Carbon capture and storage (CCS) technology has garnered increasing attention as a critical technology in reducing carbon emissions globally. According to the International Energy Agency's (IEA) 2024 report, 45 CCS facilities are already operational. It is expected that capture capacity will increase by 35 percent by 2030, with storage capacity going up by 70 percent.

Despite these advances, debates persist regarding CCS's effectiveness and financial viability. While some see it as a key part of future decarbonization efforts, others have questioned its scalability and economic feasibility. For data center operators, some of these key questions will need to be answered before CCS can become a central part of their net-zero strategies.

Investing to succeed

Over the past five years, major economic powers have begun to invest heavily in the CCS, especially in its deployment in hard-to-abate sectors.

In March 2023, the UK government committed £20 billion ($26.7bn) to scale up CCS projects, while the US Department of Energy allocated $131 million to support 33 research and development projects.

These investments highlight the expected value of CCS, says Eadbhard Pernot, secretary general of Zero Emissions Platform. The organization advises the European Union on carbon management, and Pernot said the fact that “carbon capture can be integrated with existing industrial processes makes it a more feasible and immediate solution in many cases."

One of the most promising applications of CCS is in hard-to-abate industries such as cement, iron, steel, and chemicals, which produce high direct emissions and are challenging to decarbonize using conventional methods. In the cement industry, for example, CCS is viewed as the most effective technology for emissions reduction, given the lack of alternatives for deep emissions cuts.

Similarly, CCS remains the most advanced and cost-effective low-carbon option in iron and steel production. "CCS will play a pivotal role in decarbonization, particularly of hard-to-abate industries,” says Dan Paterson, head of transactions at energy consultancy Xodus. “You see a lot of movement, particularly in Europe and the Far East, where CCS can support decarbonizing industrial centers."

But the potential for CCS extends beyond just decarbonizing existing industries. Paterson believes there is “a big opportunity, not only for projects in terms of developers and governments but actually for the supply chain as well, being able to balance declining oil and gas production in basins like the UK North Sea with new services in CCS or hydrogen."

As a result, CCS could play a key role in transforming the energy landscape by providing a pathway for traditional energy companies to transition into low-carbon technologies. In the data center industry, where companies are under pressure to reduce emissions as demand for energy-intensive services like generative AI spikes, CCS is gaining traction.

The likes of Google, Microsoft, and Meta are making sizeable investments in carbon removal technologies. Microsoft, which has been the biggest support of CCS among the hyperscalers, has partnered with Climeworks to remove 10,000 tons of carbon over the next decade and is working with direct air capture (DAC) firm Heirloom, as well as on a host of other projects around the world.

Meanwhile, Alphabet, Google's parent company, has supported its carbon capture startup, 280 Earth, securing a $40 million deal to fund CO2 removal. Pernot notes: "DAC offers a unique advantage because it can, in theory, be deployed anywhere, allowing for CO2 removal in locations best suited for storage or utilization." It is building a plant next to Google's Oregon data center, and will likely use its waste heat. In April, DCD exclusively reported that Meta was also looking to use data center waste heat as part of the DAC process.

CCS and hydrogen

The hydrogen economy, which aims to produce hydrogen using renewable energy (green hydrogen) and natural gas (blue hydrogen) is closely linked to CCS. To maintain blue hydrogen’s low carbon status will require the deployment of CCS to capture and store CO2 emissions generated during production.

"Emitters are finding CCS the only solution to abate those hard-to-abate sectors. This realization is driving the objectives of certain governments with ambitious stated targets," says Paterson, highlighting the critical role CCS plays in meeting low-carbon standards for blue hydrogen. In the UK, CCS is expected to be vital in advancing blue hydrogen projects.

By capturing emissions from natural gas or coal, CCS can facilitate the introduction of low-carbon hydrogen into new markets which could provide a transitional pathway, supporting the hydrogen sector while green hydrogen projects scale up and become more cost-effective.

Challenges and criticisms

Despite growing momentum and investment, CCS faces several hurdles. Historically, the technology has been closely associated with large-scale oil and gas companies operating and investing in existing CO2 storage projects and pipelines.

These companies, including Chevron, BP, and Shell, have ambitious plans to develop more than 200 new capture facilities by 2030, aiming to capture more than 220 million tons of CO2 annually. However, according to the IEA, these developments will still fall short of the 1.2 billion tonnes of CO2 per year these companies would need to capture to reach net zero by 2050. Carbon capture companies themselves are not all thriving.

Earlier this year, Running Tide, a company that promised to capture and hold carbon deep below the ocean, shut down blaming a lack of demand. The firm had counted Microsoft among its early customers.

Paterson believes the biggest challenge for CCS is “uncertainty on the business model.” He says: “A large number of first-of-a-kind projects need government intervention to provide support, and there is uncertainty in how a merchant market will be realized without higher CO2 ETS prices.

“CCS, as a business or an industry, has not done a great PR job historically when it is a key enabler to decarbonize. There have been several false starts in the last decade, but there is now momentum, and the next 24 months will be pivotal, particularly in Europe, to deliver and create confidence in the sector."

Critics also point to some pilot projects' high costs and underwhelming performance. Zero Emissions Platform’s Pernot says: "The upfront costs are high, and without significant subsidies, regulations, carbon pricing, or ideally a combination thereof, it's challenging to make the economics work." The complexity of CCS projects, which require coordination across different sectors like energy, chemicals, and heavy industries, can also lead to delays and increased costs, especially for first-of-a-kind initiatives.

The way forward

Countries like Norway are leading the way in the CCS market with projects such as Northern Lights, the first commercially licensed CO2 storage facility on the Norwegian shelf, which is expected to become operational in the next two years. This project, alongside various bilateral agreements with European countries, positions Norway as a significant importer of CO2 in Europe.

Paterson says Norway is “pushing ahead” in the CCS market, and notes: “The Northern Lights project is targeting commercial operation this year and has also signed several bilateral agreements with European countries to be the biggest importer of CO2 in Europe. The UK, whilst it has cost-competitive stores, is lagging behind in bilateral agreements to enable cross-border transport."

The potential of CCS extends beyond national borders and into global markets. "You're seeing emitters really find CCS as the only solution to abate those hard-to-abate sectors,” Paterson says. “This realization is driving the objectives of certain governments who have ambitious stated targets. The UK is targeting 20 million tons per annum (MTPA) by 2030, the EU is targeting 50 MTPA. Yet, we don't have any operational projects, and we are almost halfway through the decade."

Public perception is likely to shift positively as more projects are successfully implemented, Pernot argues. "I think that as we build more projects and people see that they work and they're safe, the public perception will shift in a positive direction,” he says.

Does CCS make business sense for data centers?

While the hyperscalers have provided the funding for many projects around the world, interest in CCS and carbon sequestration isn't solely in the minds of the biggest players in the market. "CCS is definitely something we are looking at, but it needs to make business sense and be available in a timely manner to support our decarbonization objectives,” says Aaron Binkley, vice president of ESG at Digital Realty.

This demonstrates that data center operators are exploring all the opportunities available to support their operations' decarbonization. These initiatives reflect growing confidence in carbon capture and removal technologies, complementing the data center sector's broader efforts to mitigate emissions. Their increasing adoption suggests that industry leaders believe in their potential to support their net-zero goals.

This sentiment aligns with the broader industrial application of CCS, as Xodus’s Paterson points out: "There have been a number of false starts in the last decade, but there is now momentum." CCS holds significant promise for reducing emissions, particularly in sectors with less viable solutions. Its role in the hydrogen economy and potential applications in hard-to-abate industries underscore its importance in the push toward global decarbonization.

However, for CCS to fulfill its potential, it must overcome substantial economic, logistical, and perception challenges. As investment and development continue, the technology's future will hinge on proving its effectiveness and scalability in real-world applications, building public trust, and creating viable business models.

As Pernot puts it, these projects are “inherently complex, involving coordination between different sectors like energy, chemicals, and heavy industries, which can lead to delays and increased costs, especially for first-of-a-kind projects." The next few years will be critical in determining whether CCS can meet its promise and play a vital role in achieving long-term climate goals.