compelling carbon capture considerations

Global Infrastructure Research Compelling Carbon Capture Considerations

Connections Series Infrastructure | Sector Review

Figure 1: TAM for CCUS and Potential Facility Growth from Existing Technologies

Source: Credit Suisse, Global Carbon Capture and Storage (CCS) institute and Exxon Mobil

We view carbon capture utilization and storage/sequestration (in this report, CCS and CCUS

are interchangeable) as a critical part of emission reduction efforts – especially with an

acceleration in the number of countries moving towards net zero 2050 objectives and more

coordinated carbon prices. In this note, we leverage Credit Suisse’s Global Infrastructure

Research Team to provide a global perspective on this topic.

A Large Potential Opportunity. Reasonable scenarios translate into a ~US$2tn market

requiring ~US$500bn of capital across the energy, chemical, selected heavy industries

(cement, steel, pulp, etc.) and utilities sectors. For perspective, about 9% emissions

reductions via CCS would require roughly 2,000 new facilities over the next few decades

from the existing 50 facilities (operating and proposed).

Technologically Feasible Today. Unlike some other emissions reductions efforts, CCS is

technologically feasible today along with generating economically attractive rates of return.

Therefore, clear potential exists for CCS to provide upside to capital programs at relatively

attractive rates of return into the future. More notably, some of this upside looks to be

largely within current planning cycles for many infrastructure companies. In the coming

quarters, greater clarity on the potential for a global carbon pricing could translate into

future project upside for various chemical and energy infrastructure companies.

Selected Stocks: We highlight three groups: (1) Public companies with meaningful

CCS exposure (Page 6): (2) Public companies with greater potential for CCS from

existing asset bases (Page 6); and, (3) Selected private CCS companies (Page 6)

including: Carbon Cure Technologies (Canada); Carbon Engineering (Canada), Climeworks

(Switzerland), and Global Thermostat (USA); Sask Power (Canada); Storegga (UK); Svante

Inc. (Canada).

26 July 2021

Equity Research

Americas | Canada

DISCLOSURE APPENDIX AT THE BACK OF THIS REPORT CONTAINS IMPORTANT DISCLOSURES, ANALYST CERTIFICATIONS,

LEGAL ENTITY DISCLOSURE AND THE STATUS OF NON-US ANALYSTS. US Disclosure: Credit Suisse does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the Firm may have a conflict of interest that could

affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision.

Research Analysts

Andrew M. Kuske

416 352 4561

[email protected]

Spiro Dounis

212 325 3463

[email protected]

Mark Freshney

44 20 7888 0887

[email protected]

Phineas Glover

61 2 8205 4448

[email protected]

Betty Jiang, CFA

212 325 6259

[email protected]

Stefano Bezzato

44 20 7883 8062

[email protected]

Horace Tse

852 2101 7379

[email protected]

Gary Zhou, CFA

852 2101 6648

[email protected]

Joanna Cheah, CFA

6 03 2723 2081

[email protected]

John Walsh

212 538 1664

[email protected]

Alejandro Zamacona, CFA

52 55 5283 8901

[email protected]

Article intended for:

phineas.glover#credit-suisse.com

26 July 2021

Global Infrastructure Research 2

Focus Charts and Tables

Figure 2: Selected Carbon Neutral Initiatives by Countries Figure 3: CO₂ Reductions Needed to Keep Global Temperature

Rise Below 1.5 °C or 2°C

Source: Credit Suisse estimates, the BLOOMBERG PROFESSIONAL™ service Source: Our World in Data, Robbie Andrew (2019), Based on Global Carbon

Project & IPPC SR15. Note: Carbon budgets are based on a > 66°C chance of staying

below 1.5 °C from the IPCC’s SR15 Report.

Figure 4: Historical per Capita Energy Consumption – Global,

OECD, China, and India (1990-2040E) (1)

Figure 5: Selected Countries Carbon Emission per capita

(Tons) Time Series

Source: Credit Suisse estimates, The World Bank, (1) 2025+ projections are under

IEA’s Stated Policies (“Base” Case) Scenario

Source: the BLOOMBERG PROFESSIONAL™ service

0

5

10

15

20

25

30

35

20

00

20

03

20

06

20

09

20

12

20

15

20

18

20

21

20

24

20

27

20

30

20

33

20

36

20

39

20

42

20

45

20

48

20

51

20

54

20

57

20

60

20

63

20

66

20

69

20

72

20

75

20

78

20

81

20

84

20

87

20

90

20

93

20

96

20

99

Bil

lio

n t

CO2 mitigation curves for 1.5C CO2 mitigation curves for 2C

0.00

1.00

2.00

3.00

4.00

5.00

199

0

199

1

199

2

199

3

1994

199

5

199

6

199

7

199

8

199

9

200

0

200

1

200

2

200

3

200

4

200

5

200

6

200

7

200

8

200

9

201

0

201

1

201

2

201

3

201

4

201

5

201

6

201

7

201

8

202

5E

203

0E

203

5E

204

0E

Per

Capita E

nerg

y C

onsum

ption (

Tonnes O

il E

qv P

er

Capita)

OECD China Global India



26 July 2021


Figure 6: CCS Is Key Component of IEA's Emissions Goals Figure 7: TAM Could Be $2Tln by 2040

Source: National Petroleum Council, IEA, Credit Suisse Research Source: Credit Suisse Research, Exxon Mobil Presentation

Figure 8: CO2 Concentration by Source Figure 9: Project Economics Vary by Source

Source: National Petroleum Council, Credit Suisse Research, Wood Mackenzie Source: National Petroleum Council, Credit Suisse Research

Figure 10: Reaching Scale Requires Considerable Support

Source: National Petroleum Council

$- $2 $4 $6 $8

Biofuels

Hydrogen

CCUS

Chemicals

Oil & Gas

Total Addressable Market 2040 ($Tn)

Process

CO2

Concentration

NatGas Processing 95%-100%

Industrial Hydrogen Plants 15%-95%

Steel Blast Furnace 26%

Cement Plants 20%

Refinery FCCs 16%

Coal Power Plants 13%

Industrial Furnaces 8%

NatGas Power Plants 4%

Low

Concentration

High

Concentration

Greater concentration

drives lower unit costs

Requires higher carbon

price to incentivize



26 July 2021


Executive Summary

With an acceleration of countries and regions are pursuing net zero policies, we believe existing

technologies like carbon capture storage/sequestration (interchangeable with carbon capture

utilization and storage/sequestration – CCS/CCUS) will become a more prominent part of the

discussion and investment dialogue. Given the CCS technology is proven and increased clarity

for escalating carbon prices improve the economic returns, carbon capture faces an interesting

window of opportunity for accelerated capital deployment.

This report is divided into four parts: 1) Capturing the Carbon Context; 2) Pondering Pricing;

3) Technical Talk; and, 4) Regional Round-up. Each of these areas is addressed in greater

detail later in the report. To help frame the discussion, we start of by highlighting ~26 countries

that already set long-term goals and another 23 contemplating that path. Figure 18 provides a

visual of this dynamic.

Urgency of Carbon Reduction Efforts

The outright number of countries with commitments is interesting, however, an acceleration of

these initiatives is more pertinent in our view. An increasing pace of focus on carbon reductions

is required to meet a meaningful carbon curtailments to limit global warming efforts. Achieving

these goals with economic and population growth requires global per capita energy consumption

to decline in a meaningful fashion. Figure 22 shows past and potential with forecasts from our

ESG Team work as outlined in Energy Transition Primer – Race Against the Carbon Clock.

With this background, the carbon intensity of energy needs to decline by ~50% by 2040 along

with energy efficiency gains needing to double to achieve these goals. From our perspective,

CCS is very well positioned as part of a practical “bridging effort” towards an accelerated path

towards meaningful emissions reductions. CCS plays a clear role for a variety of applications –

albeit with a number of limiting factors.

A Multi-Trillion Dollar Market

Some context on the opportunity includes: “To put the scale of what is required in perspective,

the Global Carbon Capture and Storage (CCS) institute estimates that over 2,000 CCS facilities

will be needed by 2040 to achieve capture levels required under the IEA’s SDS case. This

implies capturing and permanently storing a total of 5.6 gigatons of CO2 in 2050...”

With these numbers, we note only 19 large-scale CCS facilities are in operation today and 32

other large-scale facilities in various stages of development. Collectively, these facilities could

store nearly ~100 million tonnes of CO2 annually versus the ~40 million tonnes today.

On the IEA’s numbers a projected 9% contribution to emissions reductions is not as large as a

number of other areas. Several calculations are possible for the overall CCS market size, but a

useful estimate comes from ExxonMobil with CCS at a Total Addressable Market of ~US$2Tln

by 2040. We note, a critical aspect of CCS revolves around certain industrial applications that

are likely to face considerable difficulty (and maybe even near-impossibility without significant

technology change) in going completely off carbon. Selected carbon concentration levels by

source appear in Figure 44.

Carbon Prices a Key Piece of the Puzzle

Carbon prices is one approach to incent capital toward, but so are tax credits or deductions with

those mechanisms often favoured in the US. Given the decarbonization backdrop, the role of

carbon prices or other mechanisms are critical for economic returns. Some perspective on

existing carbon prices based on existing policies appears in World Energy Outlook 2020 from

the IEA in Figure 11.

A shifting political bias

Broad-based Bridging Effort – with limitations

Carbon Prices and Tax Incentives



https://plus.csintra.net/ECP_S/app/container.html#loc=/MENU_RESEARCH_DETAIL?htmlfile=sectorUpdate.html&contentType=Thematic%20Research&type=PDF&cspId=1767377009183662080&ldocid=1082929511

26 July 2021


Figure 11: CO2 Prices for electricity, industry and energy production in the NZE

Source: IEA World Energy Outlook 2020

In this context, some of the high concentration industries in the petrochemical ecosystem look

very well positioned to reduce emissions – with the “right” incentive mechanisms. We highlight

some of the context in Figure 12 with the bookend comparison of natural gas processing and

natural gas power plants.

Figure 12: Project Economics Vary by Source

Source: National Petroleum Council, Credit Suisse Research

Carbon Capture – Credit Suisse’s Model

As an extension of this work, our illustrative CCS model provides a dynamic view of many key

variables in a few economic scenarios. Some of the key assumptions included:

A Base Case scenario carbon price of US$50/tonne with US$10/tonne annual escalation

for 10 periods; and,

A High Carbon Price scenario with US$100/tonne pricing with US$10/tonne escalation

annually for 10 periods.

Figure 13: Carbon Capture – Illustrative Simplified Model Summary

Source: Credit Suisse estimates

USD (2019) per tonne of CO2 2025 2030 2040 2050

Advanced economies 75 130 205 250

Selected developing economies 45 90 160 200

Other emerging market and developing economies 3 15 35 55

Capital Cost ($/tonne) 96$ Capital Cost ($/tonne) 416$

CO2 Emissions (mtpa) 0.23 CO2 Emissions (mtpa) 1.28

Capex ($mm) 22$ Capex ($mm) 532$

$mm $/tonne $mm $/tonne

Revenue 11$ 46$ Revenue 169$ 132$

Capture Opex (5)$ 20$ Opex (90)$ 70$

Transport Costs (1)$ 5$ Transport Costs (6)$ 5$

Storage Costs (2)$ 7$ Storage Costs (9)$ 7$

EBITDA 3$ 13$ EBITDA 64$ 50$

Annual Return 12% Annual Return 12%

NatGas Processing NatGas Power Plant

Base Case High Carbon Price Case

High Mediium Low High Mediium Low

Carbon Capture Assumptions

Carbon Price (USD per tonne) 50 50 50 100 100 100

Year Escalator (USD per tonne) 10 10 10 10 10 10

Escalator Starts - Year 2 2 2 2 2 2

Escalator Ends - Year 12 12 12 12 12 12

Concentration - % 90% 60% 10% 90% 60% 5%

Operating Cost Assumptions - per Captured Tonne (USD)

Total - Operating Cost - $/tonne 30 30 30 30 30 30

Asset Life 25 25 25 25 25 25

0 0 0 0 0 0

Tax Shield

Years for Tax Shield 10 10 10 10 10 10

NPV 485.0 71.0 -659.2 893.4 343.4 -685.3

IRR 29% 12% n.a 47% 20% n.a

Anticipating Escalating Carbon Prices



26 July 2021


Clearly, this illustrative model approach is very dynamic and subject to a number of assumptions.

Yet, the key conclusions include:

The model does not account for any potential economic benefit from EOR, carbon sales or

the sales of by-product;

Lower concentration industries remain challenged without other incentives or regulation;

Obviously, higher concentration industries offer even greater returns with escalating carbon

prices; and,

Capex amounts remain a very significant variable in the NPV analysis.

Very interestingly, this analysis highlights that CCS will be economic in most regions during the

current planning cycles for many infrastructure companies (most public capital plans are five

years in duration with private plans often being a decade in length for the larger companies). As

a result, a significant amount of capital allocation to capturing carbon could on the horizon for a

series of emissions intensive industries. In the coming quarters, greater clarity on the potential

for a global carbon pricing could translate into future upside for a number of chemical along with

energy infrastructure companies. Another clear role for CCS is the interplay with hydrogen

production and energy transition.

Stock Implications

With this background, we focus on a selection of stocks in three groupings:

1. Public companies with meaningful CCS exposure, including: Advantage Energy

(AAV.TO); Aemetis Inc. (AMTX); Bloom Energy (BE); Capital Power (CPX.TO); Chart

Industries (GTLS); Emerson Electric (EMR); Equinor (EQNR.OL); Flowserve (FLS);

General Electric (GE); Green Plains Inc. (GPRE); Honeywell International (HON); Ingersoll

Rand (IR); Kinder Morgan (KMI); New Fortress Energy (NFE); NextDecade (NEXT); and,

TC Energy (TRP.TO).

2. Public companies with greater potential for CCS from existing assets, including: Air

Liquide (AIRP.PA); AltaGas Ltd (ALA.TO); Air Products (APD); APA Group (APA.AX);

ATCO Ltd. (ACOx.TO); Beach Energy (BPT.AX); Boral (BLD.AX); Canadian Utilities

(CU.TO); CEMEX (CX); Cenovus Energy (CVE.TO); Cheniere (LNG); China Resources

Power (0836.HK); Datang Power Group (0991.HK); Drax (DRX.L); Enbridge Inc.

(ENB.TO); ExxonMobil (XOM); Huaneng Power Group (0902.HK); Huadian Power

Group (1071.HK); Indian Oil Corporation (IOC.NS); Keyera (KEY.TO); National Grid plc

(NG.L); Nutrien Ltd (NTR.TO); Oil and Natural Gas Corporation (ONGC.NS); Orica

(ORI.AX); Petrobras (PBR); PetroChina (0857.HK); Royal Dutch Shell (RDSa.AS);

Santos (STO.AX); Sempra (SRE); Sinopec (0386.HK); SSE plc (SSE.L); Syngas

(3SQ1.F): Sims (SGM.AX); Total Energies (TTEF.PA); TransAlta Corporation (TA.TO);

Valero Energy Corp (VLO); and, Whitecap Resources Inc. (WCP.TO).

3. Private CCS focused companies, including; Alberta Carbon Trunk Line; Carbon Cure

Technologies; Carbon Engineering; Climeworks; Comision Federal de Electricidad (CFE);

Enhance Energy; Global Thermostat; Japan Oil, Gas and Metals National Corporation; JX

Nippon Oil & Gas Exploration; North West Redwater Partnership; Petronas; PT Pertamina;

Sask Power; Storegga; and, Svante Inc.

Carbon Concentration Creates Challenges

Pondering Project Plans



26 July 2021


Valuation Comparison Table: Key stocks

The stocks discussed in this report span a number of sectors and geographic regions along with

varied degrees of CCS relevance (existing or potential). Yet, we believe there is some degree of

utility in providing a segmented comp table as appears in Figure 14.

Figure 14: Key Stocks With Classification (1 – Meaningful CCS Exposure & 2 – Potential for Greater CCS Exposure Within Assets)

Source: Credit Suisse, © 2021 Refinitiv



26 July 2021


CCS Exposed Companies

Figure 15 to Figure 17 provide summary views of selected CCS exposed companies mentioned

in this report with a 5-star relevance scaling system (1 for least and 5 for greatest). That scaling

system provides a view of the existing positioning and prospective potential.

Figure 15: CCS Exposure: ASEAN, Australia, Brazil and Canada

Source: Company data and Credit Suisse

Company TickerRelevance

ScoreCommentary

Asean

Petronas -

Malaysia’s national oil company is deploying CCS technology at the Kasawari development with the 1st injection

in 2025. This project is part of a greater strategic plan for CCS across depleted gas fields in Malaysia with a

total 46 trillion cubic feet of storage volume identified.

Australia

Santos Ltd. STO.AX

A natural gas company engaged in exploration and production ativities in Australia that is a JV partner with BPT

on the Moomba CCS project. STO is also exploring potential for a CCS hub offshore the Northern Territory of

Australia utilising Bayu Undan infrastructure

Beach Energy Ltd. BPT.AX An oil and natural gas exploration and production company in Australia that is a JV partner with STO on the

Moomba CCS project.

Sims Ltd. SGM.AXA metals and electronics recycler that aims to create a closed loop in metals recycling with outputs that could

include: plastics, hydrogen and electricity.

Boral Ltd. BLD.AXA building and construction materials company that received a A$2.4m grant to use carbon capture to improve

the quality of recycled concrete, masonry and steel slage aggregates.

Orica Limited ORI.AX

Engaged in the manfuacture and distribution of commercial blasting systems with aims to turn captured CO2 from

industrial sources into carbonates that can be used to manufacture a range of building and construction products

at its Kooragang Island site.

APA Group APA.AXEnergy infrastructure company with a pilot plant under construction with Southern Green Gas that aims to

produce methane using solar generatied electricity, water and CO2 from the atmosphere.

Brazil

Petrobras PBRAn integrated national oil company (NOC) that committed to re-inject 40MM ton of CO2 in the next five years

through CCUS projects.

Canada

Advantage Energy AAV.TOAn energy producer with a subisidary, Entropy Inc., having a number of MOUs for a total of ~1m tpa of CCS

using proprietary Modular CCS technology.

Alberta Carbon Trunk Line -Is the main backbone for much of Alberta’s existing CO2 pipeline transmission network with a capacity of up to

14.6m tonnes per annum.

ATCO/Canadian Utilities ACOx.TO/CU.TOThe ATCO Group of companies recently announced a collaboration with Suncor Energy (SU) for a potential clean

hydrogen project near Fort Saskatchewan, Alberta that will use carbon capture technology.

AltaGas Ltd. ALA.TOAn energy infrastructure company with a combination of natural gas processing, logistics and storage expertise

with potential opportunities for CCS related efforts.

Carbon Cure Technologies - A private company that enables concrete producers to re-utilize CO2 into products.

Carbon Engineering - Private company involved in Direct Air Capture Technology

Capital Power Corporation CPX.TO Power generator with a capture project focused on carbon nanotube production.

Enbridge Inc. ENB.TOAn energy infrastructure company with a large footprint in Western Canada and in the major US basins with

opportunities for CCS and transport across much of the portfolio.

Enhance Energy - Alberta-based company specializ ing in CCS focused Enhanced Oil Recovery (EOR).

Husky Energy (now

Cenovus Energy)CVE.TO

An integrated oil producer that received funding to explore commercialized CCS with Inentys with the

VeloxoTherm Capture Process.

Keyera Corp. KEY.TOAn energy infrastructure company with a meaningful NGL storage business in Western Canada with key

positioning in the basin for future storage and pipeline assets.

North West Redwater

Partnership-

Developed a bitumen processing solution that produces ultra-low Sulphur fuels while incorporating CCS at the

Sturgeon Refinery. The captured CO2 acts as an anchor supply for the Alberta Carbon Trunk Line.

Nutrien Ltd. NTR.TOA provider of crop inputs and services that set an objective to launch a comprehensive carbon program in

addition to supplying carbon captured from NTR's North West Ferlizer Facility to the Alberta Carbon Trunk Line.

Quest Carbon Capture and

Storage-

The Quest facility (operated by Shell Canada Energy on behalf of the Athabasca Oil Sands project) has stored

over 5m tonnes of CO2 to date.

Sask Power -A Crown-owned integrated electricity generator with the Boundary Dam facility that captures ~1mtpa of carbon

from the coal-fired generator.

Svante Inc. -Involved with a number of oil and gas producers, including: Husky Energy (now Cenovus Energy) with an effort in

Saskatchewan along with Chevron, Mitsui (Canada) and Total.

TransAlta Corporation TA.TO An Alberta-based power generator that has some potential for carbon capture initiatives.

TC Energy TRP.TOAn energy infrastructure company that is exploring a large scale carbon transportation and sequestration system

with a partner that could ship more than 20mtpa.

Whitecap Resources Inc. WCP.TOAn oil and gas company that acquired the Joffre CCUS project with plans to ramp up carbon sequestration from

21,500 tonnes per annum of CO2 in 2020 to 45,000 tonnes per annum.



26 July 2021


Figure 16: CCS Exposure: China, Europe, India, Japan, Mexico and UK



ScoreCommentary

China

Sinopec 0386.HK

An energy and chemical company with a portfolio of CCUS projects that have captured ~5m tonnes of CO2.

Sinopec's largest project, the Sinopec Qilu Petrochemical CCUS, will begin operation at the end of year with

over 1mtpa capacity.

PetroChina Co Ltd. 0857.HKPrincipally engaged in the production and distribution of oil and gas and owns the PetroChina Jilin CCUS

Industrial project that has already captured more than 1.5m tonnes of CO2.

Huaneng Power Group 0902.HKLaunched China's first coal-fired power plant CCUS in 2010 at the Beijing Gaobeidian Power plant and has since

developed a new facility at the Huaneng Changchun Co-Generation Power Plant.

China Resources Power 0836.HKPrincipally engaged in the investment, development and operation of power plants and put the Guangdong

Province Carbon Capture Pilot Project into operation in 2019.

Huadian Power Group 1071.HK Succesfully commissioned China's first GW level coal-fired power unit with CCUS technology.

Datang Power Group 0991.HKDatang Group and Alstom jointly announced that the two parties formally signed a memorandum to form long-

term strategic partnership and jointly develop carbon capture and storage (CCS) demonstration projects in China.

Europe

Climeworks AG - A Switzerland-based environmental technology company that develops atmospheric carbon capture solutions.

Shell RDSaOne of the key beneficiaries of the Porthos project in the Port of Rotterdam area. Also invovled in the Longship

CCS Project in Brevik

ExxonMobil XOM One of the key beneficiaries of the Porthos project in the Port of Rotterdam area.

Air Liquide AIRP.PA One of the key beneficiaries of the Porthos project in the Port of Rotterdam area.

Air Products APD n.a One of the key beneficiaries of the Porthos project in the Port of Rotterdam area.

Equinor ASA EQNR.OLA Norway-based energy company that is involved in the Northern Lights Storage Project (JV) with Shell and

Total.

Total TTEF.PAA France-based energy company that is involved in the Northern Lights Storage Project (JV) with Shell and

Equinor.

Repsol, S.A. REP.MCAn integrated energy company that is pursuing technological developments to advance the energy transition,

including: CCS, green hydrogen and e-fuels.

India

Indian Oil Corporation Ltd. IOC.NS A refining company that has a CCS project at its Koyali refinery.

Oil and Natural Gas

CorporationONGC.NS

MoU between IOC, ONGC and Oil India to supply CO2 from refinery stacks at Gujarat & Digboi and to their

depleting oil fields.

Japan

Japan Oil, Gas and Metals

National Corporation-

A Japanese government Independent Administrative Institution that plans to strengthen the CCS business and

integrate with natural resource development.

JX Nippon Oil & Gas

Exploration - An oil and natural gas exploration company involved in the mothballed Petra Nova CCUS project.

Mexico

Comision Federal de

Electricidad (CFE)- State owned power company with a portfolio that includes cabon capture at the Poza Rica Power plant.

CEMEX, S.A.B. de C.V. CX

Cemex is at the forefront of CCS implementation for the cement industry. CX believes CCUS can support a 34%

reduction in concrete’s carbon footprint, the second largest contributor to its ambition to reach net-zero concrete

by 2050. CX also expects the Carbon Clean and Synhelion projects to become operational before 2021 YE.

Including the Carbon Clean project, CX has announced 15 different carbon capture projects.

United Kingdom

National Grid NG.LAn electric and natural gas utility that is well positioned with regards to the UK Government's Transport and

Storage regulation model.

Storegga -A Norway-based low-carbon project delivery business that is well positioned with regards to the UK

Government's Transport and Storage regulation model.

Drax Group PLC DRX.L A UK-based energy generator that is focused on biomass enabled carbon capture and storage.

SSE PLC SSE.LAn electric and natural gas utility with generation and other energy services with plans to develop a carbon

capture system at its Peterhead CCS Power Station with Equinor.



26 July 2021


Figure 17: CCS Exposure: United States



ScoreCommentary

United States

Midstream

Cheniere Energy Inc LNG Pure-play US LNG company who just launched several initiatives to monitor and report GHG emissions.

Kinder Morgan Inc. KMI An energy infrastructure company with CO2 operations for EOR use. May potentially expand further into CCUS.

NextDecade Corp NEXTLNG project company with plans to capture/offset 90% or more of the carbon emitted up to the point of

shipment.

New Fortress Energy Inc. NFEAn integrated gas-to-power company that is pursuing a blue hydrogen project that will incorporate carbon

capture through its Zero Parks JV.

NRG Energy Inc. NRG An integrated power company that operated the Petra Nova CCUS plant which suspended operations in 2020.

Sempra Energy SREAn energy infrastructure company that is considering adding technology to capture and store carbon at its

proposed Port Arthur LNG export terminal in Texas and its Cameron LNG plant in Louisiana.

Equipment/Industrials - US Multi Industry

Flowserve Corp FLSA manufacturer and service provider of flow control systems that provide equipment into the hydrogen market

primarily in the process of steam methane reforming. Additionally, FLS has product offerings for CCS.

Chart Industries GTLS

A provider of equipment (ACHX, cold boxes) and process knowledge (SES) for carbon capture, largely built

through the acquisitions of SES (cryogenic carbon capture), Svante (CCUS), Earthly Labs minority investment

(small scale CCUS), and L.A. Turbine (insourcing).

Ingersoll Rand Inc. IRA provider of flow creation products and industrial solutions and has identified the hydrogen refueling/dispensing

market as a key growth opportunity and expects to accelerate new product introduction.

Emerson Electric Co EMRA global technology, software and engineering company with applications for hydrogen accelerating across four

use cases.

General Electric Co GE An industrial company with combustion turbines that will operate on carbon free hydrogen over the next decade.

Honeywell International

Inc.HON

A technology and manufacturing company that sees a long runway for carbon capture and hydrogen service

addressable market. HON participates across the hydrogen value chain.

Energy, Refiners and Renewable Fuels

Aemetis Inc. AMTX

An international renewable fuels and biochemicals company with a CCS project at the Aemetis biofuels facility

that was cited by the Stanford Carbon Capture Centre as one of the most sustainable and profitable potential

CCS projects in California.

Green Plains Inc. GPREPrimarily an ethanol producer but has partnered with Summit Carbon Solutions for a CCS project for a pledged

commitment of 658m gallons of annual capacity.

Valero Energy Corp VLO

VLO and Blackrock Global Energy announced they are partnering with Navigator Energy Services to develop an

industrial scale CCS pipeline with the initiatl phase expected to span more than 1,200 miles of new CO2

gathering and transportation across five states.

Utilities and Alternative Energy

Bloom Energy Corp BE

Manufactures solid oxide fuel cells that produce electricity using natural gas. The technology produces cleaner

CO2 (splitting CH4 & O2 into CO2 & H2O) with minimal NOx and Sox (due to no combustion), which can then be

stored using carbon capture technologies with minimal cleaning. The company is also in the process of launching

hydrogen fuel cells and electrolyzers enabling secular growth in a zero carbon economy.



26 July 2021


Table of Contents

Executive Summary 4

Urgency of Carbon Reduction Efforts .............................................................................. 4

A Multi-Trillion Dollar Market ........................................................................................... 4

Carbon Prices a Key Piece of the Puzzle ......................................................................... 4

Carbon Capture – Credit Suisse’s Model ......................................................................... 5

Stock Implications .......................................................................................................... 6

Valuation Comparison Table: Key stocks 7

CCS Exposed Companies 8

Capturing the Carbon Context 13

Calculating the Carbon Climate ..................................................................................... 13

The Reduction Reality................................................................................................... 19

Pondering Pricing 22

Carbon pricing policy levers ........................................................................................... 23

Assessing carbon price trajectories ................................................................................ 24

Choose your pathway: SSPs ......................................................................................... 25

SSPs + warming constraint = future carbon prices ......................................................... 26

1.5 degrees 26

2 degrees 27

2.5 degrees 27

Carbon Calculations ..................................................................................................... 28

Technical Talk 33

Carbon Capture Methods.............................................................................................. 35

Transporting CO2 ........................................................................................................ 36

CO2 Storage ............................................................................................................... 36

Selected CO2 Applications ........................................................................................... 38

Regional Round-up 40

ASEAN ....................................................................................................................... 42

Australia ...................................................................................................................... 44

Brazil........................................................................................................................... 45

Canada ....................................................................................................................... 46

Lots of Legacy 46

Plenty of Prospects 47

Company Considerations 49

China .......................................................................................................................... 51

Government stance on CCUS 51



26 July 2021


Pilot projects in China 52

Big 3 Oils’ CCUS plan in a nutshell 52

Europe (EU-27) ........................................................................................................... 54

India............................................................................................................................ 55

Mexico ........................................................................................................................ 56

United Kingdom ........................................................................................................... 57

United States .............................................................................................................. 59

Midstream 59

Equipment/Industrials – U.S. Multi-Industry 61

Energy, Refiners and Renewable Fuels 64

Utilities and Alternative Energy 66



26 July 2021


Capturing the Carbon Context

Before getting into some of the technical details in relation to carbon capture, this section of the

report helps frame the issue in relation to broader carbon dynamics under two headings:

Calculating the Carbon Climate; and,

The Reduction Reality.

Each of these areas is addressed in more detail below.

Calculating the Carbon Climate

This part of the report helps briefly frame some of the issues related to carbon reduction efforts.

Naturally, our ESG Team, along with others, addressed some of these issues in greater detail.

As a result, we provide a series of links to a few relevant works that include:

Decarbonisation: Key Themes and Stocks;

Global ESG: Key Themes and Topics for 2021;

Global ESG Research: An Investors Roadmap for the Energy Transition;

Global ESG Research: Energy Transition Primer - Race Against the Carbon Clock;

Beyond the Pandemic: The Green-Shaped Recovery; and,

Thoughts on ESG & Impact: The EU Green Deal.

For the big picture, a growing number of countries and regions are pursuing net zero policies.

With a non-exhaustive view, we highlight approximately 26 countries that already set long-term

goals and another 23 contemplating that path. Figure 18 provides a visual of this dynamic.

Figure 18: Selected Carbon Neutral Initiatives by countries

Source: Credit Suisse estimates, the BLOOMBERG PROFESSIONAL™ service

The outright number of countries with commitments is interesting, however, an acceleration of

these initiatives is more pertinent in our view. Figure 19 shows the progression of commitments

from 2016 to 2020.

An Array of ESG Efforts

A shifting political bias



https://plus.credit-suisse.com/researchplus/ravDoc?docid=_Yb7L4AA-WEpXsB

https://plus.credit-suisse.com/researchplus/ravDoc?docid=_YVIp4AA-WEpXsB

https://plus.credit-suisse.com/researchplus/ravDoc?docid=V7n5vg4AK-Whq9

https://plus.csintra.net/ECP_S/app/container.html#loc=/MENU_RESEARCH_DETAIL?ldocid=1082929511


https://plus.credit-suisse.com/researchplus/ravDoc?docid=V7kTEg4AN-e

26 July 2021


Figure 19: Numbers of Commitments by Countries (2016-2020)

Source: the BLOOMBERG PROFESSIONAL™ service and Credit Suisse

Additional non-exhaustive context appears in Figure 20 with specifics for several countries and

a number of sub-sovereign regions.

Figure 20: Carbon Initiatives by selected Regions

Source: the BLOOMBERG PROFESSIONAL™ service, ODI. org, Institute for government, Library of Congress, Climate Transparency, Reuters, BBC

1 1

11

6

1

2

3

14

20

0

2

4

6

8

10

12

14

16

18

20

2016 2017 2018 2019 2020

# Incremental Countries to agree on CO2 Neutral Tgt # Countries agreed on CO2 Neutral Tgt

Country

Co2 Neutral Target

Year Co2 Neutral Target Status Comments

Australia na Under discussion

Australia set a target for 2030 of making a 26-28% reduction in its

emissions compared with 2005 levels under the Paris Climate

Agreement.

Canada 2050 Government position

Canada proposed Canadian Net-Zero Emissions Accountability Act in

Parliament on November 19, 2020 to formalize the target to achieve

net-zero emissions by the year 2050, and establish a series of interim

emissions reduction targets at 5-year milestones toward that goal;

The Government of Canada has committed $3 billion to establish a

Net-Zero Accelerator Fund and will launch the Net-Zero Challenge to

Canadian companies.

China 2060 Government position

China will aim to have CO2 emissions peak before 2030 and achieve

carbon neutrality before 2060 in the 75th session of the UN General

Assembly (UNGA 75).

France na LegislatedThe French president signed 2050 carbon neutral law regarding

Energy and Climate) on November 8, 2019.

Germany 2050 Legislated

German Chancellor Angela Merkel's cabinet approved draft legislation

for more ambitious CO2 reduction targets, including being carbon

neutral by 2045, after a landmark court ruling last month forced the

government to act. Under the new plans, which come as the

environmentalist Greens top most polls before a September federal

election, Germany will cut its carbon emissions by 65% by 2030 from

1990 levels, up from a previous target of a 55% reduction.

India na No target

Italy 2050 In legislative process

Italy’s draft National Energy and Climate Plan does not include an

implementation road map for a coal phase-out by 2025 and has a less

ambitious GHG emission target than its National Energy Strategy

2017.

2050 (Michigan) Government position

2050 (Montana) Government position

2050 (Washington DC) Government position

2050 (Washington) In legislative process

2045 (California) Legislated

2045 (Hawaii) Legislated

2050 (Louisiana) Legislated

2050 (Massachusetts) Legislated

2050 (Nevada) Legislated

2050 (New York) Legislated

United Kingdom 2050 Legislated

UK parliament passed legislation requiring the government to reduce

the net emissions of greenhouse gases by 100% relative to 1990

levels by 2050 In June 2019.

United States

The United States has set a goal to reach 100 percent carbon

pollution-free electricity by 2035 and a new target to aim at 50-52

Percent Reduction in U.S. Greenhouse Gas Pollution from 2005

Levels in 2030.

Accelerating Carbon Commitments



26 July 2021


The United Nations Intergovernmental Panel on Climate Change’s (IPCC) Special Report on

Global Warming of 1.5°C found global net zero CO2 emissions by 2050 would translate into a

high probability of limiting global warming to below 1.5°C and by around 2070 to limit warming

to below 2.0°C. From Our World in Data, the projected magnitude of CO2 reductions required

to limit temperatures rising appear in Figure 21 below.

Figure 21: CO₂ reductions needed to keep global temperature rise below 1.5 °C or 2°C

Source: Our World in Data, Robbie Andrew (2019), Based on Global Carbon Project & IPPC SR15. Note: Carbon budgets

are based on a > 66°C chance of staying below 1.5 °C from the IPCC’s SR15 Report.

Notably, achieving these objectives with economic and population growth will require global per

capita energy consumption to decline to levels not witnessed before 1970. To help frame some

of the magnitude of this transition, Figure 22 shows past and potential with forecasts from our

ESG Team work as outlined in Energy Transition Primer – Race Against the Carbon Clock.

Figure 22: Historical per Capita Energy Consumption – Global, OECD, China, and India (1990-2040E) (1)

Source: Credit Suisse estimates, The World Bank; (1) 2025+ projections under IEA’s Stated Policies (“Base” Case)

Scenario

Beyond energy consumption, carbon intensity per capita appears in Figure 22 from Bloomberg

and the World Bank. In terms of emissions trends per capita, the red highlights growing per

0

5

10

15

20

25

30

35

20

00

20

03

20

06

20

09

20

12

20

15

20

18

20

21

20

24

20

27

20

30

20

33

20

36

20

39

20

42

20

45

20

48

20

51

20

54

20

57

20

60

20

63

20

66

20

69

20

72

20

75

20

78

20

81

20

84

20

87

20

90

20

93

20

96

20

99

Bill

ion

t

CO2 mitigation curves for 1.5C CO2 mitigation curves for 2C

0.00

1.00

2.00

3.00

4.00

5.00

199

0

199

1

199

2

199

3

1994

199

5

199

6

199

7

199

8

199

9

200

0

200

1

200

2

200

3

200

4

200

5

200

6

200

7

200

8

200

9

201

0

201

1

201

2

201

3

201

4

201

5

201

6

201

7

201

8

202

5E

203

0E

203

5E

204

0E

Per

Capita

Energ

y C

onsu

mptio

n (

Tonnes

Oil

Eqv

Per

Capita

)

OECD China Global India

Meaningful Carbon Cull Required

Outlining Energy Intensity



https://ourworldindata.org/grapher/co2-mitigation-15c

https://plus.csintra.net/ECP_S/app/container.html#loc=/MENU_RESEARCH_DETAIL?htmlfile=sectorUpdate.html&contentType=Thematic%20Research&type=PDF&cspId=1767377009183662080&ldocid=1082929511

26 July 2021


capita emissions, yellow for no significant change and green with declining trends. We note this

data set provides an estimate for 2030e per capital emissions.

Figure 23: Selected Countries Carbon Emission per capita (Tons) Time Series

Source: the BLOOMBERG PROFESSIONAL™ service

With this background, the carbon intensity of energy needs to decline by ~50% by 2040 along

with energy efficiency gains needing to double to achieve these goals. One significant area of

focus for emissions reductions is carbon dioxide (CO2) that accounts for about three-quarters

of global GHG emissions as shown in Figure 24.

Figure 24: Global Manmade Greenhouse Gas Emissions by gas, 2015

Source: U.S. EPA, inventory of U.S. Greenhouse Gas Emissions and Sinks: 1990-2019,April 2021

For a comprehensive view of macro energy transition trends, we relied, in part, on the scenarios

from the International Energy Agency (IEA) that included:

76%

16%

6%2%

Carbon Dioxide

Methane

Nitrous Oxide

HFC,PFC,SF6

Considering CO2 Context



26 July 2021


The Stated Policies Scenario with a pathway incorporating today’s policy intentions and

targets; and,

The Sustainable Development Scenario (SDS) that back solves for changes needed to

reach net zero global CO2 emissions in 2070.

From the IEA’s World Energy Outlook 2020, the forecasted amount of emissions reductions

from CCUS with about 430 Mt CO2 of energy related and industrial process related emissions

captured by 2030.

Figure 25: Energy and industrial process CO₂ emissions and reduction levers

Source: Credit Suisse estimates, Work Energy Outlook 2020

An interplay to watch, but not broadly addressed in this report are the dynamics of lower carbon

electricity and CCS equipped natural gas reformers being used for hydrogen production. The

addition of CCS amidst a broader energy transition to various industrial processes may not only

reduce carbon emissions, but aid the production of hydrogen that can further aid overall

emissions. Some of Credit Suisse’s past hydrogen related research efforts, include:

Hydrogen: A New Frontier – Update to European Hydrogen Backbone Study;

Hydrogen: A New Frontier – Part 1: A Primer on the European Value Chain;

Hydrogen: A New Frontier – Recent Developments in the Value Chain;

China New Energy – Hydrogen;

US Midstream & Master Limited Partnerships (MLPs) – Midstream’s Hydrogen Opportunity;

Hydrogen: A New Frontier – Part 2: A Primer on the APAC value chain;

Hydrogen: A New Chemicals Frontier – Part 3: Mapping Supply and Demand to 2050 En

Route to Net Zero; and,

Hydrogen Economy Part 4: A Primer on the Americas Value Chain.

More specific to the IEA numbers, in the SDS ~850Mt CO2 emissions are captured globally

through 2030 and by 2050 this number rises to 5000Mt CO2 – with about 1/3 captured by the

US and Chinese power sectors and the remainder coming from various industrial processes

(cement and steel as existing big emitters). In that context, we note that de-carbonization of the

electric power generation sector is extremely important to overall reduction efforts and CSS

works partly into this theme. A few operational examples exist on this front as outlined in Figure

26 with a more comprehensive list later in the report.

CCS and Hydrogen and Interesting Interplay

Power Generation CCS Currently North

American Centric




https://plus.csintra.net/ECP_S/app/container.html#loc=/MENU_RESEARCH_DETAIL?ldocid=1083235851v



https://plus.credit-suisse.com/researchplus/ravDoc?docid=V7n2Nn4AF-ZS6W




26 July 2021


Figure 26: Selected CCS Projects (Operational and under-construction status) in

Power Generation Industry

Source: Global CCS report, Company data. Note: Petra Nova was recently mothballed

Given the concentration issues (or lack thereof) of emission associated with power generation, a

meaningful amount of historical carbon capture related capital targeted chemical and natural gas

processing activities with the US leading over the last nearly 50 years (Figure 27).

Figure 27: Total Accumulated Investment (USD) of Large-scale CCUS project (1972-2020)

Source: Credit Suisse, Infra360, IEA, MIT CC&ST Program, Enid News&Eagle,ZEROCO2.NO,Equinor, NS Energy, Construction Boxscore Database, TIC-powered by

people, Great Plains Institute, Offshore, Energy and Policy Institute, Green Car Congress

Over the last nearly 50-years, the US$79bn of capital allocated towards CCS can be compared

to the IEA’s 2019 estimate of less than US$1bn and the current advanced stage projects at an

estimated US$27bn.

From our perspective, CCS is very well positioned as part of a practical “bridging effort” towards

an accelerated path towards meaningful overall emissions reductions. To start, a series of very

Operation

DateFacility Status Country Industry

Capture

capacity

(Mtpa)

Capture Type Storage Type

2014 Boundary Dam Carbon Capture and Storage Operational Canada Power generation 1.00 Post combustion capture EOR

Ph2 2014 Aquistore Project Operational Canada Power generation na Other Aquifers

2017 Petra Nova Carbon Capture Mothballed US Power Generation 1.40 Post combustion capture EOR

1H 2022 Capital Power - C2CNT In construction Canada Power generation 0.01 Post combustion capture

CO2 into carbon nanotubes

(CNT's) - alternatives to metal

60%

80%

100%

Source

Iron and steel production

Ethanol production

Power generation

Hydrogen production

Synthetic natural gas

Fertiliser production

Natural gas processing

Total Investment = $79 Billion USD

Natural gas processing

$68B

Fertiliser production $2.0B

Hydrogen Production $1.5B

Iron and steel production

$4.0B

Power Generation $2.0B

Ethanol Production $141M

Country

China

Australia

UAE

Saudi Arabia

Canada

Norway

US

US $60B

Canada $3.2B

UAE $4.0B

Australia $11B

China $388M

Saudi Arabia $143M



26 July 2021


carbon intensive industries will be difficult to transition without significant cost pressures. As a

result, CCS plays a clear role for power generation (coal and natural gas as two examples) in

certain markets (albeit not all), cement, steel and various aspects of the petrochemical industry.

Major limiting factors are the costs of retrofitting existing plants and the lack of appropriate

geologic conditions to support storage efforts.

Our US ESG Team helped frame this effort with some of the following commentary from

Energy Transition Primer – Race Against the Carbon Clock:

“To put the scale of what is required in perspective, the Global Carbon

Capture and Storage (CCS) institute estimates that over 2,000 CCS facilities

will be needed by 2040 to achieve capture levels required under the IEA’s

SDS case. This implies capturing and permanently storing a total of 5.6

gigatons of CO2 in 2050, split almost equally between the power sector and

industry sector including iron and steel production, cement production,

refineries and oil & gas production. In the power sector, ~215 GW of coal-

fired power plants would need to be equipped with CCUS (~10% of existing

coal fleet), primarily in China where the average age of the fleet is fairly

young. For the industrial sector, CCUS is the primary option for capturing

CO2 from blast furnaces used for steel-making and process emissions from

cement manufacturing.”

With these numbers, we note only 19 large-scale CCS facilities are in operation today and

another 32 large-scale facilities in various stages of development. Collectively, these facilities

could store nearly ~100 million tonnes of CO2 annually versus the ~40 million tonnes today.

The US market remains the largest for CCS/CCUS and six projects were market driven versus

four others being significantly supported by policies to aid economic viability according to the

NPCC.

From our analysis, this experience is somewhat similar in most regional markets – even with the

well-developed and understood CO2 injection technology. Given this reality, an interplay of

carbon pricing, various government incentives along with tax initiatives, among other things, will

be in key focus for the continued CCS development. Beyond the economics, aspirations of

countries like Norway to be viewed as a “clean” hydrocarbon producer with large scale CO2.

These offshore CCS projects were funded by way of CLIMIT – a national program supporting

CCS research. Canada was an early innovator in CCS, but has somewhat stalled – in 2008 the

Canada-Alberta Carbon Capture and Storage Task Force proposed a framework, but was never

implemented. Yet, a number of operational projects exist in the Western Canadian energy eco-

system.

This framing of the broader issue now focuses on specifics related to the reduction reality in the

next section.

The Reduction Reality

For overall emissions reductions, CCS is viewed as a key part of puzzle as partly shown with the

IEA’s views in Figure 28.

Broad-Based Bridging

Focused on Facilities

Policy Potential

Clean Hydrocarbons



https://plus.credit-suisse.com/s/V7n5vL4AF-YN88

26 July 2021


Figure 28: CCS is Key Component of IEA's Emissions Goals

Source: National Petroleum Council, IEA, Credit Suisse Research

Naturally, on the IEA’s numbers a projected 9% contribution to emissions reductions is not as

large as a number of other areas. Yet, a critical aspect of CCS revolves around certain industrial

applications that are likely to face considerable difficulty (and maybe even near-impossibility

without significant technology change) in going completely off carbon. Therefore, CCS is a

clearly viable way for selected operations to continue into the future.

From the US ESG Team, in this type of context, we highlight a very useful framework for the

readiness of CCS for a number of industries in Figure 29.

Figure 29: Readiness of Key Technologies in the CCUS Value Chain

Source: Credit Suisse estimates, IEA

In terms of costs, according to Intergovernmental Panel on Climate Change (IPCC), meeting the

2-degree goal could be twice as expensive without CCUS. Several benefits exist, especially in

the energy industry, for using CCS to not only reduce emissions, but to enhance production

(enhanced oil recovery as the major example). That dynamic fits well into a broader energy

transition theme that becomes increasingly cost competitive (i.e. returns enhancing) with rising

CCS Value Chain



26 July 2021


carbon prices without factoring in any benefit from improvements in technology. This positioning

can be compared to emerging technologies that need to still make progress in operational

performance – let alone a regulatory framework.

To provide a quantifiable perspective, less than 1% of CO2 emission are captured on a global

basis. Under the IEA’s Sustainable Development Scenario approximately 5.6Gt of carbon

capture is required by 2050. This figure compares to ~40Mt of global CCS capacity today with

a line of sight on a total of 100Mt of capacity in the relative near-term. ExxonMobil estimated

that CCS may have a Total Addressable Market of ~US$2Tln by 2040. That sheer market size

would be greater than their estimates for both hydrogen and biofuels on a combined basis of

US$1.4tn. Some of this broader perspective appears in Figure 30 and Figure 31.

Figure 30: TAM Could Be $2Tln by 2040 Figure 31: US Dominates Storage

Source: Credit Suisse Research, Exxon Mobil Presentation Source: CCS Institute, Credit Suisse, National Petroleum Council, Wood Mackenzie

Given the appropriate geology along with fairly large sources of emissions, the US is well

positioned for significant future growth of CSS. This dynamic is highlighted, in part, with 12 of

the 17 new CCUS projects added to the global pipeline in 2020.

Figure 32: CO2 Emissions from All Sources Figure 33: CO2 Emissions from Stationary Sources

Source: Credit Suisse Research, National Petroleum Council Source: Credit Suisse Research, National Petroleum Council

Collectively power generation and industrial sources present the largest opportunities to capture;

however, individual sites have low concentrations of CO2 emissions making unit economics

more challenging. Therefore, an initial focus should be on high concentration industries that

includes natural gas processing. Admittedly, this sector only represents ~4% of emissions, but

clearly falls at the low end of the cost curve and is viable today. Another clear role for CCS is

the interplay with hydrogen production and energy transition. Some of this issue is addressed

later in the report.

$- $2 $4 $6 $8

Biofuels

Hydrogen

CCUS

Chemicals

Oil & Gas

Total Addressable Market 2040 ($Tn)

US, 66%

UK / Europe, 9%

Indonesia / Malaysia,

8%

Australia, 5%

Russia, 3%Other, 8%

% of Global Geological Storage by Region

US leads world in geologic storage potential

Technology Feasible and Enhanced Economics



26 July 2021


Pondering Pricing

For technologies like CCS, economic returns can be challenged without explicit carbon prices at

higher levels than current (for some regions zero and others a range of escalating levels).

Globally, there are 61 national and regional carbon pricing initiatives either in place or scheduled

to be implemented by 2021, covering an estimated 22% of global emissions. Even over the

past five years, global carbon prices have increased both in terms of emissions coverage and

price. The cost of carbon ranges widely from a couple of dollars to >US$100 per metric ton,

with the highest prices concentrated in Europe. Despite carbon prices increasing, they remain

substantially lower than what is necessary to be consistent with the Paris Agreement. The

High-Level Commission on Carbon Prices estimates that carbon prices of at least

US$40–80/tCO2 by 2020 and US$50 100/tCO2 by 2030 are required to reduce emissions

to cost-effectively in line with the temperature goals of the Paris Agreement. Select carbon

price trading systems are shown in Figure 34.

Figure 34: National and Regional Carbon Pricing Varies Widely Across Regions

Source: ICAP Allowance Price Explorer (full list can be found here). ETS stands for Emission Trading System

Figure 35: Share of global emissions covered by carbon

schemes

Figure 36: Carbon price, share of emissions covered and

carbon pricing revenues of the largest 15 initiatives*

Source: World Bank, Credit Suisse Source: World Bank, Credit Suisse. NB: that the China ETS is currently not

included in as it is not yet generated a full year of revenues

0%

5%

10%

15%

20%

25%

199

0

199

2

199

4

199

6

199

8

200

0

200

2

200

4

200

6

200

8

201

0

201

2

201

4

201

6

201

8

202

0

Other China national ETS

EU ETS

France carbon tax

Canada federal fuel

charge

Japan carbon tax

Sweden carbon tax

California CaT

Finland carbon tax

Norway carbon tax

BC carbon tax

Switzerland carbon tax

UK carbon price floor

Ireland carbon tax

Denmark carbon tax

Quebec CaTRGGI

0

50

100

150

0% 20% 40% 60% 80% 100%

Car

bon

pric

e (U

S$)

Share of GHG emissions covered by the jurisdiction

Analysts

Phineas Glover

Betty Jiang

Lydia Brunton

Significant Variations in Carbon Pricing



https://icapcarbonaction.com/en/ets-prices

26 July 2021


Carbon pricing policy levers

Strong public and private sector leadership is a pre-requisite to hammering out a plan

that is equitable to all parties. A well-designed legislation needs to address both the supply

and demand side of the equation and target all sources of emissions, not just those that are

energy related. The carbon-intensive industries are most affected by the tax, even though the

immediate response will be to pass on the higher costs to consumers. The longer-term impact

on businesses, however, depends on many factors such as demand elasticity, speed and cost

of emission abatement efforts, and future technologies. Considering the wide-ranging impacts

across many parts of the economy, the collective political, financial, and societal commitment

needed to pass a nationwide carbon legislation is enormous. Below we outline key

considerations of a carbon regulation:

Structure: Carbon tax and cap-and-trade systems are the two primary forms of carbon

regulation. A carbon tax sets the cost of carbon while letting the market determine the

environmental outcome; cap-and-trade does the opposite by setting the level of emissions

reduction while keeping the price fluid. The two approaches should be economically

equivalent, though cap-and-trade provides more flexibility for corporates (e.g., lower

emissions cost during an economic downturn, as seen in the current carbon markets in

Europe and California) but requires greater government intervention. However, either option

is preferred over the current rule-based approach by letting market forces determine the

most optimized paths to reduce emissions.

Carbon price: The Bills introduced in Congress last year recommended launching a carbon

tax (US$/tCO2) starting at US$15, US$30, or US$40 with an annual escalation factor (the

CLC’s plan mentioned above is at the high-end of the range proposed in these Bills). To put

the cost into perspective, at the current US gasoline price of US$2.30/gallon and an

emissions factor of 360 kg CO2e/Bbl (or 8.6 kg /gallon), a US$15-US$40/tCO2 carbon

price would imply a 6-15% increase to retail gasoline prices.

Use of proceeds: This is a critically important consideration, as the economic impact of a

carbon tax depends on how revenue is used and recycled through the economy. Many

proponents support a revenue-neutral policy, which means all revenues are returned to

taxpayers in the form of tax cuts or dividends. Others support using the revenue to

accelerate investments in infrastructure and R&D. The former may be more palatable to

taxpayers considering the immediate increase in energy costs.

Point of taxation: While specifics are lacking, broadly speaking, taxes are ideally levied at a

point that maximizes the share of the tax base and minimizes the number of collections.

Specifically, the CLC plan recommends the tax to be implemented at the refinery exit, or at

the first point that fuels enter the economy (e.g., mine, port, or local gas distribution

company). Taxation on non-energy-related emissions is more administratively complex but

necessary as it levels the playing field for all emissions sources. Importantly, all of the

proposals include a border adjustment that taxes imports while reimburses exports, thus

protecting the United States’ trade competitiveness. That said, such border tax may be

contentious with trade partners that do not have similar carbon policies.

In addition to carbon price, targeted regulations/subsidies can also incentivize

investments. In relation to CCS, carbon prices are one key factor for incenting capital

allocation. Therefore, greater clarity in certain jurisdictions on carbon pricing mechanisms,

escalation, duration and applicability are collectively supportive of increased capital allocation

towards CCS.

Any such capital allocation is independent of other incentive tools like tax credits or deductions

that can be supplemental or used on a standalone basis. Those mechanisms are often favoured

in the US (such as Low Carbon Fuel Standard in California and 45Q tax credit). The efficacies

of these policies aside, the biggest challenge for decision makers is the regulatory uncertainty,

as the “see-sawing” of policies between different administrations is an impediment to how



26 July 2021


companies invest. Given the decarbonization backdrop, the role of carbon prices or other

mechanisms are critical for overall economic returns.

Assessing carbon price trajectories

There is a growing body of research on the trajectory of carbon prices under varying scenarios.

The key resources we utilize to shape our view include the Shared Socioeconomic Pathways

(SSPs) database; the World Bank’s State and Trends of Carbon Pricing series and IEA’s

recently released Net Zero 2050 special report, among others.

The Intergovernmental Panel on Climate Change (IPCC) is the United Nations body for

assessing the climate-related science and it is the most authoritative for climate futures,

mitigation, adaption and policies including carbon prices. In its Assessment Reports, the IPCC

use representative concentration pathways (RCPs) to describe different climate futures. Each

RCP represents a concentration or volume of greenhouse gas emissions in the atmosphere in

2100 that causes a specific degrees Celsius warming and each Assessment Report details the

impacts, and required adaptation and mitigation for each RCP.

The SSPs are a new framework of five scenarios that describe distinct narratives about how

societal choices, demographics, ideologies and economics will affect emissions and climate

action. The SSP framework is being adopted by the climate change research community to

facilitate the integrated analysis between societal behavior and climate action. These SSPs are

now being used as important inputs for the latest climate models, feeding into the IPCCs next

assessment report, AR6, due in 2022.

In Figure 37 we show a range of carbon price trajectories categorized by the corresponding

warming, where lines of the same colour represent different SSP narratives under specific RCP.

Warming <1.5 degrees is aligned to the aspirational goal of the Paris Agreement

Warming <2 degrees aligns to minimizing the effects of climate change through mitigation

Warming <2.5 degrees and 3 degrees link to moderate adaptation and mitigation action

Warming >3 degrees is low adaptation and high mitigation future.

However, the RCPs are not policy prescriptive and do not represent specific futures with

respect to climate policy action (or no action) or technological, economic, or political viability of

specific future pathways or climates. Therefore, as there is uncertainty as to exact societal

narrative that may unfold to reach the commitments under the Pairs Agreement, in Figure 38

we also average the carbon price trajectories under each SSP. According to both the IPCC and

IEA, between now and 2030, carbon prices under a 1.5 scenario could rise to a minimum of

US$100, and could reach over US$200 by 2050.



26 July 2021


Figure 37: IPCC range of carbon prices Figure 38: Key average carbon prices

Source: IPCC, Credit Suisse Source: IEA, World Bank IPCC, Credit Suisse.

Choose your pathway: SSPs

As we outlined above, the SSPs are based on five narratives describing broad socioeconomic

trends that could shape future society intended to span the range of plausible futures. These

narratives describe baselines for how the future will eventuate in the absence of future climate

policy (beyond already in place today), and allow researchers to examine barriers and

opportunities for climate mitigation and adaptation in each possible future world when combined

with mitigation targets.

Specifically, each SSP looks at how each different warming outcome could be achieved within

the context of the underlying socioeconomic characteristics and shared policy assumptions of

that world. Therefore, the outcome of the IPCC modelling of carbon price trajectories is

determined through consideration of both the socio-economic policy context and the global

warming temperature constraint. Therefore, for example, not all SSPs are compatible with the

RCPs limiting warming to 1.5C or 2C above pre-industrial levels.

The SSPs include: a world of sustainability-focused growth and equality (SSP1); a “middle of

the road” world where trends broadly follow their historical patterns (SSP2); a fragmented world

of “resurgent nationalism” (SSP3); a world of ever-increasing inequality (SSP4); and a world of

rapid and unconstrained growth in economic output and energy use (SSP5). See Figure 39 for

the SSP narrative descriptions.

$-

$200

$400

$600

$800

$1,000

2010 2020 2030 2040 2050

Above 3

Below 3

Below 2.5

Below 2

Below 1.5

$-

$200

$400

$600

$800

$1,000

2020 2030 2040 2050

IEA - advanced economies

IEA - select developing economies

IEA - developing economies

World Bank - High Case

World Bank - Low Case

IPCC - Average Below 2

IPCC - Average Below 1.5



26 July 2021


Figure 39: The five SSP narratives that shape climate modelling outputs

SSP1 Sustainability – Taking the Green Road (Low challenges to mitigation and adaptation) The world shifts gradually, but pervasively, toward a more sustainable path, emphasizing more inclusive development that respects perceived

environmental boundaries. Management of the global commons slowly improves, educational and health investments accelerate the demographic

transition, and the emphasis on economic growth shifts toward a broader emphasis on human well-being. Driven by an increasing commitment to

achieving development goals, inequality is reduced both across and within countries. Consumption is oriented toward low material growth and lower

resource and energy intensity.

SSP2 Middle of the Road (Medium challenges to mitigation and adaptation) The world follows a path in which social, economic, and technological trends do not shift markedly from historical patterns. Development and income growth proceeds unevenly, with some countries making relatively good progress while others fall short of expectations. Global and national

institutions work toward but make slow progress in achieving sustainable development goals. Environmental systems experience degradation,

although there are some improvements and overall the intensity of resource and energy use declines. Global population growth is moderate and

levels off in the second half of the century. Income inequality persists or improves only slowly and challenges to reducing vulnerability to societal

and environmental changes remain.

SSP3 Regional Rivalry – A Rocky Road (High challenges to mitigation and adaptation) A resurgent nationalism, concerns about competitiveness and security, and regional conflicts push countries to increasingly focus on domestic or, at

most, regional issues. Policies shift over time to become increasingly oriented toward national and regional security issues. Countries focus on

achieving energy and food security goals within their own regions at the expense of broader-based development. Investments in education and

technological development decline. Economic development is slow, consumption is material-intensive, and inequalities persist or worsen over time.

Population growth is low in industrialized and high in developing countries. A low international priority for addressing environmental concerns leads

to strong environmental degradation in some regions.

SSP4 Inequality – A Road Divided (Low challenges to mitigation, high challenges to adaptation) Highly unequal investments in human capital, combined with increasing disparities in economic opportunity and political power, lead to increasing

inequalities and stratification both across and within countries. Over time, a gap widens between an internationally-connected society that

contributes to knowledge- and capital-intensive sectors of the global economy, and a fragmented collection of lower-income, poorly educated

societies that work in a labor intensive, low-tech economy. Social cohesion degrades and conflict and unrest become increasingly common.

Technology development is high in the high-tech economy and sectors. The globally connected energy sector diversifies, with investments in both

carbon-intensive fuels like coal and unconventional oil, but also low-carbon energy sources. Environmental policies focus on local issues around

middle and high income areas.

SSP5 Fossil-fueled Development – Taking the Highway (High challenges to mitigation, low challenges to adaptation) This world places increasing faith in competitive markets, innovation and participatory societies to produce rapid technological progress and

development of human capital as the path to sustainable development. Global markets are increasingly integrated. There are also strong

investments in health, education, and institutions to enhance human and social capital. At the same time, the push for economic and social

development is coupled with the exploitation of abundant fossil fuel resources and the adoption of resource and energy intensive lifestyles around

the world. All these factors lead to rapid growth of the global economy, while global population peaks and declines in the 21st century. Local

environmental problems like air pollution are successfully managed. There is faith in the ability to effectively manage social and ecological systems,

including by geo-engineering if necessary.

Source: Riahi et al, 2017, Credit Suisse

SSPs + warming constraint = future carbon prices

When considering future expectations of carbon prices, it is necessary to reconcile expectations

of future warming and climate change with understanding of the current or evolving policy

settings. We can do this by utilizing the combined IPCC’s SSPs and RCPs to compare

trajectories under a chosen warming constraint. In this section of the report, we compare how

different policy narratives can impact carbon price expectations under a 1.5 degrees, a 2

degrees and a 2.5 degrees warming constraint.

1.5 degrees

Limiting warming to 1.5 degrees is aligned to the aspirational goal of the Paris Agreement. To

achieve this target, the taking the green road scenario (SSP1) results in carbon prices of

US$400 by 2030 and US$900 by 2050. The carbon price in 2030 under SSP1 is four-times

the carbon price under SSP2 and SSP5 where carbon prices only reach US$100. This is due

to lesser emphasis and policy focus on mitigation. However, by 2050, the carbon price under



26 July 2021


the SSP5, Fossil-fueled development, almost reaches the same as SSP1 after accelerating

from US$100 as rapid deployment in costly abatement technology is required. Overall, the

carbon prices required to reach a 1.5 degree target reflect the immense abatement challenge

faced by society.

Figure 40: Carbon price (USD) trajectories under a 1.5°C scenario

Source: IPCC, IIASA, Credit Suisse estimates

2 degrees

Limiting warming to 2 degrees aligns to minimizing the effects of climate change through

mitigation. As this target requires less adaption efforts than the Paris Agreement target of 1.5

degrees, carbon prices do not go as high, reaching a maximum of US$350 in 2050. The critical

observation under a 2 degree warming target is that SSPs with greater levels of early policy

action result (SSP1, SSP2) in lower carbon prices overall compared to SSPs that utilize fossil

fuels for longer (SSP4, SSP5). In our view, this is driven by the greater abatement gap that is

created by using fossil fuels for longer. To reach 2 degrees, by 2030 carbon prices range from

US$40 under SSP1 to US$90 under SSP4, and by 2050 reach US$100 under SSP2 and

US$350 under SSP5.

Figure 41: Carbon price (USD) trajectories under a 2°C scenario


2.5 degrees

Limiting warming to 2.5 degrees does not align to any global emissions or net zero targets;

instead it entails adaptation requirements to deal with the effects of climate change. This target,

$0

$100

$200

$300

$400

$500

$600

$700

$800

$900

$1,000

2020 2025 2030 2035 2040 2045 2050

SSP1

SSP2

SSP5 Article intended for:


26 July 2021


lacking mitigation ambition, creates carbon prices under three of the five SSPs that do not

reach US$100 by 2050. Instead, by 2030, carbon prices range from US$7 under SSP1 to

US$46 under SSP4. There is an obvious outlier scenario under the 2.5 degrees scenario which

is SSP3; this returns a higher carbon price trajectory across the time horizon, reaching US$120

in 2030 and US$250 in 2050. The SSP3 was designed to deal with a high level of challenges

to mitigation with resurgent nationalism, concerns about competitiveness and security, and

regional conflicts push countries to increasingly focus on domestic or, at most, regional issues.

As a result, the model does not allow for a solution under the 1.5 or 2 degree target and

instead delivers a higher carbon price trajectory under a 2.5 degree scenario reflecting the

mitigation challenge.

Figure 42: Carbon price (USD) trajectories under a 2.5°C scenario


Carbon Calculations

For technologies like CCS, economic returns can be challenged without explicit carbon prices at

higher levels than current (for some regions zero and others a range of escalating levels). Some

perspective on existing carbon prices based on existing policies appears in World Energy

Outlook 2020 from the IEA using USD 2019 dollars in Figure 43.

Figure 43: CO2 Prices for electricity, industry and energy production in the NZE

Source: IEA World Energy Outlook 2020 - Table 2.2

Several challenges exist with the current patchwork quilt framework of carbon prices around the

globe, including different price points, escalators, range of applicability and, among other things,

approaches to implementation. In general, a clear upward bias exists to carbon pricing, arguably,

broader acceptance and far reaching applicability. In relation to CCS, carbon prices are one key

factor for incenting capital allocation. Therefore, greater clarity in certain jurisdictions on carbon

pricing mechanisms, escalation, duration and applicability are collectively supportive of increased

capital allocation towards CCS.

Any such capital allocation is independent of other incentive tools like tax credits or deductions

that can be supplemental or used on a standalone basis. Those mechanisms are often favoured

in the US. Given the decarbonization backdrop, the role of carbon prices or other mechanisms

USD (2019) per tonne of CO2 2025 2030 2040 2050

Advanced economies 75 130 205 250

Selected developing economies 45 90 160 200

Other emerging market and developing economies 3 15 35 55

Analysts

Andrew M. Kuske

Spiro Dounis

A Question of Carbon

All about Escalation



26 July 2021


are critical for overall economic returns. Some of these dynamics are more broadly discussed in

the US specific section.

Aside from the carbon price regime or the taxation related issues, we note that not all carbon

capture is the same given some industrial processes are more carbon intensive. In addition,

some processes are easier to capture the carbon. Without diving into too much detail, Figure 44

outlines a few areas for carbon concentration by source.

Figure 44: CO2 Concentration by Source

Source: National Petroleum Council, Credit Suisse Research, Wood Mackenzie

In this context, some of the high concentration industries in the petrochemical ecosystem look

very well positioned to reduce emissions – with the “right” incentive mechanisms. We highlight

some of the context in Figure 45 with the bookend comparison of natural gas processing and

natural gas power plants.

Figure 45: Project Economics Vary by Source

Source: National Petroleum Council, Credit Suisse Research

Above we illustrate two projects at each end of the cost curve. NatGas processing is a high

CO2 concentration source with a lower unit cost. Accordingly, NatGas processing is viable

in the current tax regime; requiring CO2 revenue of <US$50/tonne to earn a 12% return.

Alternatively, a low CO2 concentration NatGas power plant would require a CO2 price above

US$130/tonne to justify investment at an unlevered return of 12%. The hurdle could

potentially be met with a combination of tax credits, rate base offsets, and a higher power

generation price if utilities are able to charge a premium to carbon free power.

The National Petroleum Council estimates 20% of carbon emissions from stationary

sources could be addressed with a US$110/tonne incentive price. The market would

require US$150/tonne to capture half of the emissions from stationary sources.

Very interestingly, this analysis highlights that CCS will be economic in most regions during the

current planning cycles for many infrastructure companies (most public capital plans are five

Process

CO2

Concentration

NatGas Processing 95%-100%

Industrial Hydrogen Plants 15%-95%

Steel Blast Furnace 26%

Cement Plants 20%

Refinery FCCs 16%

Coal Power Plants 13%

Industrial Furnaces 8%

NatGas Power Plants 4%

Low

Concentration

High

Concentration

Greater concentration

drives lower unit costs

Requires higher carbon

price to incentivize

Capital Cost ($/tonne) 96$ Capital Cost ($/tonne) 416$

CO2 Emissions (mtpa) 0.23 CO2 Emissions (mtpa) 1.28

Capex ($mm) 22$ Capex ($mm) 532$

$mm $/tonne $mm $/tonne

Revenue 11$ 46$ Revenue 169$ 132$

Capture Opex (5)$ 20$ Opex (90)$ 70$

Transport Costs (1)$ 5$ Transport Costs (6)$ 5$

Storage Costs (2)$ 7$ Storage Costs (9)$ 7$

EBITDA 3$ 13$ EBITDA 64$ 50$

Annual Return 12% Annual Return 12%

NatGas Processing NatGas Power Plant

Tax Treatment and Considerations



26 July 2021


years in duration with private plans often being a decade in length for the larger companies). As

a result, a significant amount of capital allocation to capturing carbon could on the horizon for a

series of emissions intensive industries. In the coming quarters, greater clarity on the potential

for a global carbon pricing could translate into future upside for a number of chemical along with

energy infrastructure companies.

Simply, capture costs can comprise 75% of the entire carbon value chain process; the carbon

concentration in the emission flue gas is a key determinant. For instance, operating cost/ton of

CO2 in a NatGas power plant with 4% concentration is 20% more expensive than a coal power

plant with 13% concentration. This increase is due to the added equipment needed to let more

gas flow through in order to capture a smaller amount of carbon. Ironically, carbon capture

would be more viable if more power plants still ran on coal power. Additional perspective on this

issue appears in Figure 46.

Figure 46: Reaching Scale Requires Considerable Support

Source: National Petroleum Council

This US centric view was adapted from the National Petroleum Council (NPC) illustrates three

phases of CCUS development, Activation, Expansion, and At Scale. In the Activation Phase

(dark blue, left hand side), the US can double CCUS capacity in 5-7 years with regulatory clarity

– some of which occurred recently in relation to the 45Q tax credit. Our US Midstream Team

noted more can be done here to expand the applicability and permanence of CCS as part of the

overall energy and carbon reduction theme. More specifically, the 45Q tax credit largely covers

costs in the US$50/t part of the curve with high concentration sources (natgas processing). To

put this part of the curve perspective, about US$50bn of cumulative investment in would be

required in this initial phase.

The Expansion Phase requires a US$50/t to US$90/t incentive to offset costs, however, that

pricing of carbon would look to potentially add an additional 85-95 mtpa (~150 mtpa total US

capacity) over the next 15 years. To facilitate this type of expansion, the US would require more

clarity on longer-term tax credits, market-based carbon pricing or some combination of both.

Beyond these issues related to economic returns, permitting and storage regulations would also

need some form of evolution and streamlining. Under these dynamics, cumulative capital could

amount to US$175bln. In the US, April’s bipartisan bill H.R. 2633 would increase the 45Q

sequestration credit to US$85/tonne along with making the tax dynamic permanent. If passed,

the bill could propel the US into the expansion phase.

To build upon this work and provide some more dynamic capabilities, we designed an illustrative

model for CCS. Without considering the impact of tax credits (beyond full tax depreciation over

Considering Concentration

Capital Calculations



26 July 2021


a ten-year period) and the likely reality of escalating carbon prices, we highlight a few potential

economic scenarios below. Some of the key assumptions in our dynamic illustrative CCS work

includes:

A Base Case scenario carbon price of US$50/tonne with US$10/tonne annual escalation

for 10 periods;

A High Carbon Price scenario with US$100/tonne pricing with US$10/tonne escalation

annually for 10 periods;

CCS operating costs of US$30/tonne;

An assumption of a 10-year capital cost recovery by way of tax depreciation;

Carbon concentration levels and capex amounts vary in three situations;

A 50/50 capital structure of debt and equity; and,

Twenty-five years of asset life for the facility.

Figure 47: Carbon Capture – Illustrative Simplified Model Summary

Source: Credit Suisse estimates

Clearly, this illustrative model approach is very dynamic and subject to a number of assumptions.

Yet, the key conclusions include:

The model does not account for any potential economic benefit from EOR, carbon sales or

the sales of by-product;

Lower concentration industries remain challenged without other incentives or regulation;

Obviously, higher concentration industries offer even greater returns with escalating carbon

prices; and,

Capex amounts remain a very significant variable in the NPV analysis.

From an independent source, we also highlight an overall cost breakdown in Figure 48 from the

Global CCS Institute.

Base Case High Carbon Price Case

High Mediium Low High Mediium Low

Carbon Capture Assumptions

Carbon Price (USD per tonne) 50 50 50 100 100 100

Year Escalator (USD per tonne) 10 10 10 10 10 10

Escalator Starts - Year 2 2 2 2 2 2

Escalator Ends - Year 12 12 12 12 12 12

Concentration - % 90% 60% 10% 90% 60% 5%

Operating Cost Assumptions - per Captured Tonne (USD)

Total - Operating Cost - $/tonne 30 30 30 30 30 30

Asset Life 25 25 25 25 25 25

0 0 0 0 0 0

Tax Shield

Years for Tax Shield 10 10 10 10 10 10

NPV 485.0 71.0 -659.2 893.4 343.4 -685.3

IRR 29% 12% n.a 47% 20% n.a



26 July 2021


Figure 48: Carbon Capture & Storage – Cost Breakdown

Source: GCCSI

With this overview, we now transition to some technical aspects of CCS in the next section.



26 July 2021


Technical Talk

Before getting into some of the technical details, this section starts with an industry overview for

areas already using CCS or with greater rollout potential. We focus on three main industry areas

with some underlying sub-sectors: (1) power generation; (2) industrial emitters; and, (3) energy.

Power Generation

The electricity sector truly exists on a global basis, however, there is a considerable amount of

variation in generation mix among countries in the world (let alone regions within countries with

larger land masses). Some of that power generation variability appears in Figure 49 and Figure

50.

Figure 49: Actual Generation Mix (TWh) Figure 50: Generation Capacity Mix (MW)

Source: Credit Suisse estimates¸ China Energy Portal Source: Credit Suisse estimates, Our World Data

With that background, for power generation, CCUS is not broadly applicable to all regions and is

further limited by the availability of geologic formations required to store carbon. Therefore, the

power generation industry holds significant promise as one of largest single sources of CO2

emissions on a global basis. Yet, there are a number of practical limitations and realities,

including: low CO2 concentrations; the regulatory constructs of the utilities industry (arguably –

a two-edged sword with some benefits and burdens); geology; and, the broader electricity

sector’s greater use of renewables integrated with battery technology.

Industrial Emitters

There are several carbon capture applications in the industrial sector – though there is more

variability in approach and extent of capture given differences in CO2 emission levels on the

basis of total level, intensity and the concentration. Given the wide variability, we provide a few

subsectors for discussion with some general comments:

Pulp and Paper: The two primary processes for pulp and paper are mechanical mills and

integrated kraft mills. Kraft mills represent the bulk of CO2 emissions given the use of

recovery boilers that are used to burn byproduct to provide steam. Two carbon capture

options for pulp and paper mills are focused on: black liquor integrated gasification

combined cycle (BLGCC) and biomass-based CHP systems in kraft pulp mills.

Chemicals: In general, the chemicals industry is quite energy intensive. The EPA estimated

that ~184MT of CO2 was emitted in 2017. Ammonia is an opportunity for increased

capture as ~64% of the hydrogen consumed is by way of a captive fashion that

concentrates emissions. At selected facilities, CO2 can be captured and used for methanol

-

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

China United States EU-27 India

1 2 3 4

Twh

Electricity from coal (TWh) Electricity from gas (TWh) Electricity from hydro (TWh)

Electricity from other renewables (TWh) Electricity from solar (TWh) Electricity from oil (TWh)

Electricity from wind (TWh)

-

200,000

400,000

600,000

800,000

1,000,000

1,200,000

1,400,000

1,600,000

1,800,000

2,000,000

China EU-27 United States India

1 2 3 4

MW

Hydro Installed generation capacity (MW) Thermal Installed generation capacity (MW)

Nuclear Installed generation capacity (MW) Wind Installed generation capacity (MW)

Highly Variations in Generation Mix

Geologic Constraints for CCS



26 July 2021


production. Ethylene and propylene also present immediate opportunities given that flue gas

is often vented into the atmosphere.

Iron and Steel: Steel production is split into primary and secondary processes. Primary

steelmaking is most common. At an iron and steel plant, ~75% of point source emissions

originate at the blast furnace, which also tends to have fairly high CO2 concentrations

(~27%). Electricity generation from the grid contributes ~12% of emissions at these plants.

Options currently exist to directly capture CO2 from blast furnaces post-combustion,

although many facilities would likely need to be retrofitted. CCS was used at an Abu Dhabi

based facility in 2016 with the ability to capture 0.8 MTPA.

Cement: The process for cement manufacturing tends to produce ~14-33% CO2, primarily

driven from the off-gas from the kiln. Concentrations are ~20% although off-gas also has

high levels of SOx and NOx, which presents challenges to capture – scrubbing and

desulfurization is often required.

In general, with existing technologies, these industries will look to face a number of challenges

in moving towards a true net-zero. As a result, CCS will look to be an attractive option for a

number of these businesses – depending on geographic positioning among other factors.

Energy

To varying degrees, hydrocarbons are consumed across the globe – albeit differing in the

amount and the molecules used. Yet, on a more limited basis, a few countries are largely

involved in hydrocarbon production. Simply, at this time, CCUS is not practical for most areas of

hydrocarbon consumption (other than large-scale industrial applications addressed above). As a

result, the focus is really on the major areas of energy production. To frame this issue, Figure

51 and Figure 52 provides some context for energy production globally.

Figure 51: Natural Gas Producing Countries (Bcf/d) Figure 52: Oil Producing Countries ( Million bbl/day)

Source: Credit Suisse and BP Source: Credit Suisse and Wikipedia

For the energy industry, two of the major areas for CCS usage are oil refining and natural gas

processing facilities. Natural gas processing represents one of the most immediate and

economic applications of carbon capture due to the high concentration of CO2 in the flue gas.

Selected data highlights refining accounts for ~10% of US industrial emissions and the great

amount of flue gas streams creates challenges for large-scale CO2 capture given low

concentrations (<20%). Both oxy-combustion and post-combustion have been considered for

CO2 capture at refineries.

With that background, the remainder of this section is divided into several areas:

Carbon Capture Methods;

Transporting CO2;

CO2 Storage; and,

Selected CO2 Applications.

0

20

40

60

80

100

120

US Russia Iran China Canada

1 2 3 4 5

Bcf

/Day

-

2

4

6

8

10

12

US Russia Saudi

Arabia

Canada Iraq China UAE Brazil Iran Kuwait

1 2 3 4 5 6 7 8 9 10

Millio

n

bbl/

day



26 July 2021


Carbon Capture Methods

A number of carbon capture approaches are outlined in Figure 53.

Figure 53: Selected Carbon Capture Approaches

Source: Credit Suisse estimates, Fossil Energy and Carbon Management, Resource for the future, ScienceDirect

For a bit of technical context, Figure 54 highlights a few of the primary methods for carbon capture.

Figure 54: The primary methods of capture

Source: Credit Suisse Research, IEA, National Petroleum Council

Capture Method

Post- combustion carbon capture

- Post-combustion capture is useful for separating CO2 from exhaust gases

created by burning fossil fuel.

- Primary used in existing power plants.

Pre- combustion carbon capture

- Pre-combustion capture refers to removing CO2 from fossil fuels before

combustion is completed.

- Primary used in industrial processes

Oxy-fuel combustion

- In the Oxy-fuel combustion capture systems, fuels are burned in the presence

of pure oxygen rather than air to produce flue gas with higher CO2

concentrations and free from nitrogen-derived pollutants.

- The Oxy-fuel combustion capture systems are restricted to processes that

generate CO2 in combustion processes, such as fossil-fuel power plants,

clinker production in cement plants, and the iron and steel industry.

Biomass Energy paired with Carbon

Capture (BECCS)

This approach (albeit still in the development stage) can result in negative

emissions.

Direct Air Capture (DAC): This technology takes low concentrations of CO2 directly in the atmosphere

(~400 parts per million) and some small-scale projects are operational.



26 July 2021


Transporting CO2

Depending on the proximity of CO2 source to end use or storage, the method of transportation

will vary with pipelines being the most predominate (and inextricably involved in the other areas

of transportation at some level). Some relevant points include:

Pipeline: Pipelines are the most prevalent method of transporting large amounts of CO2

long distances due to favorable economics. We expect pipelines to remain the preferred

transport method as CCUS grows – for a variety of reasons, including:

o The presence of existing pipeline rights of way;

o The ability to repurpose existing assets;

o The proximity to large source emitters;

o Proximity to demand sinks; and,

o The underlying geology required for safe sequestration at scale.

A number of variables for the costs to build CO2 pipelines is far ranging including the type of

terrain and population density. Recently built CO2 pipelines cost anywhere between ~US$70k-

US$200k/diameter inch-mile. Repurposing natural gas pipelines is not yet a viable alternative

when transporting large quantities of CO2 over long distances due to the greater pressure

(compression) needed to transport CO2 versus natural gas – in some high pressure vapor lines

could be repurposed. Some perspective for pipelines comes in Figure 55 and Figure 56.

Figure 55: Pipelines are most efficient method of

transporting large quantities of CO2 Figure 56: Notable US CO2 Pipelines

Source: Company data, Credit Suisse estimates Source: Company data, Credit Suisse estimates, National Petroleum Council

Ship: Ship transport is a less capital intensive investment (US$200m) than pipelines; but

has more limited life-cycle economics. The design is similar to LPG carriers that can hold

45k tonnes of CO2. Ship transport will likely be a more popular method when crossing large

bodies of water in point-to-point transport. The limited ability to scale and transport larger

quantities of CO2 likely makes it a less popular transport method than pipelines as demand

for CCUS grows. Shipments of CO2 from Europe and Asia to the US or Australia for

sequestration are the most likely eventual application for shipping.

Rail and Truck: Rail and truck transport alternatives are viable for smaller volume, short

distance transportation from isolated CO2 source centers. Trucking can be used with

shipping to transport CO2 from terminal to demand sites for use. That said, low capacity

limits the ability for wider adoption of these transportation methods. While not likely to be the

primary transport methods, rail, trucking and ship transport will likely be a complement to

pipeline transport for isolated, point sources of CO2.

CO2 Storage

For large-scale CO2 storage, the most economic approach comes from geologic formations

that tend to revolve around two areas: depleted hydrocarbon reservoirs and salt dome structures.

Transportation

Method

Typical

Capacity

Pipelines

890-103,000

Tonnes/day

Shipping

~46,000

Tonnes/Vessel

Rail

~80-83

Tonnes/Car

Truck

~18

Tonnes/Tanker

Pipeline US State ISDLength (miles) /

Diameter (inches)

Cost ($mm

/ mile)

Green Pipeline La / Tx 2009 / 2010 320 / 24 3.04$

Greencore Pipeline Wy / Mt 2011 / 2012 232 / 20 1.37$

Seminole Pipeline Tx 2012 12.5 / 6 0.48$

Coffeyville Pipeline Ks / Ok 2013 67.85 / 8 0.93$

Webster Pipeline Tx 2013 9.1 / 16 3.19$

Emma Pipeline Tx 2015 2 / 6 0.75$

Trinity of Transport Options



26 July 2021


Geologic Storage: CO2 storage tends to be most economic when large scale geologic

formations are used. Depleted oil and gas wells and saline formations represent the majority

of storage capacity. Equinor first pioneered the process when the company began injecting

~1Mtpa of CO2 into an offshore formation in the Sleipner gas field. More recently, the

Gorgon project in Australia began injecting CO2 into a saline formation than is anticipated to

store 3-4Mtpa. Notably, the NPC now estimates >32Mtpa of total global storage volumes

today. According to the IEA there is anywhere from 8,000-55,000 GT of global storage

capacity. While some formations are more viable than others, capacity is more than enough

to support the IEA’s projected 220 Gt of CO2 stored through 2070 in the Sustainable

Development Scenario. Cost estimates for geologic storage vary widely, the US Department

of Energy estimated most sites in the US operate ~US$7-US$13/tCO2 (inclusive of both

capex and operating costs).

Conventional Onshore Storage: In the US, underground CO2 storage is regulated by the

EPA, which issues permits for injection sites. According to the NPC, US storage potential

for conventional reservoirs ranges anywhere from 3,000-8,600Gt. Typically, conventional

formations are required to be at least ~3,000 feet deep, with some formations reaching as

deep as 13,000 feet. CO2 storage is also only permitted in saline formations that are saltier

than 10,000ppm Total Dissolved Solids – this is in order to ensure that injection is

sufficiently deep enough to protect drinking water aquifers. Additionally, storage reservoirs

must have geologic seals above them in order to reduce permeability. Seals are most

commonly formed by clay, salt, or carbonate rock.

Unconventional Reservoir Storage: Unconventional reservoirs consist of low-permeability

rocks containing hydrocarbons (i.e. shale). Some non-shale rocks can also be classified as

unconventional. At least 20 states in the US have been identified as having unconventional

oil or gas reserves. In 2011, the EIA estimated that the US could have technical CO2

storage potential of ~135Gt across 19 shale formations. Most notably, studies estimate the

Marcellus shale could have as much as 55Gt of technically feasible storage capacity.

Offshore CO2 Storage: Offshore CO2 storage presents potentially billions of acres of

suitable storage locations. That said, there are relatively few existing offshore sites given a

number of issues including unclear jurisdictional authority and potentially high costs. Existing

facilities are located in the Barents Sea and North Sea in Norway and the Netherlands, as

well as projects off the coasts of Brazil and Japan. The Gulf of Mexico presents a potential

opportunity for the US given elevated emissions from power generation and industrial plants

alongside one of the largest geologic sinks in the United States. Some studies have

estimated that total feasible CO2 capacity could be as much as 559Gt.

Figure 57: Geologic Storage (%) Around the World

Source: Credit Suisse estimates, CCS Institution

Canada

1%

US

66%

Norway

5%

Europe

3%

China

3%

Malaysia

4%

Australia

5%

Canada US Brazil UK Norway

Europe Saudi Ababia UAE Russia China

Indonesia Malaysia Australia

Selected Storage Options



26 July 2021


Selected CO2 Applications

Currently, the major area of focus for CO2 is EOR:

Enhanced Oil Recovery (EOR): EOR is a method of injecting CO2 to release additional oil

from wells to boost yields and revenues. EOR is a mature, proven process used for decades.

Oil revenues generated from CCS improve economics. There are more than 150 CO2 EOR

projects that use industrial produced CO2 or naturally occurring CO2 from underground

deposits. A majority of CO2 pipelines in the US support EOR with a number of companies

that include: XOM, CVX, OXY, KMI, and DEN (see Figure 58).

Figure 58: Existing US CCS Facilities

Source: Credit Suisse Research, CCS Institute, Wood Mackenzie

A number of prospective projects appear in Figure 59.

Figure 59: US Project Pipeline

Source: Credit Suisse estimates , CCS Institute, Wood Mackenzie

Industrial Uses: CO2 is used as a feedstock in many industries to make end products.

From the IEA, roughly 230 million tonnes of CO2 are consumed per annum (including EOR)

Name ISD Status IndustryMax Capacity

(MTPA)Capture Type Storage Type

Terrell Natural Gas Processing Plant 1972 Operational Natural Gas Processing 0.4 Industrial Seperation EOR

Enid Fertilizer 1982 Operational Fertilizer Production 0.2 Industrial Seperation EOR

Shute Creek Gas Processing Plant 1986 Operational Natural Gas Processing 7 Industrial Seperation EOR

Great Plains Synfuels Plant and

Weyburn-Midale 2000 Operational Synthetic Natural Gas 3 Industrial Seperation EOR

Core Energy CO2 2003 Operational Natural Gas Processing 0.35 Industrial Seperation EOR

Arkalon CO2 Compression Facility 2009 Operational Ethanol Production 0.29 Industrial Seperation EOR

Century Plant 2010 Operational Natural Gas Processing 5 Industrial Seperation EOR & Geological

Bonanza BioEnergy 2012 Operational Ethanol Production 0.1 Industrial Seperation EOR

PCS Nitrogen 2013 Operational Fertilizer Production 0.3 Industrial Seperation EOR

Lost Cabin Gas Plant 2013 Operational Natural Gas Processing 0.9 Industrial Seperation EOR

Coffeyville Gasification Plant 2013 Operational Fertilizer Production 1 Industrial Seperation EOR

Air Products Steam Methane Reformer 2013 Operational Hydrogen Production 1 Industrial Seperation EOR

Petra Nova Carbon Capture 2017 Suspended Power Generation 1.4 Post-combustion Capture EOR

Illinois Industrial Carbon Capture and

Storage 2017 Operational Ethanol Production 1 Industrial Seperation Dedicated Geological Storage



Project Interseqt - Hereford Ethanol

Plant 2021 Early Development Ethanol Production 0.3 Industrial Seperation Dedicated Geological Storage

Project Interseqt - Plainview Ethanol


Wabash CO2 Sequestration 2022 Advanced Development Fertilizer Production 1.75 Industrial Seperation Dedicated Geological Storage

San Juan Generating Station Carbon

Capture 2023 Advanced Development Power Generation 6 Post-combustion Capture EOR

Cal Capture 2024 Advanced Development Power Generation 1.4 Post-combustion Capture EOR

Velocys' Bayou Fuels Negative

Emission Project 2024 Early Development Chemical Production 0.5 Industrial Seperation Dedicated Geological Storage

OXY and Carbon Engineering Direct Air

Capture and EOR Facility Mid-2020 Early Development Air 1 Industrial Seperation EOR

LafargeHolcim Cement Carbon Capture Mid-2020 Early Development Cement Production 1.5 Industrial Seperation In Evaluation

Gerald Gentleman Station Carbon

Capture Mid-2020 Advanced Development Power Generation 3.8 Post-combustion Capture In Evaluation

Mustang Station of Golden Spread

Electric Cooperative Carbon Capture Mid-2020 Advanced Development Power Generation 1.5 Post-combustion Capture In Evaluation

Prairie State Generating Station Carbon

Capture Mid-2020 Advanced Development Power Generation 6 Post-combustion Capture Dedicated Geological Storage

Plant Daniel Carbon Capture Mid-2020 Advanced Development Power Generation 1.8 Post-combustion Capture Dedicated Geological Storage

Lake Charles Methanol 2025 Advanced Development Chemical Production 4 Industrial Seperation Dedicated Geological Storage

Dry Fork Integrated Commercial Carbon

Capture and Storage 2025 Early Development Power Generation 3 Post-combustion Capture Dedicated Geological Storage

Red Trail Energy BECCS Project 2025 Early Development Ethanol Production 0.18 Industrial Seperation Dedicated Geological Storage

The Illinois Clean Fuels Project 2025 Early Development Chemical Production 2.7 Industrial Seperation Dedicated Geological Storage

Clean Energy Systems Carbon

Negative Energy Plant - Central Valley 2025 Early Development Power Generation 0.32 Oxy-combustion Capture In Evaluation

Project Tundra 2025 Advanced Development Power Generation 3.6 Post-combustion Capture Dedicated Geological Storage

The ZEROS Project Late-2020 In Construction Power Generation 1.5 Oxy-combustion Capture EOR

NEXT Carbon Solutions 2025 Early Development LNG Production 5 Post-combustion Capture Dedicated Geological Storage

Valero Carbon Pipeline 2024 Early Development Ethanol Production 5 In Evaluation In Evaluation

Summit Carbon Solutions 2024 Early Development Ethanol Production 10 In Evaluation In Evaluation



26 July 2021


– the largest being the fertilizer industry. Outside of EOR, some of the primary industries

that can use CO2 include fuels and organic chemicals, biomass, inorganic materials and

working fluids. There are four primary technologies used to convert CO2 into a useable

product including thermochemical, electrochemical and photochemical, carbonation, and

biological conversion technologies.

o Thermochemical: Thermochemical conversion refers to high temperature

reactions that produce hydrocarbon products. CO2 can be used as a feedstock,

co-reactant, or an oxidant. Products produced include olefins, liquid hydrocarbons,

aromatics, syngas, and other chemicals. Plants in Germany, Norway, and Iceland

have utilized thermochemical reactions to turn CO2 into useable product.

o Electrochemical and Photochemical: Electrochemical conversion uses

electricity from various sources for energy in the CO2 reaction while photochemical

conversion uses sunlight to convert CO2 and water into solar fuels. The

electrochemical reaction produces gas and liquid products including CO, methane,

ethylene, and methanol. Converting CO2 to CO appears to be a popular application

of this technology.

o Carbonation: Carbonation converts CO2 to solid mineral carbonates. The process

can be used to create more sustainable construction products. One application is in

the cement production process. CO2 carbonation lowers the energy requirement of

cement curing - resulting in lower carbon emissions from cement production.

o Biological Conversion: Biological converts CO2 to biomass, chemicals and fuels

via photosynthetic and non-photosynthetic methodologies.



26 July 2021


Regional Round-up

This part of the report provides regional views on CCS and related technologies, but starts with

an overview of existing and proposed facilities in Figure 60 and Figure 61. The existing facilities

in Figure 60 show the prominence of the energy industry for existing CCS applications.

Figure 60: Global CCS Facilities in Operation

Source: Global CCS report 2020, MIT CC&ST Program, Zeroco2.no

Based on Global CCS Institute data and Credit Suisse research, a key points, include:

A total of ~122 mtpa of CCS/CCUS for these 80 facilities;

Forty-one of these projects are directly involved in EOR; and,

Both capital and operating costs vary on a wide array of factors creating comparability

challenges – overall and regionally. Moreover, external benefits from EOR, CO2 sales, by-

product production along with tax related dynamics tend to be collectively additive to the

overall returns.

Given our earlier analysis, a large quantifiable investment opportunity exists for CCS to scale in

a very significant fashion. Under a series of assumptions, approximately 2,000 facilities could be

put into service with capital investment of US$500bn+ to move toward meaningful emissions

reductions. Yet, the existing list of projects (non-exhaustive) is fairly limited with plans for only

~45 mtpa of capture across 33 projects having online dates of 1972-2020. A non-exhaustive

list of CCS projects on a global basis in Figure 61.

Operation Date Facility Status Country Industry Capture capacity Capture Type Storage Type

1972

Terrell Natural Gas Processing Plant (formerly Val Verde Natural Gas

Plants) Operational United States Natural gas processing 0.40 Industrial Separation EOR

1982 Enid Fertilizer Operational United States Fertiliser production 0.20 Industrial Separation EOR

1986 Shute Creek Gas Processing Plant Operational United States Natural gas processing 7 Industrial Separation EOR

1996 Sleipner CO2 Storage Operational Norway Natural gas processing 1.00 Industrial SeparationDedicated Geological

Storage

2000 Great Plains Synfuels Plant and Weyburn-Midale Operational United States Synthetic natural gas 3 Industrial Separation EOR

2000 Weyburn-Midale Carbon Dioxide Project Operational Canada Chemical production 3.00 Post combustion capture EOR

2003 Core Energy CO2-EOR Operational United States Natural gas processing 0.35 Industrial Separation EOR

2006 Sinopec Zhongyuan Carbon Capture Utilisation and Storage Operational China Chemical production 0.12 Industrial Separation EOR

2008 Snøhvit CO2 Storage Operational Norway Natural gas processing 0.7 Industrial Separation

Dedicated Geological

Storage

2009 Arkalon CO2 Compression Facility Operational United States Ethanol production 0.29 Industrial Separation EOR

2010 Century Plant Operational United States Natural gas processing 5 Industrial Separation

EOR&Dedilcated

Geological Storage

2012 Bonanza BioEnergy CCUS EOR Operational United States Ethanol production 0.10 Industrial Separation EOR

2013 PCS Nitrogen Operational United States Fertiliser production 0.3 Industrial Separation EOR

2013 Petrobras Santos Basin Pre-Salt Oil Field CCS Operational Braz il Natural gas processing 4.60 Industrial Separation EOR

2013 Lost Cabin Gas Plant Operational suspended United States Natural gas processing 0.9 Industrial Separation EOR

2013 Coffeyville Gasification Plant Operational United States Fertiliser production 1.00 Industrial Separation EOR

2013 Air Products Steam Methane Reformer Operational United States Hydrogen production 1 Industrial Separation EOR



2015 Swan Hills ISCG/Sagitawah Power Project Operational Canada Other na Other Aquifers

2015 Alberta Carbon Trunk Link (ACTL) Operational Canada Oil&Gas 0.3 Pre- Combustion capture EOR

2015 Quest Operational Canada Hydrogen production oil sand upgrading1.20 Industrial Separation EOR

2015 Karamay Dunhua Oil Technology CCUS EOR Operational China Chemical production 0.1 Industrial Separation EOR

2015 Uthmaniyah CO2-EOR Demonstration Operational Saudi Arabia Natural gas processing 0.80 Industrial Separation EOR

2016 Abu Dhabi CCS (Phase 1 being Emirates Steel Industries) Operational UAE Iron and steel production 0.8 Industrial Separation EOR

2016 Alberta Saline Aquifer Project & Genesee Demonstration Project Operational Canada Oil refinery 1.00 Industrial Separation Aquifers

2017 Petra Nova Carbon Capture Operational suspended United States Power generation 1.4 Post combustion capture EOR

2017 Illinois Industrial Carbon Capture and Storage Operational United States Ethanol production 1.00 Industrial Separation Dedicated Geological

2018 CNPC Jilin Oil Field CO2 EOR Operational China Natural gas processing 0.6 Industrial Separation EOR

2019 Gorgon Carbon Dioxide Injection Operational Australia Natural gas processing 4.00 Industrial Separation Dedicated Geological

2019 Qatar LNG CCS Operational Qatar Natural gas processing 2.1 Industrial Separation


Storage

2020 Alberta Carbon Trunk Line (ACTL) with Nutrien CO2 Stream Operational Canada Fertiliser production 0.30 Industrial Separation EOR

2020

Alberta Carbon Trunk Line (ACTL) with North West Redwater Partnership's

Sturgeon Refinery CO2 Stream Operational Canada Oil refinery 1.4 Industrial Separation EOR



26 July 2021


Figure 61: Global CCS Facilities under Development

Source: Global CCS report 2020, MIT CCS&ST Program, Zeroco2.no

Operation Date Facility Status Country Industry Capture capacity Capture Type Storage Type

Delayed to 2020s Yanchang Integrated Carbon Capture and Storage Demonstration In construction China Chemical production 0.41 Industrial Separation EOR

2020s Sinopec Shengli Power Plant CCS Early Development China Power generation 1.00 Post combustion capture EOR

2020s Acorn Scalable CCS Development Early Development UK Oil refinery 4.00 Industrial Separation


Storage

2020s Korea-CCS 1 & 2 Early Development South Korea Power generation 1.00 Under evaluationDedicated Geological

Storage

2020-2021 Sinopec Qilu Petrochemical CCS In construction China Chemical production 1.00 Industrial Separation EOR

2021 Project Interseqt - Hereford Ethanol Plant Early Development US Ethanol production 0.30 Industrial SeparationDedicated Geological

Storage

2021 Project Interseqt - Plainview Ethanol Plant Early Development US Ethanol production 0.33 Industrial Separation


Storage

2022 Advantage Oil & Gas Ltd In construction Canada Oil&Gas 0.20 Pre- Combustion capture Aquifers

1H 2022 Capital Power - C2CNT In construction Canada Power generation

0.01

Post combustion capture

CO2 into carbon

nanotubes (CNT's) -

alternatives to metal

2022 Wabash CO2 Sequestration Advanced Development US Fertiliser production 1.75 Industrial SeparationDedicated Geological

Storage

2023 San Juan Generating Station Carbon Capture Advanced Development US Power generation 6.00 Post combustion capture EOR

2023 Santos Cooper Basin CCS Project Advanced Development Australia Natural gas processing 1.70 Industrial SeparationDedicated Geological

Storage

2023-2024 Fortum Oslo Varme - Langskip Advanced Development Norway Waste to Energy 0.40 Post combustion captureDedicated Geological

Storage

2023-2024 Brevik Norcem - Langskip Advanced Development Norway Chemical production 0.40 Industrial SeparationDedicated Geological

Storage

2024 Hydrogen 2 Magnum (H2M) Early Development The Netherlands Power generation 2.00 Industrial SeparationDedicated Geological

Storage

2024 Project Pouakai Hydrogen Production with CCS Early Development New Zealand Hydrogen production&Power Generation1.00 Industrial Separation In Evaluation

2024 Caledonia Clean Energy Early Development UK Power generation 3.00 Post combustion captureDedicated Geological

Storage

2024 Cal Capture Advanced Development US Power generation 1.40 Post combustion capture EOR

2024 Velocys’ Bayou Fuels Negative Emission Project Early Development US Chemical production 0.50 Industrial SeparationDedicated Geological

Storage

Mid 2020s OXY and Carbon Engineering Direct Air Capture and EOR Facility Early Development US Air 1.00 Industrial Separation EOR

Mid 2020s LafargeHolcim Cement Carbon capture Early Development US Chemical production 0.72 Industrial Separation In Evaluation

Mid 2020s HyNet North West Early Development UK Hydrogen production 1.50 Industrial SeparationDedicated Geological

Storage

Mid 2020s Gerald Gentleman Station Carbon Capture Advanced Development US Power generation 3.80 Post combustion capture In Evaluation

Mid 2020s Mustang Station of Golden Spread Electric Cooperative Carbon Capture Advanced Development US Power generation 1.50 Post combustion capture In Evaluation

Mid 2020s Prairie State Generating Station Carbon Capture Advanced Development US Power generation 6.00 Post combustion captureDedicated Geological

Storage

Mid 2020s Plant Daniel Carbon Capture Advanced Development US Power generation 1.80 Post combustion captureDedicated Geological

Storage

2025 Lake Charles Methanol Advanced Development US Chemical production 4.00 Industrial SeparationDedicated Geological

Storage

2025 Dry Fork Integrated Commercial Carbon Capture and Storage (CCS) Early Development US Power generation 3.00 Post combustion captureDedicated Geological

Storage

2025 Net Zero Teesside - CCGT Facility Early Development UK Power generation 6.00 Post combustion captureDedicated Geological

Storage

2025 Abu Dhabi CCS Phase 2: Natural gas processing plant Advanced Development UAE Natural gas processing 2.30 Industrial Separation EOR

2025 Red Trail Energy BECCS Project Early Development US Ethanol production 0.18 Industrial SeparationDedicated Geological

Storage

2025 The Illinois Clean Fuels Project Early Development US Chemical production 2.70 Industrial SeparationDedicated Geological

Storage

2025 Clean Energy Systems Carbon Negative Energy Plant - Central Valley Early Development US Power generation 0.32 Oxy-combustion capture In Evaluation

2025-2026 Project Tundra Advanced Development US Power generation 3.60 Post combustion captureDedicated Geological

Storage

2026 Northern Gas Network H21 North of England Early Development UK Hydrogen production 1.50 Industrial SeparationDedicated Geological

Storage

2026-2027 Hydrogen to Humber Saltend Early Development UK Hydrogen production 1.40 Industrial SeparationDedicated Geological

Storage

2027 Drax BECCS Project Early Development UK Power generation 4.00 Industrial SeparationDedicated Geological

Storage

2028 Ervia Cork CCS Early Development Ireland Power generation&Oil refinery 2.50 Industrial SeparationDedicated Geological

Storage

Late 2020s The ZEROS Project In construction US Power generation 1.50 Oxy-combustion capture EOR

na Inventys and Husky Energy VeloxoTherm Capture Process Test Early development Canada Other 0.10 na EOR

na Joffre CO2 Capture Project Early development Canada Other na Post combustion capture EOR

na Kinder morgan - Goldsmith Early development US Energy Infrastructure na na EOR

na Kinder morgan - Katz Unit Early development US Energy Infrastructure na na EOR

na Kinder morgan - SACROC Early development US Energy Infrastructure na na EOR

na Kinder morgan - Tall Cotton Field Early development US Energy Infrastructure na na EOR

na Kinder morgan - Yates Field Early development US Energy Infrastructure na na EOR

na Kinder morgan - Sharon Ridge Early development US Energy Infrastructure na na EOR



26 July 2021


Following this overview, we highlight a number of geographies, including:

ASEAN;

Australia;

Brazil;

Canada;

China;

Europe (EU-27);

India

Mexico;

United Kingdom; and,

United States.

These regions are addressed in more detail below by our various teams.

ASEAN

With almost 90% of ASEAN’s energy demand growth being met by fossil fuels since 2000, the

CCUS technology is seen as an important pillar for helping the region transition from its current

energy mix to one that is aligned with future climate goals. According to the IEA, for CCUS

deployment to be consistent with the Paris Agreement’s temperature goals, this would require

CO2 capture of 200mil tonnes or more in ASEAN by 2050, from a limited base today. The

required investment in this technology would reach an average of ~US$1bn pa between 2025

and 2030.

In Jun-2021, Japan announced the launch of the “Asia CCUS Network”, an international

industry-academia-government platform aiming at knowledge sharing and improvement of

environment for CCUS. All ASEAN member states have expressed intention to participate in the

network, which is a significant milestone. Being rich in oil and gas fields, ASEAN is seen as a

viable location for storing CO2. So far, at least seven potential projects have been identified and

are in early development especially in Malaysia, Singapore and Indonesia. Below are some of

the ongoing projects and investments in the region:

Petronas is deploying CCUS technology at the Kawasari gas facility in Malaysia, with first

injection into a depleted gas field planned in 2025. This project is aligned with Petronas’

ambition to achieve net-zero carbon emissions by 2050, announced in Nov-20. The national

oil company of Malaysia has also signed a MoU with Japan’s JOGMEC and JX Nippon Oil

and Gas Exploration in Mar-20 to study the development of Malaysia’s high CO2 content

gas fields with CCUS and the possibility of exporting natural-gas based hydrogen to Japan.

ExxonMobil announces plans for a CCS hub concept, with a plan to capture CO2 emissions

from Singapore manufacturing facilities for storage in the region.

J-POWER and Japan NUS Co, in co-operation with PT Pertamina are exploring a project to

demonstrate CO2 storage of up to 300k tonnes of CO2/pa at the Gundih gas field in

Central Java, Indonesia.

Repsol SA indicated in its 2020 Sustainability Plan for Indonesia that they will carry out a

study for a large-scale CCUS project in their Sakakemang Block natural gas development in

South Sumatra.

Mitsubishi with JOGMEC, PAU and Bandung Institute of Technology commenced a study

on a project to produce low-emission ammonia in Indonesia.

Research Analyst:

Joanna Cheah

The Asia CCUS Network

A number of developments on the horizon



26 July 2021


Estimates of CO2 stores capacity in the ASEAN region are uncertain but early indication shows

that the theoretical capacity to store CO2 would likely far exceed the region’s needs. Global

CCS Institute projects that each of the ASEAN countries has a storage capacity of >10bn

tonnes.

Figure 62: CO2 sources and storage potential in Southeast Asia

Source: IEA 2021

In Indonesia, emission sources are concentrated on Java; more than half of the country’s

thermal-power plant fleet is installed there. In addition to Java, there are large emission sites

on Kalimantan Island and Sumatra Island. Indonesia could play a leading role for CCUS

deployment in the region and is already exploring opportunities to advance CCUS

technology across a broad range of sectors (power, industry, upstream oil and gas) and

fuels (coal, biomass, oil).

In the Philippines, the main emitters are concentrated near the capital, Manila. The

potential for early large-scale CCUS projects outside Manila may be limited due to a lack of

concentrated emission sources.

In Vietnam, many industrial emitters – including cement and steel manufacturing – are

concentrated in the north. But assessments of CO2 storage capacity in that area have been

limited thus far.

In Thailand, most industrial activity and emissions are concentrated around Bangkok,

opening the potential for a CCUS capture cluster. Notably, many of the industrial clusters in

Southeast Asia are located near the coast, opening the potential for offshore CO2 storage.

Regulations to facilitate investment in CCUS, in particular CO2 storage, have yet to be

developed in the region, although Indonesia has made the most significant progress. In some

countries, existing oil and gas regulations could serve as a starting point.

Multiple potential sites across the region

Indonesia could play a leading role



26 July 2021


Figure 63: Opportunity factors for CCUS in a selection of ASEAN countries

Brunei Darussalam Indonesia Malaysia Philippines Singapore Thailand Vietnam

Domestic CO2 storage potential

Potential to use CO2 for EOR

Legal and regulatory frameworks for CCUS in place √ √ √ √ √ √

Industrial clusters with Co2 capture prospects

Recognition of CCUS in long-term strategies/ goals √ √

Targeted policies to support CCUS investment

Active pilot or demonstration facilities

Plans for commercial CCUS facilities

= yes, √ = possibly/ partially

Source: IEA, Credit Suisse

Australia

Specific names to highlight would be STO and BPT: Santos (STO) alongside JV partner Beach

Energy (BPT) are undertaking FEED on phase 1 of the Moomba CCS project (1.7mpta), with

ambitions to scale up to 10mtpa. FID is subject to CCS becoming eligible for ACCUs, planned

for 2H21. Phase 1 targets CCS of reservoir emissions from the nearby oil and gas fields, with

lifecycle breakeven cost of A$20-A$30/t (above recent ACCU pricing of ~A$20/t, so one

needs a constructive view on ACCU pricing to see value accretion). Future expansion may be

dependent on CO2 transport from sources further away or blue H2 development, which present

cost challenges.

Gorgon CCS: Australia is home to one of the world’s largest CCS projects (3.4-4mtpa) at

the Gorgon LNG project, which is used to sequester gas reservoir CO2, with over 100mt

CO2 to be sequestered over project life. The CCS project was imposed as a regulatory

requirement for the LNG project (on an ad hoc basis – such requirement does not apply

elsewhere). The CCS project ramped up in 2020 after suffering from cost escalation and

delays.

Policy incentives coming soon: The Australian Government is seeking to incorporate

CCS within its Emissions Reduction Fund (ERF) mechanism, which will allow CCS to qualify

for Australian Carbon Credit Units (ACCUs) as part of a well-established carbon offsets

scheme with recent pricing A$20/t. The policy change to include CCS (amongst other

mechanisms) is expected in 2H21. CCS used for EOR will not qualify for ACCUs under the

proposed changes, as the ERF is designed to aid projects that otherwise wouldn’t be

commercial. The government has also recently provided direct funds to six CCS projects via

the A$50mn CCUS Development Fund (facilitating A$412mn in investment), allocated a

further A$264mn for development of CCUS projects and hubs in the 2021/22 budget and

is seeking to make CCS eligible for funding by the Australian Renewable Energy Agency

(ARENA), although changing ARENA’s mandate has been blocked in the Senate to date.

Under development: Santos (STO) alongside JV partner Beach Energy (BPT) are

undertaking FEED on phase 1 of the Moomba CCS project (1.7mpta), with ambitions to

scale up to potentially 10mtpa. STO say FID is subject to CCS becoming eligible for ACCUs

in 2H21 (per above). Phase 1 targets CCS of reservoir emissions from the nearby oil and

gas fields, with lifecycle breakeven cost of A$20-30/t (above recent ACCU pricing of

~A$20/t). Future expansion may be dependent on CO2 transport from sources further

away or blue H2 development. CCS hubs under consideration: STO is also exploring

offshore NT including depleting Bayu-Undan reservoir as a CCS hub, while Government and

industry are exploring Bass Strait as a CCS hub (CarbonNet) and WPL is exploring

opportunities for CCS at scale, which we think may include offshore WA including as part of

any future Browse project.

Research Analysts:

Saul Kavonic

Peter Wilson



https://www.minister.industry.gov.au/ministers/taylor/media-releases/412-million-new-investment-carbon-capture-projects

26 July 2021


Syngas: Sims (SGM.AX) aiming to create closed loop in metals recycling, outputs could

include plastics, hydrogen and electricity: the Sims Resource Renewal program aims to

convert 1mtpa of auto-shredder residue (ASR) into products by 2030, with several global

sites envisaged. Pilot/demonstration plants for Rocklea in QLD and Campbellfield are at the

planning approval and design stage. The aim is to demonstrate the commercial viability of

producing syngas and a vitrified concrete additive from ASR, with the syngas providing a

feedstock for recycled plastic, hydrogen or electricity.

Carbonation for construction materials: Boral (BLD.AX) one of two construction

materials projects awarded ARENA grant: Boral received a A$2.4mn grant to use carbon

capture to improve the quality of recycled concrete, masonry and steel slag aggregates at

the site of its clinker kiln in New Berrima, New South Wales. Mineral Carbonation

International Pty Ltd received A$14.6mn for a demonstration plant on Orica’s (ORI.AX)

Kooragang Island site, which aims to turn captured carbon dioxide from industrial sources

into carbonates that can be used to manufacture a range of building and construction

products including building materials, chemicals, cements, concretes and consumer

products.

Renewable methane using atmospheric carbon dioxide: APA Group (APA.AX) pilot

plant under construction: APA and partner Southern Green Gas are constructing a A$2.2mn

pilot plant in QLD that aims to produce methane using solar-generated electricity, water and

carbon dioxide from the atmosphere. The pilot plant aims to produce 320kg of hydrogen per

year, converting it into 32GJ of methane.

2050 value of APA’s gas transmission pipelines? Commercial viability of zero or low

emissions gas an important consideration; this could include hydrogen, biogas, renewable

methane, or natural gas with CCS.

Brazil

CCUS potential in Brazil: Brazil has several potential locations for CO2 geological store in

the context of CCUS projects. The country has widespread sedimentary basins, both

onshore and offshore. Noteworthy, many of those basins are located close to the most

relevant emitting sources, in the Southeast region. The potential locations for CO2 storage

include (i) storage in Oil & Gas fields for Enhanced Oil Recovery (EOR), in special on pre-

salt reservoirs, (ii) store in coal deposits, (iii) storage in saline formations, and (iv) storage in

volcanic rocks. However, only part of the CCUS wide potential is captured through the

existing EOR projects in Brazil.

EOR to respond for carbon capture in Brazil: Although Brazil has no specific CCUS

running projects, E&P companies face strict limitations on flaring and associated natural gas

losses, which are imposed by the local regulator (National Agency of Petroleum, Natural

Gas and Biofuels, the ANP). The consequence is that companies like Petrobras are

incentivized to include EOR projects in their portfolio. The benefits are twofold: (i) it helps to

reduce the carbon footprint of their operations and (ii) as they dispose of those gases

(natural gas and CO2) by re-injecting, they can increase production by building-up pressure

in the reservoir.

Petrobras’s emission and CCUS targets. Notably, Petrobras committed to re-inject

40MM ton of CO2 in the next 5 years through Carbon Capture, Utilization and Store

(CCUS) projects. During its Investor Day, in December 2020, the company announced

USD1bn capex for environmental initiatives in their 2021-2025 business plan. In numbers,

Petrobras’s emission goal is to reach 15kgCO2e/boe in the E&P segment by 2025, which

compares to 20kbCO2e/boe OGCI (Oil & Gas Climate Initiative, which includes Petrobras)

target for the same year. For Petrobras, the CCUS projects are part of a wider strategy of

10 sustainability commitments. Those initiatives are divided in five main action axes,

including (i) reduction on emissions and carbon intensity, (ii) reduction in water collection,

Research Analysts:

Regis Cardoso



26 July 2021


focusing on reuse, (iii) zero growth in process waste generation, (iv) action plans on

biodiversity on all PBR’s facilities and (v) investments in social and environmental projects.

Canada

In terms of the Canadian carbon capture ecosystem, there are a number of key historical along

with future plans that we address in three parts:

Lots of Legacy;

Plenty of Prospects; and,

Company Considerations.

Each of these areas is addressed in greater detail below.

Lots of Legacy

Canada has a relatively long history of CCS given some of the requisite conditions, including:

(a) Appropriate geology;

(b) Carbon intensive industries;

(c) Selected economic drivers (e.g. EOR, etc); and,

(d) Selected government incentives and support.

Without delving into a major Canadian history lesson in CCS, Figure 64 highlights some of the

operating CCS assets in the country with a focus on the following:

1. SaskPower’s Boundary Dam coal-fired unit with carbon capture opened in 2014 and

possesses a capacity of about 1mtpa;

2. Shell’s Quest plant received Federal and Provincial grants with a capture capability in

excess of 1mtpa;

3. The Alberta Carbon Trunk Line serves as the CO2 backbone for transmission activities

in part of Alberta’s industrial heartland – with capture from the North West Redwater

Sturgeon Refinery, a fertilizer plant and selected other sources near Edmonton.

Capacity of 14.6mtpa; and,

4. At CNQ’s Horizon facility, the company is capturing 438k tonnes per annum of Co2.

A broader perspective and selected details appears in Figure 64 below.

Figure 64: Operational CCS Projects in Canada

Source: Company data, Credit Suisse estimates, Zeroco2.no

Historically, as with a number of other jurisdictions, various government incentives help stimulate

and support some of these investment activities. Specifically, several legacy projects received a

number of incentives, including:

Operation

Date Facility Status Country Industry

Capture

capacity Capture Type Storage Type

2000 Weyburn-Midale Carbon Dioxide Project Operational Canada Chemical production 3 Post combustion capture EOR



2015 Swan Hills ISCG/Sagitawah Power Project Operational Canada Other na Other Aquifers

2015 Alberta Carbon Trunk Link (ACTL) Operational Canada Oil&Gas 0.3 Pre- Combustion capture EOR

2015 Quest Operational Canada Hydrogen production oil sand upgrading1.20 Industrial Separation EOR

2016Alberta Saline Aquifer Project & Genesee

Demonstration Project Operational Canada Oil refinery 1 Industrial Separation Aquifers

2020Alberta Carbon Trunk Line (ACTL) with Nutrien

CO2 StreamOperational Canada Fertiliser production 0.30 Industrial Separation EOR

2020

Alberta Carbon Trunk Line (ACTL) with North

West Redwater Partnership's Sturgeon

Refinery CO2 Stream Operational Canada Oil refinery 1.4 Industrial Separation EOR

Research Analysts:

Andrew M. Kuske

Hamza Aziz

James Aldis

The Trunk Line Back Bone



26 July 2021


Boundary Dam received C$240m in funding from the Federal government;

Alberta’s government committed C$1.24bn towards two projects targeting reductions; and,

Shell’s Quest heavy oil upgrader in Alberta received C$120m from the Federal government

and C$745m from the Alberta government.

Beyond these legacy government initiatives, the conditions for further capital investment in CCS

look to be accelerating as discussed in the next section.

Plenty of Prospects

With Canada’s proposed escalating carbon prices (as outlined in Figure 65), the economic

viability of CCS looks to be well supported in a number of areas.

Figure 65: Canada Carbon Pricing (CAD/t CO2)

Source: Credit Suisse estimates, Environment and Climate Change Canada, C2ES

Increasing carbon prices combined with forecast carbon emissions from the Western Canadian

petrochemical complex translates into some of the requisite conditions being satisfied for CCS

acceleration. As per some of the earlier content, Canada is a major hydrocarbon producer –

both outright and on a population adjusted. The quintessentially Canadian large landmass

(second largest next to Russia) with only a population of ~38m along with significant

hydrocarbon production helps underpin part of the economic opportunity facing CCS in the

country. Some of this perspective appears in Figure 66 in terms of oil production per capita.

Figure 66: Production of Oil in 2020 (in bbls) / person (Population) / day

Source: EIA, CIA Factbook and Credit Suisse

$0

$20

$40

$60

$80

$100

$120

$140

$160

$180

$200

2021 2022 E 2023 E 2024 E 2025 E 2026 E 2027 E 2028 E 2029 E 2030 E

Increase of $15 CAD/t CO2 per year 2022 - 2030

Projected Carbon Pricing

0

0

00

0

0

0

0 0

0

0

0

0

0

0

0

0

0

0

0

1

United

States

Saudi

Arabia

Russia Canada China Iraq United

Arab

Emirates

Brazil Iran Kuwait

Escalating Canadian Carbon Compliance

Meaningful per capita context



26 July 2021


We also consider Canada’s more than 5m bpd of oil production on the basis of independent

environment rankings as appears in Figure 67.

Figure 67: Environmental Performance Index at-a-glance

Source: Credit Suisse estimates and EPIl

Some of the motivations for Canadian crude production to pursue CCS to a greater degree are

related to a few major factors, including: (a) the longevity of the producing assets (especially for

oil sands with virtually no decline rates); and, (b) relative upstream carbon intensity.

Figure 68: Upstream Emissions - KG CO₂ EQ/bbl Figure 69: Total Greenhouse Gas Emissions/bbl - KG CO₂

EQ/bbl

Source: Credit Suisse, Oil-Climate Index (OCI) Source: Credit Suisse, Oil-Climate Index (OCI)

The existing Western Canadian energy ecosystem is very well developed and already supports

~16 Bcf/d of natural gas production without having significant export capability via LNG. With

that LNG capability coming on the horizon (LNG Canada ~2025 online date) and the country’s

geographic positioning and ample hydroelectric power (about two-thirds of total Canadian

generating capacity), there are significant motivations for greater CCS that can also dovetail

very well into the overall hydrogen strategy.

The Federal Government recently published the “Hydrogen Strategy for Canada - Seizing the

Opportunities for Hydrogen - Call to Action” report. The report stated, in part, “Canada has all

the ingredients necessary to develop a competitive and sustainable hydrogen economy…with

hydrogen playing an integral role, delivering up to 30% of Canada’s end-use energy by 2050.”

Hydrogen has potential to be a cornerstone of Canada’s goal of being net-zero emissions by

2050, in part, given the already well-established ecosystem and the country already being a 10

hydrogen producer globally with ~3m tonnes being sourced per annum from natural gas.

The most recent Federal Government report outlined a series of hydrogen related opportunities

that could be achieved by 2050, including:

57

206

166

57

37

173

204

60

34

71

133

Libya Waha

Canada Athabasca FC-HC SCO

U.S. Texas Eagle Ford Condensate Zone

UK Forties Blend

China Qinhuangdao

Venezuela Hamaca SCO

Venezuela Merey Blend

Brazil Lula

Saudi Arabia Ghawar

Iraq Kirkuk

Nigeria Bonny

Upstream Emissions - KG CO₂ EQ./BARREL CRUDE

0 200 400 600 800 1000

Libya Waha

Canada Athabasca FC-HC SCO

U.S. Texas Eagle Ford Condensate Zone

UK Forties Blend

China Qinhuangdao

Venezuela Hamaca SCO

Venezuela Merey Blend

Brazil Lula

Saudi Arabia Ghawar

Iraq Kirkuk

Nigeria Bonny

TOTAL GREENHOUSE GAS EMISSIONS PER BARREL - kg CO₂ eq./barrel crude

Upstream Total

Environmental Excellence

Hydrogen Highlights



https://www.nrcan.gc.ca/sites/www.nrcan.gc.ca/files/environment/hydrogen/NRCan_Hydrogen-Strategy-Canada-na-en-v3.pdf

https://www.nrcan.gc.ca/sites/www.nrcan.gc.ca/files/environment/hydrogen/NRCan_Hydrogen-Strategy-Canada-na-en-v3.pdf

26 July 2021


“Up to 30% of Canada’s energy delivered in the form of hydrogen”;

Being a top 3 global clean hydrogen producer with a supply of greater than 20 Mt/yr;

Being able to supply low-carbon intensity hydrogen with delivered prices of C$1.50-

C$3.50/kg;

Five million FCEVs on the road along with a nationwide hydrogen fueling network;

Establish a competitive hydrogen export market; and,

Greater than 50% of energy supplied today by natural gas could be supplied by hydrogen

via blending in existing pipelines along with dedicated hydrogen pipelines.

Given the background and history, CCS is likely to be an even greater part of Canada’s broader

energy dynamic as outlined in the next section.

Company Considerations

There is a rather long history carbon capture related initiatives in Canada with one of the most

interesting being the launch of the Alberta-Canada Carbon Capture, Utilization and Storage

Steering Committee with the Province of Alberta and the Federal Government in March 2021

and the Canada’s Fossil Energy Future report between the Province of Alberta and the Federal

Government published in 2008. In terms of company specifics, this section outlines a number of

the public and privates involved in CCS in the Canadian market (and, in some cases, beyond).

The bullets below help provide a bit more context.

Advantage Energy (AAV.TO): This energy producers via a subsidiary called Entropy Inc.

has a number of Memoranda of Understanding for a total of about 1m tpa of CCS using

their own proprietary Modular Carbon Capture and Storage (MCCS) technology. The MCCS

is scaled for projects as small as 8,000 tCO2e/year and reportedly recovers ~90% of

carbon emissions. AAV’s Glacier Gas Plant will be the first area for deployment with an

expected in-service date of March 2022 with a phase one cost of C$27m. This initial phase

is expected to capture, store and offset ~46k tonnes of CO2 per year. AAV estimates the

monetization of carbon offsets to generate operating income of up to C$3m per year based

on a C$50/tonne CO2 price with no escalation. An IRR is expected to be 12% without

carbon pricing escalation. Ultimately, AAV expects to market “blue natural gas” (net zero

supply) when the project is online.

Alberta Carbon Trunk Line (private): Is the main backbone for much of Alberta’s existing

CO2 pipeline transmission network with a capacity of up to 14.6m tonnes per annum. That

figure equates to ~20% of current oil sands emissions in Alberta. The system’s partners

include: Canadian Natural Resources (CNQ); the privately held Enhance Energy; Nutrien

(NTR) and Wolf Midstream.

ATCO/Canadian Utilities (ACOx.TO/CU.TO): The ATCO Group of companies owns a

selection of assets in Alberta and looks to be well positioned with storage and transportation

potential given the geographic positioning in the basin. Recently, ATCO announced a

collaboration with Suncor Energy (SU) for a potential clean hydrogen project near Fort

Saskatchewan, Alberta that will use carbon capture technology to capture more than 90%

of the emissions generated in the hydrogen production process.

AltaGas Ltd (ALA.TO): Given the company’s asset footprint in western Canadian with a

combination of natural gas processing, logistics and storage expertise, we believe a number

of opportunities will exist for various CCS related efforts.

Carbon Cure Technologies from Dartmouth, Nova Scotia enables concrete producers to

re-utilize CO2 into products.

Carbon Engineering: This private company is based in Squamish, British Columbia and is

focused on Direct Air Capture (DAC) for CO2 applications.

Longer-term Hydrogen Highlights



https://www.nrcan.gc.ca/sites/www.nrcan.gc.ca/files/www/pdf/com/resoress/publications/fosfos/fosfos-eng.pdf

26 July 2021


Capital Power (CPX.TO): There are two aspects to this power generator’s carbon capture

efforts: (a) carbon capture plans for selected coal-fired generation units; and, (b) a project to

manufacture carbon nanotubes to be used in concrete various industrial applications from

emissions streams. For the carbon nanotubes project C2CNT is targeting an initial capacity

of 2,500 tonnes of carbon nanotubes per year in 2022 with an eventual production of

7,500 tonnes per annum. The capital costs are estimated at C$20m-C$25m with potential

reduction of 840 tonnes, 4,400 tonnes and 302 tonnes of CO2 per tonne of C2CNT

produced for concrete, aluminum and steel, respectively.

Enbridge Inc. (ENB.TO): With the company’s footprint in Western Canada and throughout

the major producing basins in the US, there are opportunities for carbon capture and

transport across much of the portfolio. There was a legacy proposal from a prior acquisition

for larger scale CCS in British Columbia that could be brought back.

Enhance Energy: A privately-owned, Alberta-based company specializing in CCS focused

on EOR. In addition, Enhance and Wolf Midstream have a service agreement related to the

Alberta Carbon Trunk Line (ACTL).

Husky Energy (now Cenovus Energy): The integrated oil producer received funding to

explore commercialized CCS with Inentys with the VeloxoTherm Capture Process.

Keyera (KEY.TO): The company possesses a meaningful NGL storage business in

Western Canada with key positioning (no pun intended) in the basin for future storage and

pipeline assets that could serve an integrated network. Moreover, a number of processing

facilities in the overall portfolio may face future capital investment given the economics of

escalating carbon pricing and reduction efforts for those kinds of facilities.

North West Redwater Partnership: The North West Redwater Partnership (NWR)

developed a bitumen processing solution that produces ultra-low Sulphur fuels while

incorporating CCS at the Sturgeon Refinery that helps to eliminate ~70% of the refinery’s

total CO2 footprint. The captured CO2 is then sold to third parties for enhanced oil recovery

and permanent storage, including acting as an anchor supply to the Alberta Carbon Trunk

Line. The Alberta government has a 50% ownership in the refinery.

Nutrien Ltd (NTR.TO): Set an objective to launch and scale a comprehensive carbon

program by 2030 that is far-reaching. Additionally, carbon captured from NTR’s North West

Fertilizer Facility provides CO2 to the Alberta Carbon Trunk Line to transport for use in

enhanced oil recovery before permanent storage.

Quest Carbon Capture and Storage: The Quest facility is operated by Shell Canada

Energy on behalf of the Athabasca Oil Sands Project and, to date, has stored over 5 million

tonnes of CO2. The purpose of Quest is to capture CO2 produced at the Scotford Upgrader

and to compress, transport and inject the CO2 for permanent storage in a saline formation

near Thorhild, Alberta. Approximately 1.2m tpa of CO2 will be captured and represents

more than 35% of the CO2 produced from the Scotford Upgrader.

Sask Power: The Crown-owned integrated electricity generator is positioned with the

Boundary Dam CCS facility that captures ~1m tpa of carbon from the coal-fired generator.

Svante Inc.: is another Canadian private company that is involved with a number of oil and

gas producers, including: Husky Energy (now Cenovus Energy) with an effort in

Saskatchewan along with Chevron and Mitsui (Canada) and Total.

Suncor and Mitsui & Co. (Canada) Ltd.: Suncor and Mitsui partnered with a US biotech

and carbon recycling company for a sustainable aviation fuel pilot project.

TransAlta Corporation (TA.TO): With the company’s generation assets (albeit in

transition), there is some potential for carbon capture initiatives.

TC Energy (TRP.TO): The company is exploring a large scale carbon transportation and

sequestration system with a partner that could ship more than 20mtpa.



26 July 2021


Whitecap Resources Inc. (WCP.TO): Acquired the Joffre CCUS project as part of the

NAL combination which sequestered 21,500 tonnes of CO2 in 2020 with plans for that

figure to increase to 45,000 tonnes per annum.

We also note the Carbon XPRIZE was awarded in April from Canada’s Oil Sands Innovation

Alliance (COSIA) with CarbonCure Technologies and UCLA’s CarbonBuilt teams winning the

C$20m NRG COSIA Carbon XPRIZE for work on reducing the carbon footprint of concrete

production. Finally, overall, a number of the regionally exposed Western Canadian energy

infrastructure companies look to have various CCS investment opportunities and the list above is

not comprehensive.

China

As the largest greenhouse gas producer in globe, China is confronted with challenges of climate

change. In September 2020, China announced to hit carbon emission peak by 2030 and

achieve carbon neutrality by 2060. Under such an ambitious goal, carbon capture, utilisation

and storage (CCUS) as well as the energy transition to renewables and improvement in energy

efficiency, might be game changers towards decarbonisation.

Government stance on CCUS

Ready for a step forward: China has been promoting CCUS in key sectors for quite some

time, where the earliest advocacy could date back to the 11th Five-Year Period (2006-10).

Nevertheless, no concrete guidance or incentives (i.e. subsidies on technologies or R&D /

tax credit policy) on CCUS have been introduced in China till now.

Figure 70: Government advocates CCUS as part of efforts to address climate change and achieve decarbonisation

Policy/document name Issuer Year Details

China's policies and actions in response to

climate change (2008)

Ministry of Ecology and

Environment

2008 Explore innovative way to control the greenhouse gas emissions, such as CCUS,

improvement in energy efficiency, and so on

The NDRC’s proposal on promoting the

demonstration projects of CCUS

NDRC 2013 Encourage the carbon-intensive sectors to carry out CCS pilot projects; explore how

to establish the policy incentive mechanisms; facilitate the formulation of CCS

standards

Control on greenhouse gas emission during

13th Five-Year Period

State Council 2016 Carry out large-scale demonstrations of CCUS in coal-based industries and oil & gas

exploration; control the carbon emissions from chemical industries

China’s policies and actions for addressing

climate change (2019)

Ministry of Ecology and

Environment

2019 Increase support for carbon capture, utilization and storage (CCUS) technology;

establish a CCUS special committee under Chinese Society for Environment

Sciences (CSES)

Guidance on accelerating the establishment

and improvement of a green and low-carbon

economic system

State Council 2021 Speed up the upgrade of infrastructure into low-carbon and energy efficient, including

carrying out CCUS demonstrations

Source: State Council, NDRC, Ministry of Ecology and Environment, Credit Suisse research

Even though no crystallized commitment on CCUS has been announced at current juncture,

we do see that Chinese government begun the corresponding layout recently. In March

2021, China established the National CCUS Team to facilitate the formulation of national

CCUS standards and application of demonstrations. Additionally, the National Development

& Reform Commission (NDRC) requested levels of governments to submit the details of

local CCUS projects by end of June 2021, including but not limited to those under

construction and in operation, to better assess the status of CCUS development in China

before any further actions.

We expect China to unveil a more specific guidance or initiate certain incentives to foster the

development and deployment of CCUS during the 14th Five-Year Period (2021-25), given it

could play as an imperative part of effort to meet the carbon neutrality by 2060.

Research Analysts:

Horace Tse

Cynthia Wu



26 July 2021


Milestone Marked: As mentioned in previous sessions, for technologies like CCUS,

economic returns can be challenged without explicit carbon prices at higher levels than

current. As a result, China plans to launch its national emissions trading system (ETS) in

June 2021, embracing the market mechanisms for carbon pricing for the first time. The

ETS focuses on the power sector now, which accounts for ~40% of national CO2 emissions,

and will gradually extent to cover other carbon-intensive sectors in the future. To date, free

allocation of carbon allowance dominates ETS, but the auctioning may be introduced at a

later point of time.

Pilot projects in China

Though China’s CCUS is still in infant stage since it’s crimped by additional carbon

capture/storage cost and technological barrier, the deployment of carbon capture

technology has been steadily scaling up in decades. There are dozens of demonstrations in

relation to CCUS in China at present, with total carbon capture capacity no more than 2

Mtpa.

For the demonstrations, we could see that: (1) large-scale demonstrations mainly focus on

power and chemical sectors, and no demonstration has been launched in some carbon-

intensive sectors, such as steel and transportation; (2) all the demonstrations adopt

enhanced oil recovery (EOR) as CO2 storage, injecting CO2 into oilfield to release additional

oil and increase economic return. Correspondingly, demonstrations usually locate near the

oilfield to save the transportation cost or pipeline construction cost; (3) the scales of China’s

CCUS demonstrations are still far behind that in the US/Canada. The largest operational

demonstration in China can capture 0.41 Mtpa CO2 at maximum, whilst that in US/Canada

has maximum capacity at 7/3 Mtpa respectively.

Figure 71: Large-scale pilot projects in China

Project Location Start year Status Capacity

(‘000 tpa) - max

Industry Storage

Yanchang Integrated CCS Demonstration Shanxi 2012 In Construction 410 Chemical EOR

Sinopec Shengli Power Plant CCS Shandong 2007 Advanced

Development

290 Power EOR

PetroChina Jilin CCUS Industrial Jilin 2009 In operation 1,000 Power EOR

Daqing Oil Field EOR Demonstration Heilongjiang 2003 In operation 200 Power EOR

Sinopec Zhongyuan CCUS Pilot Henan 2015 In operation 120 Chemical EOR

Huaneng GreenGen IGCC Tianjin 2016 Early Development 100 Power EOR

Sinopec Eastern China CCS Jiangsu 2020 Early Development 100 Chemical EOR

PetroChina Changqing Oil Field EOR CCUS Shanxi 2019 In operation 50 Coal-to-liquids EOR

Sinopec Qilu Petrochemical CCS Shandong 2007 In Construction 40 Chemical EOR

China Resources Power Integrated CCS Guangdong 2018 Early Development 25 Power EOR

Shenhua Ningxia CTL Ningxia n.a Early Development 2,000 Coal-to-liquids EOR

PetroChina Xinjiang Oilfield CCUS Xinjiang n.a Under construction n.a n.a EOR

Shenhua Ordos CCUS Pilot Inner Mongolia 2011-2014 Early Development 100 Power EOR

Source: Company data, Credit Suisse research

Note: projects in grey are carried out by Big 3 Oils

Big 3 Oils’ CCUS plan in a nutshell

Aiming to achieve carbon neutrality by 2050, a decade ahead of the national target, China’s

Big 3 Oils are heading to decarbonisation with different focuses. To date, along with the

devotion to energy transition, both Sinopec and PetroChina has dip toes in CCUS, whilst

CNOOC’s current commitment in CCUS is still limited.



26 July 2021


Sinopec (0386.HK): Sinopec has a broad portfolio in terms of CCUS projects, which has

captured ~5 mn tons CO2 over years. Notable pilot projects include Sinopec Shengli Power

Plant CCS, the largest operational demonstration project in China at this moment, which

designed with capture capacity of 0.41 Mtpa. The project adopts post-combustion to

capture CO2 and injects the carbon into Shengli oilfield for EOR.

o Looking ahead, Sinopec plans to capture 0.5 Mtpa CO2 and reduce 12.6 mn tons

of CO2-emission by 2023 (vs base year: 2018). Furthermore, the company

pledges to establish large-scale CCUS demonstrations with capacity over 1Mtpa by

2025. Furthermore, the company said its largest CCUS project – Sinopec Qilu

Petrochemical CCUS – will start operation at the end of the year, marking it as the

first CCUS project with over 1Mtpa capacity in China. The project will capture CO2

during the hydrogen-making process, and inject the CO2 into Shengli oilfield for

enhanced oil recovery purpose.

Figure 72: Sinopec attaches great importance to CCUS

Source: Company data

PetroChina (0857.HK): PetroChina established a renowned pilot project – PetroChina Jilin

CCUS Industrial Project - in 2009, which already captured and stored more than 1.5 mn

tons of CO2 till now. Besides the pilot projects, PetroChina also works in other areas to

foster the development and deployment of CCUS in China. As the sole member of Oil and

Gas Climate Initiative (OGCI) in China, PetroChina actively involves in compiling China

CCUS Commercialization White Paper, which analyses the status quo and challenges of

China’s CCUS development and suggests how to form the commercialization roadmap of

CCUS in China. We expect PetroChina to play a vital role in facilitating the policies

formulation and implementation in high levels.

Coal-fired IPPs’ efforts on CCUS

Coal-fired power accounts for ~70% of China’s total power output, and is also one of the

biggest source of carbon emissions (power industry contributed ~37% of China’s carbon

emissions in 2020). Adding renewable power (such as solar, wind, etc.) is one way to reduce

carbon emission, and at the same time, coal-fired IPPs are also actively researching on CCUS

technologies and trying to achieve better cost efficiency.

Huaneng Power Group: As early as 2007, Huaneng Group and Beijing Government

signed an agreement on CCUS, marking the official launch of China’s first coal-fired power

plant CCUS pilot project. In 2010, the first CCUS facility was put in operation at Huaneng

Group's Beijing Gaobeidian Power Plant, with annual processing capacity of ~3,000 tons of

carbon dioxide (CO2), until this coal-fired power plant was retired in 2017. In late 2020,

Huaneng Clean Energy Research Institute has developed a 1,000ton/year new CCUS

Research Analysts:

Gary Zhou

Sabrina Shao



26 July 2021


facility at Huaneng Changchun Co-generation Power Plant, with relatively less energy

consumption.

China Resources Power (0836.HK): In 2019, the Guangdong Province Carbon Capture

Pilot Project was officially put into operation at China Resources Power's Haifeng Power

Plant. This is also the first CCUS demonstration project for coal-fired power plants in

Southern China. It is estimated that this project can capture 20,000 tons of carbon dioxide

(CO2) per annum.

Huadian Power Group: On 13 May, 2019, Unit 4 of the second phase (2×1000MW)

expansion project of Jurong Power Generation Branch of Huadian Jiangsu Energy passed

the 168-hour full-load test operation, which marked the successful commissioning of

China’s first GW level coal-fired power unit with CCUS technology.

Datang Power Group: On 21 Sep, 2011, China Datang Group and Alstom jointly

announced that the two parties formally signed a memorandum to form long-term strategic

partnership and jointly develop carbon capture and storage (CCS) demonstration projects in

China. On 14 Jan, 2021, its first coal-fired power plant carbon capture and resource

utilization of the entire industrial chain production line demonstration project was put into trial

operation at Shanxi Datang International Yungang Thermal Power Co., Ltd.,

Chen Dai of Credit Suisse Securities (China) Limited ("CSS") provided administrative and other

support in the preparation of this research report that do not require a license. CSS is a Sino-

foreign joint venture between Founder Securities Co., Ltd. and Credit Suisse AG. CSS is not

licensed to provide securities investment advisory service by the China Securities Regulatory

Commission in the People’s Republic of China.

Europe (EU-27)

Outside the UK, we see other European countries developing strategy and implementation plans

for CCUS to contribute to their decarbonization targets. While the list is non-exhaustive, we

have seen significant developments in the following countries:

Netherlands: CCUS is central to reach a decarbonization target of 14Mt CO2 by 2030 in

the industrial sector. The focus is on industrial clusters along the North Sea coast,

supported by the ‘SDE++’ subsidy scheme. The latter covers both opex and capex, for a

maximum period of 15 years, based on the existing EU ETS and adjusted annually. The

scheme is expected to end in 2035, with a total cap of 7.2mt and is subject to no cost-

effective alternatives to CCS being available. On 9 May 2021, the government announced

to have allocated €2bn to the Porthos project (Port of Rotterdam area) over a 10-year term,

with Shell, ExxonMobil, Air Liquide and Air Products being the key beneficiaries.

Norway: The Longship CCS project (including Northern Lights transport and storage, a

capture facility at a cement factory in Brevik and a possible capture facility at a WTE in Oslo)

was approved by government and Parliament in December 2020. The project will receive

direct government investment, covering two thirds of the total project cost (NOK 25bn) and

ten years of operation. Equinor, Shell and Total are currently involved in the storage project

(Northern Lights) through a JV.

Denmark/Sweden: While at an earlier development stage compared to Norway,

governments in Denmark and Sweden are also drafting new strategies regarding CCS.

Projects could include a WTE plant in Copenhagen, an industrial cluster near Aarhus and a

district heating facility in Stockholm.

Germany: Having made CO2 storage illegal following the 2009 EU CCS directive, the

federal government has reconsidered its position and has included CCUS in the Climate

Protection Programme 2030. Under this framework, a public consultation is pending, as

well as a system of financial incentives and regulations.

Research Analysts:

Stefano Bezzato



26 July 2021


Others: Although not part of official government strategies, other projects are being

considered in Northern France (industrial cluster in Dunkerque), Normandy (clusters in Le

Havre and Rouen) and Nouvelle Aquitaine.

India

India does not have a carbon neutral target as yet but only has emission intensity reduction

target. India is having a target in the Paris pledge to reduce its carbon footprint by 33-35%

from its 2005 levels by 2030 and is aiming to outperform those goals.

According to the third Biennial Report submitted to the United Nations Framework Convention

on Climate Change (UNFCCC) in February 2021, India’s emission intensity of gross domestic

product (GDP) has reduced by 24 per cent between 2005 and 2016, thereby achieving its

voluntary goal to reduce the emission intensity of GDP by 20-25 per cent from 2005 levels,

earlier than the target year of 2020. In 2015, India further raised ambition in its nationally

determined contributions (NDC) to reduce the emission intensity of its GDP by 33-35 per cent

below 2005 levels by 2030. India’s share of non-fossil fuel-based energy resources in installed

capacity of electricity generation has already reached 38 per cent against an NDC target of 40

per cent by 2030. It also announced a target of achieving 175 GW of renewable energy

capacity by 2022, which was subsequently enhanced to 450 GW by 2030. However India still

may not be in a position to announce a long-term target such as net zero emissions by 2050 in

the run up to the 26th Conference of Parties in November 2021.

In this context, an Indian public sector oil company, Indian Oil Corporation (IOC) is setting up

a carbon sequestration and storage (CSS) project at one of its refineries. IOC is aiming to set

up industrial carbon capture and utilization project (CCUS) at its Koyali refinery. The project is

said to be India’s largest CSS project. The refinery at Koyali, in Gujarat, can help capture more

than 1.5 mtpa of CO₂but initial project size may be smaller initially to prove viability.

Approximately 750 (+ 20% capacity margin) tons per day of CO₂ is expected to be captured in

Phase-1 and subsequently it will increase to 1500 (+ 10 % capacity margin) tons per day of

CO2 from the same hydrogen generating unit and compressed to approximately 20-22 bar (g)

for transportation by pipeline to the oil fields. Additionally, a portion (100-150 Tonne per day) of

carbon captured by IOCL will be sent to either an offsite purification plant operated by an

external party or an onsite purification (inside IOCL refinery) plant to produce Food Grade CO₂

that will be sold to food and beverage industries in the Gujarat Region.

The CO₂ captured from its hydrogen generation units will be primarily used for enhanced oil

recovery at the Oil and Natural Gas Corporation’s (ONGC) oilfield at Gandhar, Gujarat, near

Koyali. ONGC is another public sector oil exploration and production company.

Oil refineries like IOCL’s Gujarat Refinery, produce their own hydrogen, which is primarily used

in a process to reduce the sulfur content of gasoline and diesel fuel. The Hydrogen Generation Units (HGU) use a Steam Reforming process to convert methane (CH4) and steam (H2O) into

a mixture of H2, CO, H2O, and CO₂. In a preliminary study, IOCL found that the flue gas from

the HGU Reformers contained more than 20mol% CO₂ with low levels of impurities, making it the most ideal refinery waste gas to use for carbon capture. The CO₂ capture process, “carbon

scrubbing” is a mature technology which takes advantage of the reversible reactions between amines and CO₂.

US-based Dastur International as the leading partner to carry out the design and feasibility while

US firm Air Liquide Global E&C Solutions (Air Liquide) and the Bureau of Economic Geology

(BEG) at the University of Texas at Austin are other partners in the project. The project is

funded by the United States Trade and Development Agency (USTDA), as part of its mission to

promote the development of sustainable infrastructure projects and fostering economic growth

in partner countries like India.

Research Analysts:

Lokesh Garg

Gaurav Birmiwal



26 July 2021


Mexico

CCS Overview in Mexico: Mexican government has shown interest in CCS technology

since the last decade aiming to comply with their targets in emissions reductions. According

to the Mexican Law of Climate Change approved in 2012, the target is to reduce 2000’s

emissions in 50% by 2050. Since 2012, the Mexican Government has identified the areas

in which carbon can be stored. Likewise, in 2014, several generation plants close to oil

fields and located in areas suitable for storage, were identified as potential candidates; as

the CO2 injection into oil fields improves the hydrocarbon flow increasing recovery rates.

Figure 73: CO² emitted by new natural gas power plants located within the inclusion

zones suitable CO²-EOR located close to the oil field

Source: ELSEVIER (International Journal of Greenhouse Gas Control)

In Mexico, the CCS technology strategy implementation has consisted into two pilot projects:

Poza Rica and Brillante. Poza Rica project started in 2015, which includes a carbon capture

plant in Poza Rica Thermoelectric Power Plant (243 MW), a combined cycle power plant owned

by CFE (power state-owned company). The Brillante project started in 2014, aiming to study

the viability of transportation of carbon from Cosoleacaque (533 Mton/yr) via trucks, and the

eventual storage in fields reservoir in the state of Veracruz (70 kms away).

In addition, few other CC projects have been identified in Mexico, mostly on refineries. Here is a list of these projects:

Alatamira – Tamaulipas Constituciones: Capture of 2 Mton/year from Thermoelectric and

potential storage in Tamaulipas field.

Morelos – Cinco Presidentes: Potential capture of 1.42 Mton/year to be stored in Cinco

Presidentes field.

Tuxpan Noreste – Campos Constituciones: Use and storage of 6.2 Mton which could be

used in Amatlan field.

Cangrejera – Ogarrio: Potential capture of 3 Mton/year to be stored in Ogarrio field.

Poza Rica – San Andres: Capture of 40 Mton/year to be stored in San Andres field.

Stock Specifics

Several companies had set targets to reduce its carbon footprint or to achieve net zero carbon

emissions. However, in Mexico, we understand only Cemex has announced an agreement with

Carbon Clean regarding specific projects for CCS. Amounts haven’t been disclosed, and

projects are located outside Mexico.

Research Analysts:

Alejandro Zamacona



26 July 2021


United Kingdom

Background to CCUS in the UK There are some hard to decarbonise sectors in the UK economy which would struggle to meet

‘net zero’ by 2050 (e.g. cement, refining, steel and chemicals). Or would meet CCUS at a very high economic cost. Therefore, by definition:

(1) Some carbon capture, utilisation and storage would be required; and/or (2) Sources of negative CO2 emissions would be required to balance it.

The UK Government has an ambition to capture 10MTCO2 pa by 2030, and according to the

industry body, cumulative savings of 40MTCO2 across 2023-32, or c9% of UK emissions. It is true that the Government pledged support is twice in the past 15 years, but on each of the past

two occasions it was dropped. But the ambition on CCUS in 2006 and 2014 was not as great,

the projects were limited in scope and other technologies such as offshore wind were taken forwards instead. This time, there is far more momentum, not least because the UK is hosting

COP26 and has net zero legislation. How the Government will approach CCUS

Figure 74: Potential CCUS Clusters in the UK


Support for CCUS on power generation goes hand-in-hand with plans to support areas with large industrial emissions. The Government will do this by creating two ‘low carbon industrial

clusters’ by the mid-2020s and four clusters by 2030. These clusters are large areas with industry (Grangemouth, Teesside, Humberside (x2), Merseyside, South Wales, and

Southampton). They will use CCUS and Hydrogen to help support industrial processes, and

capture value through local content and training. Humberside has one of the largest CO2 emissions.

The Government is developing a Transport and Storage regulation model. This will most likely

be under a regulated asset base, as used in energy and water networks in the UK. It would be a

company such as Storegga or National Grid that undertakes this investment. There is work to

NameRegion (NUTS

Level 1)Project Partners

Annual CO2 to be captured

(million tonnes)

Which company

stores carbon

Power stations

involved

Zero Carbon

Humber

Yorkshire and

the Humber

ABP, British Steel, Centrica, Drax, Equinor, Mitsubishi

power, px group NG ventures, SSE Thermal, Uniper,

University of Sheffield

10 Equinor / Centrica

Drax power station,

SSE Keadby, Triton's

Saltend power station

Humber ZeroYorkshire and

the HumberPhillips 66, Vitol 8 VPI Immingham

HyNet North West North WestEni, Essar, Progressive energy, CF Fertilisers, Cadent

gas, Hanson, Inovyn, University of Chester10 Eni Rocksavage

Neccus (Acron) ScotlandCairn Energy, Chrysaor, Crown Estate Scotland,

PetroIneos, SGN, Shell, and SSE Thermal9.3 Peterhead

SWIC Wales

CR Plus Limited, ABP, Capital Law, Carbon 8 Systems,

Celsa Steel, Confederation of Paper Industries, Connect

and Convey Ltd, Costain, Dragon LNG, Energy Systems

Catapult, ERM, Front Door Communications, Industry

Wales, Liberty Steel, Port of Milford Haven, NGET,

Neath Port Talbot Council, Offshore Renewable Energy

Catapult, Pembrokeshire County Council, Progressive

Energy, ROCKWOOL Ltd, RWE, Siemens, Tata Steel,

Tarmac, University of South Wales, Vale Europe, Valero

Energy, Western Bio-Energy, WPD and WWU

16 Pembroke

Net Zero

TeessideNorth East Five OGCI members (BP, Eni, Equinor, Shell and Total) 10 Equinor

New OGCI gas-fired

power station

Southampton South EastScotia Gas Networks, Macquarie’s Green Investment

Group (GIG), University of Southampton2.6 n.a.

*18 MtCO2/y is the overall emissions of Humber region of which Humber Zero project aims to capture 8MtCO2/y

Research Analyst:

Mark Freshney



26 July 2021


undertake on decommissioning, and the objective is to have a business model in place during

2022. There would also be a £1bn fund mostly for CCUS infrastructure, and our understanding

is that this will help create pipelines and a local grid for CO2.

Given that costs of CCUS are largely fixed, there are two items: (1) There needs to be as much CO2 as possible put into the infrastructure, so that costs are shared and come down as quickly

as possible; and (2) Ideally, a power generation plant which could put the power onto the grid would be required to quickly generate a source of CO2.

The UK is seeking to become a leader in CCUS

The end position would be that there would be a number of CCUS clusters across the UK. But

not all clusters will have access to pipelines that can take carbon into depleted oil fields. Particularly in South Wales and Southampton, for example. Access to shipping facilities to get

the CO2 to the East Coast is therefore a consideration, either to take CO2 from other clusters, or else to transfer it to a vessel for transportation that does have access.

The industrials would need to invest in capture technology. And this would be a contract of up to

15 years. There would be government funding available for the initial projects. Direct Ait

Capture with CCS would also be options, and the government is working on stimulating these.

There will be details of a mechanism developed through consultations in 2021. The business models for CCUS will be finalized in 2022.

CCUS in power generation

Figure 75: Potential CCUS Projects in the UK


As mentioned earlier, capture equipment on the back of a power station would be one of the easiest ways to help pay for the fixed cost infrastructure. There would be support under a

“Dispatchable Power Agreement”, whereby there is an availability payment and a variable payment based on marginal cost over the power price, to avoid crowding out renewables. It

would be 10-15 year contracts taking precedent from the CfD and capacity market contracts. There would be ‘change in law’ provisions to protect future investment. The model should be

finalised in 2021. And the Government wishes to take one project forwards.

There are a number of companies looking into this. For example, VPI are looking into

Immingham (Humber Zero), and SSE is working on Peterhead (Acorn) also Humber (Zero Carbon Humber). The technology would be a first of a kind, and would not have high load

factors. But it could help stimulate investment, particularly for the early projects.

Name LocationCapacity

(MW)Owner Technology

Parent Project

Operational Date

Drax BECCS Selby, England 460 Drax Power, C-CaptureBECCS (Bioenergy with carbon

capture and storage)2027-30

Keadby 3 Scunthorpe, England 910 SSE Thermal, Equinor CCS (Carbon capture and storage) Mid-2020s

Peterhead Aberdeenshire, Scotland 900 SSE Thermal, Equinor CCS (Carbon capture and storage) 2026

VPI Immingham, England 1240 Vitol CCS and Hydrogen Production 2025

Rocksavage Liverpool, England 810 Hynet NorthWest, InterGen Low carbon Hydrogen with CCS Mid-2020s

OGCI Teesside, England 2100BP, Eni, Equinor, Shell and Total

(BP to be the operator)

CCUS (Carbon capture utilization

and storage)Mid-2020s



26 July 2021


Biomass-enabled carbon capture and storage

One company—Drax—is focused upon biomass enabled carbon capture and storage. This would be a negative carbon project, and would require a CfD-type instrument that would allow

the asset to run baseload. The Government is seeking evidence on biomass-enabled CCUS,

and a Government strategy on biomass is due in 2022, recognising that there is some NGO concern on sustainability of biomass in power generation. We anticipate that once these have

been launched, Drax would start FEED studies for a BECCs facility to help create negative emissions. We expect the earliest Drax could take an investment decision would be in late 2023,

subject to Humberside being a successful ‘low carbon cluster’ and other competing projects not going ahead. Note that our experience is that timelines normally slip to the right.

United States

We address four distinct areas for the United States:

Midstream;

Equipment/Industrials;

Energy, Refiners & Renewable Fuels; and,

Utilities and Alternative Energy.

Each of these areas is addressed in more detail below.

Midstream

The Midstream Opportunity

We see three key areas where US Midstream operators can participate in carbon capture: CO2

pipeline expansion, carbon neutral LNG, and G&P operations.

CO2 Pipeline Expansion: We believe the buildout of a CO2 pipeline network is the most

obvious opportunity for midstream to participate in the growing carbon capture industry.

According to the Global CCS Institute, the global CO2 transportation infrastructure capacity

will need to increase ~100x in the next 30-40 yrs from current levels to support halving

energy related CO2 emissions by 2050. With a majority of US CO2 pipelines supporting the

EOR industry, a significant increase in CO2 pipes connected to point source emitters will

likely be needed. According to the National Petroleum Council, the US CO2 pipeline

network will need to increase 10x current levels to reach At Scale Development (500mtpa

capacity).

Carbon Neutral LNG: We believe LNG operators can use carbon capture technology to

lower the carbon intensity of LNG cargoes. LNG projects are increasingly focused on

reducing GHG emissions of cargoes as demand for low carbon fuels increases for

downstream demand centers. This focus was recently in the news as Sempra announced

that it expects to delay its Port Arthur LNG project FID to ’22 to address GHG emissions.

Cheniere has also stepped up its efforts, shipping its first carbon neutral cargo with Shell

this year as well as announcing an emissions tag initiative. Notably, NextDecade recently

announced a CCUS project which, coupled with smaller initiatives, will make its Rio Grande

LNG cargoes carbon neutral on an FOB basis.

Integrated G&P Operations: Midstream companies with significant gas processing

operations or downstream petrochemical footprints can use carbon capture to lower

emissions at these facilities. Notably, gas processing currently represents one of the most

viable industries to use carbon capture due to the high concentration of CO2 in the flue gas

stream.

Research Analysts:

Spiro Dounis

Chad Bryant

Doug Irwin



26 July 2021


Which US Midstream Companies Are Most Poised to Benefit? We believe KMI, NEXT

and NFE are all early movers in the carbon capture industry. KMI has the only significant

CO2 (EOR) business of any US midstream company under coverage and its operations

cover the entire CCUS value chain. KMI is the largest operator of CO2 pipelines in the US

and its Energy Transition Ventures group views additional CCUS opportunities as a near

term pursuit. NEXT is pursuing a proprietary carbon capture project capable of capturing

more than 5 mtpa of CO2 at its proposed Rio Grande LNG facility. NEXT’s Rio Grande

project is currently the only US LNG project offering carbon emission reduction via CCS

technology. NFE’s Zero Parks JV is pursuing a blue hydrogen project which will incorporate

carbon capture. The JV aims to transport the CO2 to demand centers for use to improve

economics of the project.

CCUS has existed in the US since the 1970’s. Today there is >20MTPA of operational

capacity which is roughly 2/3rds of global CCUS capacity. The US is also home to 85% of

the world’s CO2 pipelines with more than 5k miles in place.

Most existing US CCUS facilities utilize EOR rather than dedicated geological storage.

Notably, the majority of announced projects moving forward utilize geological storage, likely

driven by recent clarification of the 45Q tax credits, which offer a ~$12-$15/mt premium

for geological storage vs other end uses.

The Petra Nova CCUS plant, operated by NRG in Texas, suspended operations in 2020.

The facility was the only CCUS Coal Plant in the US and shut down indefinitely, in part due

to oil price volatility, highlighting one of the complexities of using captured CO2 for EOR.

Figure 76: US Project Pipeline

Source: Credit Suisse Research, CCS Institute, Wood Mackenzie



Project Interseqt - Hereford Ethanol


Project Interseqt - Plainview Ethanol


Wabash CO2 Sequestration 2022 Advanced Development Fertilizer Production 1.75 Industrial Seperation Dedicated Geological Storage

San Juan Generating Station Carbon

Capture 2023 Advanced Development Power Generation 6 Post-combustion Capture EOR

Cal Capture 2024 Advanced Development Power Generation 1.4 Post-combustion Capture EOR

Velocys' Bayou Fuels Negative

Emission Project 2024 Early Development Chemical Production 0.5 Industrial Seperation Dedicated Geological Storage

OXY and Carbon Engineering Direct Air

Capture and EOR Facility Mid-2020 Early Development Air 1 Industrial Seperation EOR

LafargeHolcim Cement Carbon Capture Mid-2020 Early Development Cement Production 1.5 Industrial Seperation In Evaluation

Gerald Gentleman Station Carbon

Capture Mid-2020 Advanced Development Power Generation 3.8 Post-combustion Capture In Evaluation

Mustang Station of Golden Spread

Electric Cooperative Carbon Capture Mid-2020 Advanced Development Power Generation 1.5 Post-combustion Capture In Evaluation

Prairie State Generating Station Carbon

Capture Mid-2020 Advanced Development Power Generation 6 Post-combustion Capture Dedicated Geological Storage

Plant Daniel Carbon Capture Mid-2020 Advanced Development Power Generation 1.8 Post-combustion Capture Dedicated Geological Storage

Lake Charles Methanol 2025 Advanced Development Chemical Production 4 Industrial Seperation Dedicated Geological Storage

Dry Fork Integrated Commercial Carbon

Capture and Storage 2025 Early Development Power Generation 3 Post-combustion Capture Dedicated Geological Storage

Red Trail Energy BECCS Project 2025 Early Development Ethanol Production 0.18 Industrial Seperation Dedicated Geological Storage

The Illinois Clean Fuels Project 2025 Early Development Chemical Production 2.7 Industrial Seperation Dedicated Geological Storage

Clean Energy Systems Carbon

Negative Energy Plant - Central Valley 2025 Early Development Power Generation 0.32 Oxy-combustion Capture In Evaluation

Project Tundra 2025 Advanced Development Power Generation 3.6 Post-combustion Capture Dedicated Geological Storage

The ZEROS Project Late-2020 In Construction Power Generation 1.5 Oxy-combustion Capture EOR

NEXT Carbon Solutions 2025 Early Development LNG Production 5 Post-combustion Capture Dedicated Geological Storage

Valero Carbon Pipeline 2024 Early Development Ethanol Production 5 In Evaluation In Evaluation

Summit Carbon Solutions 2024 Early Development Ethanol Production 10 In Evaluation In Evaluation



26 July 2021


How Is CCS Regulated?

Figure 77: US Credits Supporting CCS

Source: Credit Suisse Research, US Federal Register, US Department of Energy, California Air Resources Board

45Q Tax Credit: The 45Q tax credit program is a US federal credit to incentivize carbon

capture. In order to be eligible to receive the credit, a company must own the capture

equipment and ensure CO2 is stored or utilized. That said, the company may transfer the

credit to the end user.

California’s LCFS Credit: California’s Low Carbon Fuel Standard offers carbon capture

projects incentives if the fuel associated with the project is consumed in California,

regardless of project location. One exception to this is Direct Air Capture projects, which are

eligible to receive the credit regardless of location. Similar to the 45Q credit, the entity that

captures the CO2 is eligible to receive the credit. As shown above, this credit is more

valuable than the 45Q program.

Other US Developments: President Biden specifically mentioned using carbon capture in

various industries as a part of his emissions reductions target. This likely indicates continued

federal support of the carbon capture industry. Notably, the Department of Energy just

announced its latest round of carbon capture funding; $99mm to two projects.

Equipment/Industrials – U.S. Multi-Industry

Hydrogen, a growing opportunity within the energy transition theme

The following section focuses on: EMR, FLS, GE, GTLS, IR, and HON

Chart Industries: Since GTLS divested its Cryobiological products business in August

2020, the company has taken several strategic steps to increase their exposure in high

growth, high margin specialty markets, primarily in hydrogen, water, and carbon capture.

Similar to its strategy for LNG, Chart is focused on equipment and process versus owning

the production of the molecule itself.

Research Analysts:

John Walsh

Tamjid Chowdhury

Jing Zhang



26 July 2021


Figure 78: Chart Industries Partnership/ Acquisition Since Cryobiological Divestiture

Source: Company data, Credit Suisse

Chart has supplied into the hydrogen market for over 50 years, including 800 storage tanks

with sizes ranging from 3k to 170k gallon and end market applications including fuel cell

electric vehicles [FCEV] fuel stations, fuel cell forklift fueling, liquefaction, aerospace and

industrial. However, recent acquisitions/ partnerships suggest that the company is focused

on liquid hydrogen as one of its growth vector. Liquid hydrogen has a volumetric advantage

over its gaseous counterpart and is about three times denser that gaseous hydrogen used in

FCEVs. Liquid hydrogen can also be transfer between containers in a more efficient way

when compared to gaseous hydrogen. Chart is also making organic investments in

development of liquid hydrogen pump, hydrogen vehicle tanks (similar to HLNG vehicle

tanks), and additional sizes of hydrogen trailers, and expects to have certification for its

liquid hydrogen storage tank from the Chinese government in in Q221. The company also

sees growth opportunity for its custom-engineered brazed aluminum heat exchangers

(BAHX) that can be used in hydrogen liquefaction. The company expects to benefit from

larger core size BAHXs as production capacities increase from 10-20 megawatt range

currently, to 100+ megawatt facilities (example: steel production). Given the company’s

broader strategy to increase its exposure to interlinkage of clean energy, Chart has also

made acquisitions in water treatment and carbon capture companies which they expect to

benefit from growth in green and blue hydrogen.

TAM Discussion: Subsequent to their investment in Cryomotive, a hydrogen vehicle and

refueling technology company, Chart positively revised their hydrogen TAM to $2.4B from

$2.3B. The $100mn increase was driven by Crymotive’s CcH2 applications. Chart’s TAM

estimates does not included hydrogen pumps for non-Cryomotive applications.

Date Company Type Relevant Market

Aug-20 Firstelement Fuel Development agreement LH2 Automotive

Sep-20 Plug Power Master Supply Agreement LH2 Storage and Transport

Oct-20 McPhy Investment + MOU Zero-carbon H2 production and distribution

Oct-20 Cryogenic/ H2 Trailer assets (from WOR) Acquisition LH2 trailer, Repair/ Leasing footprint

Nov-20 BlueInGreen Acquisition Water treatment

Dec-20 HTEC Investment + MOU H2 fuel supply solutions

Dec-20 SES Acquisition Carbon capture

Jan-21 Matrix Service Company MOU H2 liquefaction, marine bunkering, fueling stations

Feb-21 Svante Investment + MOU Carbon capture

Feb-21 Ballard Power Joint Development MOU On board LH2 storage and vaporization

Feb-21 Cryo Technologies Acquisition Helium and H2 liquefaction process

Mar-21 Transform Materials Investment + MOU H2 Process

May-21 Cryomotive Investment + MOU H2 storage and refueling

Jun-21 Earthly Labs Investment + MOU Small-scale carbon capture



26 July 2021


Figure 79: Hydrogen TAM

Source: Company data, Credit Suisse

Hydrogen Industry Participation: Chart is also part of the "Hydrogen Forward" initiative,

which includes a coalition of 11 companies from all parts of the hydrogen value chain to

focus on advancing H2 development in the U.S. Further, the company is a participant in US

Department of Energy “H2@Scale” project which intends to show renewable hydrogen’s

cost effective applicability in various end markets (FCEV and baseload stationary power). On

4/5/2021, Chart announced that the company formed the FiveT Hydrogen Fund, a clea-

hydrogen focused private infrastructure fund, along with Plug power and Baker Hughes.

Chart committed €50mn of the total €260mn in the fund.

Flowserve: Flowserve currently provides pump, seals, and valves into the hydrogen market

primarily in the process of steam methane reforming [SMR] (i.e. production of hydrogen

from natural gas) with customers including fertilizer producers and refiners. The company

also has product offerings for carbon capture/sequestration (ex: SIHI liquid ring compressor)

which allows for extraction of carbon from a process and reinjection back into the process.

Further, FLS' offerings are most applicable to hydrogen processing and do not focus on the

storage and electricity/ power side. FLS believes that the combination of their offerings in

SMR and carbon capture will allow them to be a player in blue hydrogen. While energy

transition projects are not a significant portion of revenue, the company expects that to

change as customers start to scale. Flowserve plans to make both organic and inorganic

investments around these technologies.

Ingersoll Rand: Ingersoll Rand identified the hydrogen refueling/dispensing market as a

key growth opportunity and expects to accelerate new product introduction through further

investments. In 2020, the company launched a small-scale, cost effective standalone

hydrogen filling station through its Haskel business. These refueling stations can serve

FCEVs including material handling equipment, light duty vehicles, and small scale

demonstration projects for heavy duty vehicles. Ingersoll Rand expects hydrogen refueling

station count to reach 5,000 by 2027, and account for $2.5B of total addressable market.

Emerson: Applications for hydrogen are accelerating across the following four use cases,

and Emerson has capabilities applicable to each one: 1) blending into natural gas, 2) fuel

infrastructure for transportation, 3) industrial processes (steel, cement, petrochemicals), and

4) power generation (via electrolyzers). The green hydrogen wave creates a robust roadmap

for Emerson’s technologies to capture $750mn+ automation opportunities across the

hydrogen value chain. EMR sized their electrolyzer opportunity at $15mn per gigawatt, along

with the benefit from other hydrogen related investments.

Chart Offerings

• H2 vehicle fueling stations, transport equipment and

liquefaction storage at H2 production sites

• H2 storage and mobility equipment

• BAHX for H2 liquefaction

• H2 liquefaction

• CcH2 Equipment

Drivers of Size Opportunity

• Buildout of hydrogen fueling infrastructure

• Development of “green hydrogen” industry

• Government stimulus packages

• Brand name fast followers

Hydrogen TAM:

$2,400mnArticle intended for:


26 July 2021


Figure 80: Emerson Technology in Hydrogen Value Chain

Source: Company data, Credit Suisse estimates

General Electric: GE has highlighted the ability of their HA gas turbine platform, which has

the ability to operate on hydrogen-based fuels. GE will provide their 7HA.02 combustion

turbine to Long Ridge Energy’s terminal in Hannibal, Ohio, slated to operate on carbon free

hydrogen over the next decade. On broader energy transition theme, GE expects growth to

accelerate driven by their offshore, onshore wind, and HA gas offering. As highlighted

previously, on 6/14/21, GE Aviation and Safran launched a technology development

program “RISE” to produce engines with 20%+ lower fuel consumption and CO2 emissions,

compared to the current CFM Leap family, which could enter service by the mid-2030s.

This would use open rotor technology and run on either SAF or liquid hydrogen fuel (GE:

Quick Thoughts on Aerospace Recovery and FCF Model Update).

Honeywell: HON sees carbon capture and hydrogen SAM (Serviceable Addressable

Market) of $3B with 50% market CAGR. The company participates across the hydrogen

value chain, from production (acid removal/ purification, electrolyzer technologies) to

transmission and distribution (technologies for injecting H2 into transmission lines) to

consumption (H2 combustion systems). UOP’s H2 purification technologies installed base

includes 1,100 installations.

Energy, Refiners and Renewable Fuels

Valero Energy Corp (VLO)

VLO and BlackRock Global Energy have announced that they are partnering with Navigator

Energy Services to develop an industrial scale carbon capture pipeline system (CCS). The

initial phase is expected to span more than 1,200 miles of new carbon dioxide gathering and

transportation pipelines across five Midwest states with the capability of permanently storing

up to 5 million metric tonnes of carbon dioxide per year. Pending third-party customer

feedback, the system could be expanded to transport and sequester up to 8 million metric

tonnes of carbon dioxide per year. Navigator is expected to lead the construction and

operations of the system and anticipates operations to begin late 2024. Valero, one of the

largest ethanol fuels producer in North America, is expected to become an anchor shipper

by securing a majority of the initial available system capacity. The project has two benefits

from VLO: 1) Its gets IRS 45Q credits for the 5 million metric tonnes of carbon dioxide per

year its captures and sequesters; and 2) the process lowers the carbon intensity of the

ethanol from 65-67 gCO2e/MJ to 42-44 gCO2e/MJ.

Hydrogen Value Chain Opportunity Size Emerson Technology

1 GW Electrolyzer $15mn• PLC

• Pressure

Green Ammonia $15mn• DeltaV DCS

• Fisher GX Control Valve

500 Mile Pipeline $10mn• SCADA

• Bettis Actuator

Fueling Station $75k• Hydrogen Coriolis Flow Meter

• Shutoff Valves

H2 Vehicle $5k• Pressure Regulators

• Polymer Pressure Welding

Gas Power -• Turbine Controls

• Ovation DCS

Renewables -• Ovation Micro Grid Controller

• Turbine Vibration Monitoring

Research Analyst:

Manav Gupta



https://plus.credit-suisse.com/s/V7r2gb4AF-YY4s

https://plus.credit-suisse.com/s/V7r2gb4AF-YY4s

26 July 2021


EBITDA upside under IRS 45Q tax credit: The IRS 45Q tax credit value for sequestered

CO2 is approximately $50 per tonne. We estimate this creates an EBITDA upside of

$250M (5 Million Metric ton *$50/ton) under the IRS 45Q tax credits. Even if we assume

VLO pays $30-$40M a year in pipeline tariff, that’s still +$200M in EBITDA upside

associated with CCS project.

EBITDA upside under LCFS credit: Carbon capture associated with ethanol production

lowers the carbon intensity of the ethanol produced by ~25 gCO2e/MJ. If the product is

then sold in California it will generate LCFS credit if $0.67/gal (corresponding to ~25 lower

CI score).

VLO owns 13 ethanol plants that produce ethanol and various co-products. Renewable

diesel and ethanol are both low-carbon transportation fuels. Approximately 64% of VLO’s

ethanol production facility are in States through which this new pipe will pass. We assume a

high percentage of the ethanol produced from these location will see a significant reduction

in carbon intensity once the projects is up and running. If we assume VLO can sell 20% of

the lower CI ethanol (215 M gallons) in one of the LCFS markets – Currently: California &

Oregon, Possibly: Washington and New York or Canada (2022), then it can make

$0.67/gal in LCFS / CFS credits. That’s almost $145M in upside from LCFS credits.

Again if we take out transportation cost to these markets, this is still a $100M EBITDA

upside business.

Green Plains Inc. (GPRE)

GPRE has partnered with Summit Carbon Solutions (SCS) for a carbon capture and

sequestration project for a total pledged commitment of 658 million gallons of annual

capacity that translates to approximately 1.9 million metric tons of carbon captured and

sequestered annually. Carbon capture associated with ethanol production lowers the carbon

intensity of the ethanol produced by ~25 gCO2e/MJ. We estimate EBITDA upside potential

of $98M annually with Low Carbon Fuel Standard Credits (LCFS) credits (lower CI ethanol

making its way to one of LCFS markets). CCS also creates IRS 45Q tax credits, and we

estimate EBITDA upside potential of $95M (1.9 million metric tons *$50/ton). Even if we do

assume a CO2 transportation cost of $30-35M, we estimate CCS could create $150-

160M EBITDA upside potential. Unlike VLO that has a take or pay agreement with

Navigator, GRPE is actually an equity owner in this project. GPRE believes the partnership

structure that SCS has put in has better chance of attracting partners that a take or pay

offtake agreement, although each partner will have to put up his share of capital to build the

pipe.

Aemetis Inc. (AMTX)

The Aemetis Carbon Capture project at the Aemetis biofuels plant near Modesto was cited

by an October 2020 Stanford Carbon Capture Center study as one of the most sustainable

and highly profitable potential CCS projects in California. The Aemetis Keyes ethanol plant

was ranked as one of the top-three CCS sites in the state compared to the largest 61

carbon emission sources.

Each of the two wells AMTX plans to put on place for its CCS (Carbon Capture and

Sequestration) program can hold up to $1 million metric tons of CO2 per year. Once all of

AMTX projects are up and running, AMTX would be producing up to ~370,000 metric

tonnes of CO2 each year. This would be 20% of the capacity of the two wells. We expect

AMTX will be able get 3rd party volumes to capture and sequester CO2 at its 2 well sites. In

our blue sky scenario, we assume AMTX can contract 75% of the spare capacity to 3rd

parties (1.2 million Metric tons). Assuming the benefit of LCFS and IRS 45Q credits, this

adds $305M to top line. If we assume some sort of profit sharing, and take out $50M which

is passed back to refiners for signing the contract, this still adds $250M EBITDA upside to

CCS business.



26 July 2021


AMTX’s own volumes could add $93M upside based on LCFS and IRS 45Q credits. Adding

the two earnings streams, we see CCS business growing to ~$350M by 2025-2026.

Utilities and Alternative Energy

Cost Reductions Required to Compete with Renewables and Batteries

Carbon capture technologies still in early stage

Carbon capture technology is in early development stages as globally there are only 59 CCS

projects either in operation or development according to the Global Carbon Capture and

Storage Institute (GCCSI). Collectively these projects have a capacity to capture 127 mtpa

of CO2 (in 2019 35 mt was captured via CCS). However of this, only 21 are in operation

and 3 are in construction, leaving 35 in development. If we further narrow scope to blue

hydrogen, there are only four operational hydrogen facilities using CCS operational, with two

more in advanced development and three in early development. Most CCS applications

historically have been for natural gas processing.

GCCSI indicates that the cost of carbon capture varies over a wide range (<$10/t to

>$70/t), which is predominantly driven by the concentration of the CO2 stream being

captured. Choosing the correct point of capture could lead to attractive capture costs; PSA

tail gas has a CO2 (mol/mol) share of just over 50%, which in reference to GCCSI’s cost

ranges could deliver capture costs below $30/t (GCCSI notes that 27% concentration

streams have a cost range of ~$30-40/t), in addition to $15-20/t processing costs, thus

~$45-50 in total). This is similar to costs provided by the British Columbia study. However

capture at other points may be more costly (e.g. the Shifted Syngas has a CO2

concentration of 16% and 21% for the flue gas, however as shown before different CO2

capture rates are possible at these locations), and the IEA provides estimates at a slightly

higher range of $50-80/t for the cost of SMR CO2 capture. Another useful reference is

analyzing data points from some current projects:

Figure 81: Summary of Global CCS Projects Figure 82: Estimated Global Storage Capacity (GtCO2)

Source: GCCSI Source: GCCSI

Research Analysts:

Maheep Mandloi



26 July 2021


Figure 83: Carbon Capture & Storage – Cost Breakdown

Source: GCCSI

In our LCOH model we assume carbon capture and processing cost $50/MT and $35/MT for

transport and storage costs, for total CCS costs of $85/MT. This contributes $0.77/kg to the

LCOH of blue hydrogen. However, this can be counteracted by lower carbon costs for blue

hydrogen. 90% of the emissions from grey hydrogen production could be captured using CCS

(i.e. 9kg of CO2 per kg of hydrogen).

Blue hydrogen - Balancing CCS Costs with CO2 Costs

Blue hydrogen is equivalent to grey hydrogen plus carbon capture (CCS). In other words,

blue hydrogen achieves parity with grey hydrogen when carbon prices equal to CCS costs.

We therefore use the results of Levelized grey hydrogen cost as the starting point of the

blue hydrogen cost analysis. We estimate blue hydrogen cost of $2.66/kg, assuming

carbon capture cost of ~$0.77/kg (carbon capture cost $30/MT, and carbon processing

cost of $20/MT). We do not assume any incremental cost of carbon compliance, however

Blue H2 is competitive with grey hydrogen if carbon compliance price is >$85/MT.

Figure 84: Levelized cost of grey hydrogen

Source: Credit Suisse Research



26 July 2021


Figure 85: Blue hydrogen is competitive for carbon price >US$85/MT

Source: Credit Suisse Research

Bloom Energy (BE)

Bloom is a US-based manufacturer of solid oxide fuel cells that produces electricity using a

patented process from natural gas, and soon from hydrogen. Bloom's fuel cell technology is

more efficient and suited for base load applications and commercial customers. The

company today sells a distributed 24x7 baseload electric generation system for reliability

needs in data center, hospitals, supermarkets, that can be located even in dense urban

locations. Bloom Energy continues to reduce costs that makes its fuel cells competitive with

commercial electric rates in >9 states. The company is also in the process of launching new

products for marine, hydrogen fuel cell, and electrolyzers that will significantly expand TAM

and enable strong secular growth in a zero carbon economy. We see multiple catalysts over

the next five years: Gen 7.5 manufacturing expansion and continued cost reduction in

2021/22, identifying a new manufacturing location internationally (2021), announcing a

new installation partner in Europe (2021), first hydrogen electrolyzer/fuel cell demonstration

(2021) commercial shipments (2022), carbon capture demonstration (2022), biogas

commercial projects (2021), Marine product certification (2021) and Marine product

qualification with end-customers (2022). Risks: Scaling up a new technology faces many

challenges including: (i) timely execution of power system installations, (ii) cost reduction in

time to offset declining tax credits in the US, (iii) potential regulatory and policy changes,

and (iv) decline in utility retail rates. We expect the company’s natural gas fuel cells to

benefit from carbon capture policies as it can extract higher concentrations of CO2 with less

impurities compared to traditional generators.

$ 1.50

$ 1.70

$ 1.90

$ 2.10

$ 2.30

$ 2.50

$ 2.70

$ 2.90

$ 3.10

$ - $ 10 $ 20 $ 30 $ 40 $ 50 $ 60 $ 70 $ 80 $ 90 $ 100

LCO

H, $

/kg

Grey H2 Blue H2



26 July 2021


Companies Mentioned (Price as of 22-Jul-2021) APA Group (APA.AX, A$9.69) ATCO Ltd. (ACOx.TO, C$43.65) Advantage Oil & Gas Ltd (AAV.TO, C$4.93) Aemetis (AMTX.OQ, $9.95) Air Liquide (AIRP.PA, €149.26) Air Products & Chemicals (APD.N, $288.46) AltaGas Ltd. (ALA.TO, C$26.54) BP (BP.L, 284.0p) Ballard Pow Syst (BLDP.TO, C$20.26) Beach Energy (BPT.AX, A$1.27) Beacon Lighting (BLX.AX, A$1.7) Bloom Energy (BE.N, $21.81) Canadian Utilities Limited (CU.TO, C$34.97) Capital Power Corporation (CPX.TO, C$41.23) Cemex (CEMEXCPO.MX, MXN16.32) Cemex (CX.N, $8.1) Cenovus Energy (CVE.TO, C$10.13) Chart Industries, Inc. (GTLS.N, $154.01) Cheniere Energy (LNG.A, $84.38) Chevron Corporation (CVX.N, $98.82) China Medical System Holdings Ltd. (0867.HK, HK$18.66) China Resources Power Holdings (0836.HK, HK$11.56) Datang International Power Generation (0991.HK, HK$1.2) Datang International Power Generation (601991.SS, Rmb2.5) Denbury (DEN.N, $64.01) Drax (DRX.L, 408.6p) ENI (ENI.MI, €9.644) Emerson Electric (EMR.N, $97.44) Enbridge Inc. (ENB.TO, C$48.61) Equinor ASA (EQNR.OL, Nkr173.58) ExxonMobil Corporation (XOM.N, $57.11) Flowserve Corp. (FLS.N, $41.28) General Electric (GE.N, $12.7) Green Plain (GPRE.OQ, $33.41) Honeywell International Inc. (HON.OQ, $232.74) Huadian Power International (1071.HK, HK$2.2) Huadian Power International (600027.SS, Rmb3.46) Huaneng Power International Inc (0902.HK, HK$2.7) Huaneng Power International Inc (600011.SS, Rmb3.87) Indian Oil Corpn (IOC.NS, Rs106.7) Ingersoll-Rand Inc. (IR.N, $48.5) Keyera Corp. (KEY.TO, C$32.09) Kinder Morgan Inc. (KMI.N, $17.47) Matrix Service (MTRX.OQ, $10.6) McPhy Energy (MCPHY.PA, €17.46) NRG Energy (NRG.N, $40.64) National Grid (NG.L, 918.5p) New Fortress Energy (NFE.OQ, $31.87) NextDecade Corp (NEXT.OQ, $3.38) Nutrien (NTR.TO, C$74.82) ONGC (ONGC.NS, Rs115.5) Occidental Petroleum Corporation (OXY.N, $27.01) Orica (ORI.AX, A$13.08) PGB (PGAS.KL, RM15.68) PetroChina (0857.HK, HK$3.34) PetroChina (601857.SS, Rmb4.74) Petrobras (PBR.N, $10.66) Phillips 66 (PSX.N, $72.31) Plug Power (PLUG.OQ, $27.33) RWE (RWEG.DE, €29.7) Repsol (REP.MC, €9.191) Royal Dutch Shell plc (RDSa.L, 1364.6p) SES (SESFd.PA, €6.758) SSE (SSE.L, 1498.5p) Santos Ltd (STO.AX, A$6.74) Sempra USA (SRE.N, $129.12) Siemens (SIEGn.DE, €134.0) Sims Ltd (SGM.AX, A$15.65) Sinopec (0386.HK, HK$3.68) Sinopec (600028.SS, Rmb4.08) TC Energy (TRP.TO, C$61.03) TotalEnergies (TTEF.PA, €35.64) TransAlta Corporation (TA.TO, C$12.52) Uniper (UN01.DE, €32.25) Valero Energy Corporation (VLO.N, $63.48) Whitecap Rsrcs (WCP.TO, C$5.58)

Disclosure Appendix

Analyst Certification

Andrew M. Kuske, Mark Freshney, Stefano Bezzato, Gary Zhou, CFA, Joanna Cheah, CFA, Horace Tse, Spiro Dounis and John Walsh each certify, with respect to the companies or securities that the individual analyzes, that (1) the views expressed in this report accurately reflect his or



26 July 2021


her personal views about all of the subject companies and securities and (2) no part of his or her compensation was, is or will be directly or indirectly related to the specific recommendations or views expressed in this report.

As of December 10, 2012 Analysts’ stock rating are defined as follows:

Outperform (O) : The stock’s total return is expected to outperform the relevant benchmark* over the next 12 months. Neutral (N) : The stock’s total return is expected to be in line with the relevant benchmark* over the next 12 months. Underperform (U) : The stock’s total return is expected to underperform the relevant benchmark* over the next 12 months. *Relevant benchmark by region: As of 10th December 2012, Japanese ratings are based on a stock’s total return relative to the analyst's coverage universe which consists of all companies covered by the analyst within the relevant sector, with Outperforms representing the most attractive, Neutrals the less attractive, and Underperforms the least attractive investment opportunities. As of 2nd October 2012, U.S. and Canadian as well as Europea n (excluding Turkey) ratings are based on a stock’s total return relative to the analyst's coverage universe which consists of all companies covered by the an alyst within the relevant sector, with Outperforms representing the most attractive, Neutrals the less attrac tive, and Underperforms the least attractive investment opportunities. For Latin America, Turkey and Asia (excluding Japan and Australia), stock ratings are based on a stock’s total return relative to the average to tal return of the relevant country or regional benchmark (India - S&P BSE Sensex Index); prior to 2nd October 2012 U.S. and Canadian ratings were based on (1) a stock’s absolute total return potential to its current share price and (2) the relative attractiveness of a stock’s total return potenti al within an analyst’s coverage universe. For Australian and New Zealand stocks, the expected total return (ETR) calculation includes 12-month rolling dividend yield. An Outperform rating is assigned where an ETR is greater than or equal to 7.5%; Underperform where an ETR less than or equal to 5%. A Neutral may be assigned where the ETR is between -5% and 15%. The overlapping rating range allows analysts to assign a rating that puts ETR in the context of associated risks. Prior to 18 May 2015, ETR ranges for Outperform and Underperform ratings did not overlap with Neutral thresholds between 15% and 7.5%, which was in operation from 7 July 2011. Restricted (R) : In certain circumstances, Credit Suisse policy and/or applicable law and regulations preclude certain types of communications, including an investment recommendation, during the course of Credit Suisse's engagement in an investment banking transaction and in certain other circumstances. Not Rated (NR) : Credit Suisse Equity Research does not have an investment rating or view on the stock or any other securities related to the company at this time. Not Covered (NC) : Credit Suisse Equity Research does not provide ongoing coverage of the company or offer an investment rating or investment view on the equity security of the company or related products.

Volatility Indicator [V] : A stock is defined as volatile if the stock price has moved up or down by 20% or more in a month in at least 8 of the past 24 months or the analyst expects significant volatility going forward.

Analysts’ sector weightings are distinct from analysts’ stock ratings and are based on the analyst’s expectations for the fundamentals and/or valuation of the sector* relative to the group’s historic fundamentals and/or valuation: Overweight : The analyst’s expectation for the sector’s fundamentals and/or valuation is favorable over the next 12 months. Market Weight : The analyst’s expectation for the sector’s fundamentals and/or valuation is neutral over the next 12 months. Underweight : The analyst’s expectation for the sector’s fundamentals and/or valuation is cautious over the next 12 months. *An analyst’s coverage sector consists of all companies covered by the analyst within the relevant sector. An analyst may cov er multiple sectors.

Credit Suisse's distribution of stock ratings (and banking clients) is:

Global Ratings Distribution

Rating Versus universe (%) Of which banking clients (%) Outperform/Buy* 55% (32% banking clients)

Neutral/Hold* 33% (23% banking clients)

Underperform/Sell* 10% (19% banking clients)

Restricted 2%

Please click here to view the MAR quarterly recommendations and investment services report for fundamental research recommendations. *For purposes of the NYSE and FINRA ratings distribution disclosure requirements, our stock ratings of Outperform, Neutral, a nd Underperform most closely correspond to Buy, Hold, and Sell, respectively; however, the meanings are not the same, as our stock ratings are determined on a relative basis. (Please refer to definitions above.) An investor's decision to buy or sell a security should be based on investment objectives, current holdin gs, and other individual factors.

Important Global Disclosures

Credit Suisse’s research reports are made available to clients through our proprietary research portal on CS PLUS. Credit Suisse research products may also be made available through third-party vendors or alternate electronic means as a convenience. Certain research products are only made available through CS PLUS. The services provided by Credit Suisse’s analysts to clients may depend on a specific client’s preferences regarding the frequency and manner of receiving communications, the client’s risk profile and investment, the size and scope of the overall client relationship with the Firm, as well as legal and regulatory constraints. To access all of Credit Suisse’s research that you are entitled to receive in the most timely manner, please contact your sales representative or go to https://plus.credit-suisse.com . Credit Suisse’s policy is to update research reports as it deems appropriate, based on developments with the subject company, the sector or the market that may have a material impact on the research views or opinions stated herein. Credit Suisse's policy is only to publish investment research that is impartial, independent, clear, fair and not misleading. For more detail please refer to Credit Suisse's Policies for Managing Conflicts of Interest in connection with Investment Research: https://www.credit-suisse.com/sites/disclaimers-ib/en/managing-conflicts.html . Any information relating to the tax status of financial instruments discussed herein is not intended to provide tax advice or to be used by anyone to provide tax advice. Investors are urged to seek tax advice based on their particular circumstances from an independent tax professional. Credit Suisse has decided not to enter into business relationships with companies that Credit Suisse has determined to be involved in the development, manufacture, or acquisition of anti-personnel mines and cluster munitions. For Credit Suisse's position on the issue, please see https://www.credit-suisse.com/media/assets/corporate/docs/about-us/responsibility/banking/policy-summaries-en.pdf .



https://rave.credit-suisse.com/disclosures/view/quarterlyrecommendations

https://plus.credit-suisse.com/

https://www.credit-suisse.com/sites/disclaimers-ib/en/managing-conflicts.html

https://www.credit-suisse.com/sites/disclaimers-ib/en/managing-conflicts.html

https://www.credit-suisse.com/media/assets/corporate/docs/about-us/responsibility/banking/policy-summaries-en.pdf

26 July 2021


The analyst(s) responsible for preparing this research report received compensation that is based upon various factors including Credit Suisse's total revenues, a portion of which are generated by Credit Suisse's investment banking activities

For date and time of production, dissemination and history of recommendation for the subject company(ies) featured in this report, disseminated within the past 12 months, please refer to the link: https://rave.credit-suisse.com/disclosures/view/report?i=632550&v=40sqywi9vf14hsblpoeb93g2v .

Important Regional Disclosures

Singapore recipients should contact Credit Suisse AG, Singapore Branch for any matters arising from, or in connection with, this research report. The analyst(s) involved in the preparation of this report may participate in events hosted by the subject company, including site visits. Credit Suisse does not accept or permit analysts to accept payment or reimbursement for travel expenses associated with these events. For Credit Suisse Securities (Canada), Inc.'s policies and procedures regarding the dissemination of equity research, please visit https://www.credit-suisse.com/sites/disclaimers-ib/en/canada-research-policy.html. Investors should note that income from such securities and other financial instruments, if any, may fluctuate and that price or value of such securities and instruments may rise or fall and, in some cases, investors may lose their entire principal investment. To the extent any Credit Suisse equity research analyst employed by Credit Suisse International (a "UK Analyst") has interactions with a Spanish domiciled client of Credit Suisse AG or its affiliates, such UK Analyst will be acting for and on behalf of CSSSV, with respect only to the provision of equity research services to Spanish domiciled clients of Credit Suisse AG or its affiliates. Pursuant to CVM Resolution No. 20/2021, of February 25, 2021, the author(s) of the report hereby certify(ies) that the views expressed in this report solely and exclusively reflect the personal opinions of the author(s) and have been prepared independently, including with respect to Credit Suisse. Part of the author(s)´s compensation is based on various factors, including the total revenues of Credit Suisse, but no part of the compensation has been, is, or will be related to the specific recommendations or views expressed in this report. In addition, Credit Suisse declares that: Credit Suisse has provided, and/or may in the future provide investment banking, brokerage, asset management, commercial banking and other financial services to the subject company/companies or its affiliates, for which they have received or may receive customary fees and commissions, and which constituted or may constitute relevant financial or commercial interests in relation to the subject company/companies or the subject securities. This research report is authored by: Credit Suisse (Hong Kong) Limited ......................................................................................... Gary Zhou, CFA ; Horace Tse Credit Suisse Equities (Australia) Limited ..................................................................................................... Phineas Glover Credit Suisse International .................................................................................................. Mark Freshney ; Stefano Bezzato Credit Suisse Securities (Malaysia) Sdn Bhd. ....................................................................................... Joanna Cheah, CFA Credit Suisse Securities (Canada), Inc. ..................................................................................................... Andrew M. Kuske Credit Suisse Securities (USA) LLC .................................................................. Betty Jiang, CFA ; Spiro Dounis ; John Walsh To the extent this is a report authored in whole or in part by a non-U.S. analyst and is made available in the U.S., the following are important disclosures regarding any non-U.S. analyst contributors: The non-U.S. research analysts listed below (if any) are not registered/qualified as research analysts with FINRA. The non-U.S. research analysts listed below may not be associated persons of CSSU and therefore may not be subject to the FINRA 2241 restrictions on communications with a subject company, public appearances and trading securities held by a research analyst account. Credit Suisse (Hong Kong) Limited ......................................................................................... Gary Zhou, CFA ; Horace Tse Credit Suisse Equities (Australia) Limited ..................................................................................................... Phineas Glover Credit Suisse International .................................................................................................. Mark Freshney ; Stefano Bezzato Credit Suisse Securities (Malaysia) Sdn Bhd. ....................................................................................... Joanna Cheah, CFA Credit Suisse Securities (Canada), Inc. ..................................................................................................... Andrew M. Kuske

Important disclosures regarding companies that are the subject of this report are available by calling +1 (877) 291-2683. The same important disclosures, with the exception of valuation methodology and risk discussions, are also available on Credit Suisse’s disclosure website at https://rave.credit-suisse.com/disclosures . For valuation methodology and risks associated with any recommendation, price target, or rating referenced in this report, please refer to the disclosures section of the most recent report regarding the subject company.



https://rave.credit-suisse.com/disclosures/view/report?i=632550&v=40sqywi9vf14hsblpoeb93g2v

https://rave.credit-suisse.com/disclosures/view/report?i=632550&v=40sqywi9vf14hsblpoeb93g2v

https://rave.credit-suisse.com/disclosures

26 July 2021


This report is produced by subsidiaries and affiliates of Credit Suisse operating under its Sustainability, Research & Investment Solutions Division. For more information on our structure, please use the following link: https://www.credit-suisse.com/who-we-are This report may contain material that is not directed to, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation or which would subject Credit Suisse or its affiliates ("CS") to any registration or licensing requirement within such jurisdiction. All material presented in this report, unless specifically indicated otherwise, is under copyright to CS. None of the material, nor its content, nor any copy of it, may be altered in any way, transmitted to, copied or distributed to any other party, without the prior express written permission of CS. All trademarks, service marks and logos used in this report are trademarks or service marks or registered trademarks or service marks of CS or its affiliates.The information, tools and material presented in this report are provided to you for information purposes only and are not to be used or considered as an offer or the solicitation of an offer to sell or to buy or subscribe for securities or other financial instruments. CS may not have taken any steps to ensure that the securities referred to in this report are suitable for any particular investor. CS will not treat recipients of this report as its customers by virtue of their receiving this report. The investments and services contained or referred to in this report may not be suitable for you and it is recommended that you consult an independent investment advisor if you are in doubt about such investments or investment services. Nothing in this report constitutes investment, legal, accounting or tax advice, or a representation that any investment or strategy is suitable or appropriate to your individual circumstances, or otherwise constitutes a personal recommendation to you. Please note in particular that the bases and levels of taxation may change. Information and opinions presented in this report have been obtained or derived from sources believed by CS to be reliable, but CS makes no representation as to their accuracy or completeness. CS accepts no liability for loss arising from the use of the material presented in this report, except that this exclusion of liability does not apply to the extent that such liability arises under specific statutes or regulations applicable to CS. This report is not to be relied upon in substitution for the exercise of independent judgment. CS may have issued, and may in the future issue, other communications that are inconsistent with, and reach different conclusions from, the information presented in this report. Those communications reflect the different assumptions, views and analytical methods of the analysts who prepared them and CS is under no obligation to ensure that such other communications are brought to the attention of any recipient of this report. Some investments referred to in this report will be offered solely by a single entity and in the case of some investments solely by CS, or an associate of CS or CS may be the only market maker in such investments. Past performance should not be taken as an indication or guarantee of future performance, and no representation or warranty, express or implied, is made regarding future performance. Information, opinions and estimates contained in this report reflect a judgment at its original date of publication by CS and are subject to change without notice. The price, value of and income from any of the securities or financial instruments mentioned in this report can fall as well as rise. The value of securities and financial instruments is subject to exchange rate fluctuation that may have a positive or adverse effect on the price or income of such securities or financial instruments. Investors in securities such as ADR's, the values of which are influenced by currency volatility, effectively assume this risk. Structured securities are complex instruments, typically involve a high degree of risk and are intended for sale only to sophisticated investors who are capable of understanding and assuming the risks involved. The market value of any structured security may be affected by changes in economic, financial and political factors (including, but not limited to, spot and forward interest and exchange rates), time to maturity, market conditions and volatility, and the credit quality of any issuer or reference issuer. Any investor interested in purchasing a structured product should conduct their own investigation and analysis of the product and consult with their own professional advisers as to the risks involved in making such a purchase. Some investments discussed in this report may have a high level of volatility. High volatility investments may experience sudden and large falls in their value causing losses when that investment is realised. Those losses may equal your original investment. Indeed, in the case of some investments the potential losses may exceed the amount of initial investment and, in such circumstances, you may be required to pay more money to support those losses. Income yields from investments may fluctuate and, in consequence, initial capital paid to make the investment may be used as part of that income yield. Some investments may not be readily realisable and it may be difficult to sell or realise those investments, similarly it may prove difficult for you to obtain reliable information about the value, or risks, to which such an investment is exposed. This report may provide the addresses of, or contain hyperlinks to, websites. Except to the extent to which the report refers to website material of CS, CS has not reviewed any such site and takes no responsibility for the content contained therein. Such address or hyperlink (including addresses or hyperlinks to CS's own website material) is provided solely for your convenience and information and the content of any such website does not in any way form part of this document. Accessing such website or following such link through this report or CS's website shall be at your own risk.

This report is issued and distributed in European Union (except Germany and Spain): by Credit Suisse Securities (Europe) Limited, One Cabot Square, London E14 4QJ, England, which is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority; Spain: Credit Suisse Securities, Sociedad de Valores, S.A. (“CSSSV”) regulated by the Comision Nacional del Mercado de Valores; Germany: Credit Suisse (Deutschland) Aktiengesellschaft regulated by the Bundesanstalt fuer Finanzdienstleistungsaufsicht ("BaFin"). United States: Credit Suisse Securities (USA) LLC; Canada: Credit Suisse Securities (Canada), Inc.; Switzerland: Credit Suisse AG; Brazil: Banco de Investimentos Credit Suisse (Brasil) S.A or its affiliates; Mexico: Banco Credit Suisse (México), S.A., Institución de Banca Múltiple, Grupo Financiero Credit Suisse (México) and Casa de Bolsa Credit Suisse (México), S.A. de C.V., Grupo Financiero Credit Suisse (México) ("Credit Suisse Mexico"). This document has been prepared for information purposes only and is exclusively distributed in Mexico to Institutional Investors. Credit Suisse Mexico is not responsible for any onward distribution of this report to non-institutional investors by any third party. The authors of this report have not received payment or compensation from any entity or company other than from the relevant Credit Suisse Group company employing them; Japan: by Credit Suisse Securities (Japan) Limited, Financial Instruments Firm, Director-General of Kanto Local Finance Bureau ( Kinsho) No. 66, a member of Japan Securities Dealers Association, The Financial Futures Association of Japan, Japan Investment Advisers Association, Type II Financial Instruments Firms Association. This report has been prepared and issued for distribution in Japan to Credit Suisse’s clients, including institutional investors; Hong Kong: Credit Suisse (Hong Kong) Limited; Australia: Credit Suisse Equities (Australia) Limited; Thailand: Credit Suisse Securities (Thailand) Limited, regulated by the Office of the Securities and Exchange Commission, Thailand, having registered address at 990 Abdulrahim Place, 27th Floor, Unit 2701, Rama IV Road, Silom, Bangrak, Bangkok10500, Thailand, Tel. +66 2614 6000; Malaysia: Credit Suisse Securities (Malaysia) Sdn Bhd; Singapore: Credit Suisse AG, Singapore Branch; India: Credit Suisse Securities (India) Private Limited (CIN no.U67120MH1996PTC104392) regulated by the Securities and Exchange Board of India as Research Analyst (registration no. INH 000001030) and as Stock Broker (registration no. INZ000248233), having registered address at 9th Floor, Ceejay House, Dr.A.B. Road, Worli, Mumbai - 18, India, T- +91-22 6777 3777; South Korea: Credit Suisse

Securities (Europe) Limited, Seoul Branch; Taiwan: Credit Suisse AG Taipei Securities Branch; Indonesia: PT Credit Suisse Sekuritas Indonesia; Philippines:Credit Suisse Securities (Philippines ) Inc., and elsewhere in the world by the relevant authorised affiliate of the above. Additional Regional Disclaimers Australia: Credit Suisse Securities (Europe) Limited ("CSSEL") and Credit Suisse International ("CSI") are authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority ("FCA") and the Prudential Regulation Authority under UK laws, which differ from Australian Laws. CSSEL and CSI do not hold an Australian Financial Services Licence ("AFSL") and are exempt from the requirement to hold an AFSL under the Corporations Act (Cth) 2001 ("Corporations Act") in respect of the financial services provided to Australian wholesale clients (within the meaning of section 761G of the Corporations Act) (hereinafter referred to as “Financial Services”). This material is not for distribution to retail clients and is directed exclusively at Credit Suisse's professional clients and eligible counterparties as defined by the FCA, and wholesale clients as defined under section 761G of the Corporations Act. Credit Suisse (Hong Kong) Limited ("CSHK") is licensed and regulated by the Securities and Futures Commission of Hong Kong under the laws of Hong Kong, which differ from Australian laws. CSHKL does not hold an AFSL and is exempt from the requirement to hold an AFSL under the Corporations Act in respect of providing Financial Services. Investment banking services in the United States are provided by Credit Suisse Securities (USA) LLC, an affiliate of Credit Suisse Group. CSSU is regulated by the United States Securities and Exchange Commission under United States laws, which differ from Australian laws. CSSU does not hold an AFSL and is exempt from the requirement to hold an AFSL under the Corporations Act in respect of providing Financial Services. Credit Suisse Asset Management LLC (CSAM) is authorised by the Securities and Exchange Commission under US laws, which differ from Australian laws. CSAM does not hold an AFSL and is exempt from the requirement to hold an AFSL under the Corporations Act in respect of providing Financial Services. This material is provided solely to Institutional Accounts (as defined in the FINRA rules) who are Eligible Contract Participants (as defined in the US Commodity Exchange Act). Credit Suisse Equities (Australia) Limited (ABN 35 068 232 708) ("CSEAL") is an AFSL holder in Australia (AFSL 237237). Malaysia: Research provided to residents of Malaysia is authorised by the Head of Research for Credit Suisse Securities (Malaysia) Sdn Bhd, to whom they should direct any queries on +603 2723 2020. Singapore: This report has been prepared and issued for distribution in Singapore to institutional investors, accredited investors and expert investors (each as defined under the Financial Advisers Regulations) only, and is also distributed by Credit Suisse AG, Singapore Branch to overseas investors (as defined under the Financial Advisers Regulations). Credit Suisse AG, Singapore Branch may distribute reports produced by its foreign entities or affiliates pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Singapore recipients should contact Credit Suisse AG, Singapore Branch at +65-6212-2000 for matters arising from, or in connection with, this report. By virtue of your status as an institutional investor, accredited investor, expert investor or overseas investor, Credit Suisse AG, Singapore Branch is exempted from complying with certain compliance requirements under the Financial Advisers Act, Chapter 110 of Singapore (the “FAA”), the Financial Advisers Regulations and the relevant Notices and Guidelines issued thereunder, in respect of any financial advisory service which Credit Suisse AG, Singapore Branch may provide to you. EU: This report has been produced by subsidiaries and affiliates of Credit Suisse operating under its Sustainability, Research & Investment Solutions Division. In jurisdictions where CS is not already registered or licensed to trade in securities, transactions will only be effected in accordance with applicable securities legislation, which will vary from jurisdiction to jurisdiction and may require that the trade be made in accordance with applicable exemptions from registration or licensing requirements. This material is issued and distributed in the U.S. by CSSU, a member of NYSE, FINRA, SIPC and the NFA, and CSSU accepts responsibility for its contents. Clients should contact analysts and execute transactions through a Credit Suisse subsidiary or affiliate in their home jurisdiction unless governing law permits otherwise. CS may provide various services to US municipal entities or obligated persons ("municipalities"), including suggesting individual transactions or trades and entering into such transactions. Any services CS provides to municipalities are not viewed as "advice" within the meaning of Section 975 of the Dodd-Frank Wall Street Reform and Consumer Protection Act. CS is providing any such services and related information solely on an arm's length basis and not as an advisor or fiduciary to the municipality. In connection with the provision of the any such services, there is no agreement, direct or indirect, between any municipality (including the officials,management, employees or agents thereof) and CS for CS to provide advice to the municipality. Municipalities should consult with their financial, accounting and legal advisors regarding any such services provided by CS. In addition, CS is not acting for direct or indirect compensation to solicit the municipality on behalf of an unaffiliated broker, dealer, municipal securities dealer, municipal advisor, or investment adviser for the purpose of obtaining or retaining an engagement by the municipality for or in connection with Municipal Financial Products, the issuance of municipal securities, or of an investment adviser to provide investment advisory services to or on behalf of the municipality. If this report is being distributed by a financial institution other than Credit Suisse AG, or its affiliates, that financial institution is solely responsible for distribution. Clients of that institution should contact that institution to effect a transaction in the securities mentioned in this report or require further information. This report does not constitute investment advice by Credit Suisse to the clients of the distributing financial institution, and neither Credit Suisse AG, its affiliates, and their respective officers, directors and employees accept any liability whatsoever for any direct or consequential loss arising from their use of this report or its content. No information or communication provided herein or otherwise is intended to be, or should be construed as, a recommendation within the meaning of the US Department of Labor’s final regulation defining "investment advice" for purposes of the Employee Retirement Income Security Act of 1974, as amended and Section 4975 of the Internal Revenue Code of 1986, as amended, and the information provided herein is intended to be general information, and should not be construed as, providing investment advice (impartial or otherwise). Copyright © 2021 CREDIT SUISSE AG and/or its affiliates. All rights reserved. When you purchase non-listed Japanese fixed income securities (Japanese government bonds, Japanese municipal bonds, Japanese government guaranteed bonds, Japanese corporate bonds) from CS as a seller, you will be requested to pay the purchase price only.



https://www.credit-suisse.com/who-we-are

compelling carbon capture considerations

Documents