Defossilizing Industry Scaling-up CCU 2025

European Innovation Council integrates public research funding and equity investment BOX 4 The European Innovation Council (EIC) was established under the EU’s Horizon Europe programme.62 With a budget of €10.1 billion (for the period 2021-2027), it supports game- changing innovations throughout project life-cycles from early-stage research to proof of concept, technology transfer and the financing and scale-up of start-ups and SMEs. A unique feature of the EIC is that it provides funding for individual companies through both grants and investments. The investments currently take the form of direct equity or quasi-equity investments and are managed by the EIC Fund.The EIC works with programme managers (PMs) – subject matter experts who are responsible for developing visions for technological and innovation breakthroughs in their fields of expertise. PMs actively manage portfolios of EIC-funded projects to advance these strategic visions, facilitating stakeholder collaboration to translate concepts into commercial reality. They also identify potential challenges for emerging technologies and disruptive innovations. To date, there have been several CCU-relevant challenge areas, including on solar-to-X and waste-to-value devices. Source: Wood Mackenzie, expert interview with EIC. Demonstration stage: proving commerciality At the demonstration phase, CCU technologies must demonstrate feasibility scale, by integrating into real-world systems and generating revenue streams independent of government grants. However, this is often constrained by high upfront capital expenditure and insufficient demand certainty. Capital expenditures for demonstration plants are typically factored into company valuations as depreciation, which may negatively affect investor perception of commercial viability. In parallel, many early projects struggle to present convincing offtake commitments and demonstrate the evidence of revenue potential that investors are seeking. Therefore, securing credible offtake agreements, even if short-term or contingent on milestones, can de-risk investment and unlock capital. Programmes such as the World Economic Forum’s First Movers Coalition (FMC) have demonstrated how aggregate demand from large buyers can send strong market signals. FMC offtake commitments now represent annual reductions of 31 MtCO2e by 2030.63 For long-duration storage products, pre-purchase agreements for emissions removals can also help to fund deployment ahead of delivery.64 These offer a form of patient offtake that allows producers to bridge short-term capital needs while retaining long- term value. Commercial deployment: scaling- up strategically Closer to commercial deployment, most first-of- a-kind projects face the challenge of competing with fossil incumbents in price-sensitive markets. While the products they offer are often chemically identical, they tend to carry a green premium during initial production rounds, limiting adoption in the absence of cost reductions. Successful scaling-up requires strategic business models that reduce cost exposure, align with infrastructure investors and unlock new deployment mechanisms. One approach is the build-to-operate model, where the CCU company assumes early project risk in exchange for anchor offtake. As cost curves decline and technologies mature, licensing becomes a viable alternative, allowing scale without heavy capital outlay. Geographic decoupling mechanisms such as book-and-claim can further reduce cost and risk and support demand. These allow low-carbon production in optimal regions, where clean energy and feedstocks are abundant, while enabling green credit claims elsewhere. Book-and-claim initiatives are attracting growing attention for enabling SAF demand, but could be applied to other CCU- derived products. Crucially, at early stages it is important to anticipate the risk appetite of future scaling-up partners, including engineering, procurement and construction (EPC) firms and infrastructure investors. Even when CCU developers perceive additional scale as low-risk, their partners may not. Addressing these perceptions early improves the likelihood of securing project finance and attracting commercial-scale debt. Defossilizing Industry: Considerations for Scaling-up Carbon Capture and Utilization Pathways 26