Ways forward CCU could play a role in the defossilization of industrial supply chains – if supported by concerted action to validate approaches, unlock investment and overcome market constraints. The carbon atom remains a fundamental building block across the economy, underpinning a spectrum of industrial products from plastics to chemicals and fuels. Currently, demand for liquid hydrocarbons as petrochemical feedstocks alone is expected to grow from around 17 million barrels per day in 2025 to around 26 million by 2050.69 As long as consumer demand exists for carbon-based products, it can be expected to contribute to demand for fossil hydrocarbons and associated emissions. CCU presents an opportunity to transition to a more sustainable consumption model, in which captured carbon can substitute for virgin fossil carbon or be stored within materials. In this way, “defossilization” could complement decarbonization measures such as electrification and fuel switching. CCU could present an economic opportunity by creating new sources of revenue from the valorization of waste streams. This would make CCU a valuable lever for low-margin, emissions-intensive industrial sectors and a potential market differentiator for downstream consumer brands. Based on the evidence outlined in this paper, this final chapter presents next steps that would enable broader adoption of CCU. CCU presents an opportunity to transition to a more sustainable consumption model, in which captured carbon can substitute for virgin fossil carbon or be stored within materials. Building credible and durable market signals 5.1 The main challenge is that a mature market does not currently exist for CCU-derived products relevant to defossilization. Significant cost hurdles currently undermine the demand needed to drive investment; and these hurdles can only be overcome through deployment to realize technology improvements and economies of scale. Industrial companies on the whole are willing to make a transition to more sustainable operations, but they cannot be expected to bear unmanageable risks and costs. This places the emphasis on policy incentives to level the early-stage playing field and allow first movers to compete in markets with fossil alternatives. However, with the exception of a small number of leading initiatives, global policy frameworks for CCU are insufficient to drive uptake. If policy-makers wish to see deployment of CCU technologies, they must commit to stable and long-term incentives. The impact of political and regulatory volatility has been apparent across leading jurisdictions. As highlighted previously, the revocation of US federal funding under the IIJA, as well uncertainty surrounding the IRA’s 45Q mechanism, has negatively impacted investor confidence. In the EU, RED III CO2 source mandates, while well-intentioned, continue to introduce adverse incentives for CCU approaches, which have been compounded by regulatory volatility. To a degree, innovators along the innovation curve are able to navigate uncertainty in the short term, for example through geographic diversification and by leveraging multiple revenue streams. However, in the medium- to long-term, the public sector holds ultimate responsibility for establishing the enabling conditions for a self- sustaining market for CCU products. Regulatory frameworks should incentivize CCU while ensuring emissions reductions are realized by industry-standard, cradle-to-grave LCA. This approach could also extend to existing carbon pricing frameworks to account for the varying emissions benefits of shorter duration products, provided they consider product end-of-life. This could help to address functional disincentives and additional regulatory burdens facing CCU deployment compared to business-as-usual practices. Demand-side incentives such as ReFuelEU show promise for fuels pathways and applying similar content mandates to other CCU sectors, such as chemicals, could provide valuable drivers of demand. Framing enabling policies that can reduce the costs and accelerate the growth of directly related sectors, such as DAC and low-carbon hydrogen, will prove critical for CCU adoption. Beyond direct measures, lessons can be learned from the catalytic impact that public sector procurement has had on CCU products. If policy-makers wish to see deployment of CCU technologies, they must commit to stable and long- term incentives. The impact of political and regulatory volatility has been apparent across leading jurisdictions.5 Defossilizing Industry: Considerations for Scaling-up Carbon Capture and Utilization Pathways 33

Defossilizing Industry Scaling-up CCU 2025