Carbon capture: analysis shows the potential and challenges of CO2 removal in the fight against climate change

In view of the fact that the 1.5-degree target of the Paris Climate Agreement will be exceeded for the first time in 2024, measures to reduce emissions are more important than ever - so-called carbon capture processes, in which carbon dioxide (CO2) is extracted from the atmosphere and stored or utilised in a circular manner, could make an important contribution to this. These technologies are the focus of the newly published analysis ‘Carbon Capture: Decarbonisation through CO2 Removal’ by the FERI Cognitive Finance Institute. The Bad Homburg-based think tank analyses both the technical principles and the potential impact of different carbon capture approaches. The analysis takes a close look at the main players worldwide and analyses the opportunities and risks - including for entrepreneurs and investors.

Although the reduction of greenhouse gases plays a key role in the fight against climate change, a trend reversal in the emission of CO2, the main greenhouse gas responsible for global warming, is not yet in sight, according to the analysis. Targeted measures to remove CO2 from the atmosphere are therefore increasingly coming into focus. In addition to natural methods, such as afforestation and reforestation, technological carbon capture processes are becoming increasingly important in order to remove CO2 from the atmosphere and capture and store it (carbon capture and storage, CCS) or utilise it in a closed-loop process (carbon capture and utilisation, CCU). 

Technology still very research-intensive and no substitute for the precautionary principle

So far, carbon capture technologies have often only been authorised for research and testing purposes. ‘However, according to the Intergovernmental Panel on Climate Change (IPCC), it will be impossible to meet the temperature targets of the 2015 Paris Agreement without large-scale removal of carbon dioxide from the atmosphere,’ says Dr Heinz-Werner Rapp, founder and director of the FERI Cognitive Finance Institute. Consequently, the technology is recognised worldwide as an important component in the fight against climate change and is also being promoted in Germany. Although the Federal Cabinet adopted the key points of a carbon management strategy in 2024, it now depends on the new government when and to what extent concrete laws and political measures will emerge from this.  

Target-oriented technologies for carbon capture are currently still extremely capital- and energy-intensive and ‘the quantities of CO2 captured and stored are more like a drop in the ocean’, according to the analysis. In addition, there is still a lack of efficient infrastructure to reliably transport captured CO2. Safety and environmental issues, such as the storage of the greenhouse gas in underground rock reservoirs, pose further challenges, as do rapidly changing national climate targets. As the example of the USA shows, changes in government could lead to significant changes in the framework conditions in the future and existing subsidy programmes could be abolished or even cancelled.

This is another reason why carbon capture should not be seen as a panacea and does not absolve politics and industry of responsibility: ‘In view of the challenges and risks for almost all technologies in the field of carbon capture, the avoidance of greenhouse emissions should remain the top guiding principle for a sustainable climate protection policy in line with the precautionary principle,’ says Rapp.

According to Rapp, how carbon capture technologies will establish themselves in the future and what role they will ultimately play in combating climate change also depends heavily on the political and regulatory framework conditions: ‘The next few years are crucial for scaling up carbon capture technologies on a large scale and making them significantly more cost-efficient.’ However, if the right course is set, a future carbon capture market will offer extremely attractive growth opportunities.

Increasing investor interest in carbon capture technologies

This is precisely why institutional investors in particular are already showing increased interest in carbon capture projects - both through natural methods and technological processes such as CCU or CCS. The drivers here are both intrinsic motives - such as the desire to make a contribution to climate protection - and the opportunity to realise attractive financial returns from suitable projects.

‘Entrepreneurs and investors should consider the opportunities and risks of carbon capture technology as part of a holistic analysis,’ says Rapp. ‘Parameters such as technical progress, technological maturity and economic viability of individual approaches as well as their fundamental usefulness in the fight against global climate change are of central importance.’ 

The new Cognitive Briefing ‘Carbon Capture: Decarbonisation through CO2 Removal’ provides support in understanding and evaluating this technology as well as its opportunities and challenges. The analysis is available in German for download on this page.