Texas – due to falling oil prices – has shown the economic limits of CCS coupled with EOR.

According to the Global CCS Institute, there are 19 large-scale CCS facilities in operation globally today. Just two of these are in the power sector while the rest are comprised of incremental investments in industrial sectors such as gas processing and hydrogen.

None of these processes are truly circular

To close the loop, the CCE encourages the productive use of CO2 in fuels, chemicals and materials among other markets. This ‘carbon recycling’ is not without risks however. Not only would fuels made with CO2 – such as synthetic jet fuel – be expensive but they would also re-enter the atmosphere as soon as they are burned without CCS.

There is also significant room for carbon leakage. The International Energy Agency’s paper on the ‘reuse’ element of the CCE stresses the challenge of verifying emissions reductions across complex CO2 uses and supply chains.

Perhaps the greatest risk of all is the potential for the CCE narrative to encourage complacency with its techno-optimist vision of a fossil fuel-based future. As one KAPSARC brief puts it: ‘More direct air capture means more direct emissions of fossil fuels are possible while still meeting climate goals’.

This approach risks undermining ambitious climate policy, mitigation targets and carbon pricing mechanisms that seek to incentivize a move away from fossil fuels altogether. How market demand for CO2 and the means to remove it can keep pace with fossil fuel burning remains unclear particularly where forest carbon offsets are concerned. It also neglects the local environmental and public health costs of fossil fuel consumption.

The missing social dimension

Social sustainability must also be a dimension of any technology or innovation to address climate change and environmental security. The CCE is framed as a whole systems approach with the potential to achieve responsible and inclusive economic growth and deliver on all sustainable development goals (SDGs). Yet beyond maintaining and creating jobs along the fossil fuel value chain, how would the CCE contribute to this?

The claim that the CCE can enhance access to energy is underpinned by the now debunked assumptions that fossil fuels are cheaper than other forms of energy and that raising people out of energy poverty will entail increased use of fossil fuels globally. Renewables now compete with, and in many cases out-compete, fossil fuels and adding CCUS would further add to the cost of the final litre of fuel or kWh of electricity.

By contrast, rechannelling the G20’s estimated $584bn a year in government support for fossil fuel production and consumption to clean energy alternatives would directly support sustainable and equitable development while levelling the playing field for truly affordable, clean energy services.

A political agenda

While the CCE is framed in terms of technology, it is driven by politics. Removing state support for fossil fuels and putting a price on emissions is largely agreed as the most cost-effective way to ensure that CO2 is removed from the system permanently.

Every year since 2009, the G20 has reaffirmed its commitment to phasing out ‘inefficient fossil fuels subsidies’. However, this commitment was all but airbrushed out under the Saudi presidency of the G20, and only reintroduced at the last minute, in response to EU pressure amid concerns that the endorsement of the CCE would shift emphasis away from emissions reductions and towards unproven technologies.

It is no coincidence that the CCE was initially promoted by oil-exporting countries: providers of technology for heavy industry – including Japan and the US – joined oil producers Saudi Arabia and the UAE in backing early calls for a CCE. Japan promoted ‘carbon recycling’ in its climate and energy security strategy, and signed an agreement with Australia in 2019 to develop carbon recycling technologies.

The application of NETS at scale could, in theory, enable carbon neutral oil exports. French oil major Total claimed its first ‘carbon-neutral’ LNG export from Australia last month facilitated by forest carbon offsets in China and Zimbabwe.

A way forward?

These critiques are not intended to disparage all of the technologies in question. Globally, the need for the large-scale deployment of CCUS in hard-to-abate sectors is clear. And for a subset of countries like Saudi Arabia and the UAE, that are heavily dependent on oil exports, with large vertically integrated industries, developing the capacities to ‘remove’ CO2 make sense.

They face huge challenges in diversifying their economies, and have a rational interest in making their exports as low carbon as possible, given growing market pressure to reduce lifecycle emissions, and the prospect of carbon border adjustments in major consumer blocs like the EU.

However, the CCE is not a model for all, nor should it be confused with the circular economy, which aims to design out waste, promote regenerative agricultural systems and restore degraded ecosystems.

With the UK and Italy assuming the presidency of the G7 and G20 and co-hosting COP26 in 2021 – and with the return of US climate leadership – there is now a chance to build on the commitment that Saudi Arabia has signalled on radical emissions reductions and environmental stewardship.

These fora can harness long-overdue momentum on CCUS and other technologies that will be critical to decarbonizing the hardest-to-abate sectors. But they must do so as part of a comprehensive transition pathway, reinvigorating the G20’s commitment on subsidies, and focusing on a socially inclusive circular economy agenda that works for all.

Patrick Schröder, Senior Research Fellow, Energy, Environment and Resources Programme; Siân Bradley, Senior Research Fellow, Energy, Environment and Resources Programme and Glada Lahn, Senior Research Fellow, Energy, Environment and Resources Programme.

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