Defossilizing Industry Scaling-up CCU 2025

Executive summary CCU offers the potential to “defossilize” carbon-reliant industries – but for it to become viable, it requires supportive policy frameworks, patient capital and close collaboration across stakeholder groups. Carbon capture and utilization (CCU) could present an opportunity for reducing emissions from industrial supply chains by converting captured CO2 and other carbon-based emissions into valuable carbon-based products. CCU technologies therefore offer the potential to “defossilize” industries that rely on carbon feedstocks. A few re-use opportunities are already mature, such as urea production for use in fertilizers. Beyond this, there are technology pathways for reusing carbon in fuels, chemicals, construction materials and other pure-carbon products being developed with potential for climate benefits. However, many applications of re-used carbon remain at pilot and demonstration scale and/or are commercially immature. Because these CCU technologies have attracted less attention than mature applications, this paper focuses on the challenges that innovators and first movers face, including their business strategies. While CCU offers significant opportunities in theory, in practice nascent CCU technologies face many systemic barriers. This paper analyses three such barriers: –First, policy frameworks are fragmented and inconsistent across jurisdictions and CCU pathways. This makes it challenging for first movers to see a reliable and significant market to support future scaling-up, deterring investment. Moreover, existing policies heavily favour sequestration over utilization and, in some cases, effectively create disincentives to invest in CCU. –Second, CCU companies face “valleys of death” – as with many potentially important yet novel technologies. These are characterized by long development timelines, high capital requirements and immature business models lacking well-defined routes to revenue. These factors create barriers to conventional early- stage investment forms, such as traditional venture capital. –Third, successful deployment of CCU will require unprecedented cross-sectoral collaboration – in most industrial supply chains – between CCU companies and incumbent industries. Partnerships can offer access to infrastructure, expertise and market channels to support the scaling-up of nascent CCU technologies. However, the inherent complexity of testing small-scale, first-of-a- kind technical solutions within large, mature, industrial complexes can impede collaboration. Beyond practical issues of technology integration, cross-industry collaboration also has an important role in advocacy and awareness raising. This paper discusses the potential role that emerging CCU pathways could play in a sustainable industrial transition; it synthesizes community insights into systemic challenges across policy and finance; and it looks at the role of coordination across stakeholder groups. Findings are presented alongside strategic considerations for future CCU innovators and policy development needs. Defossilizing Industry: Considerations for Scaling-up Carbon Capture and Utilization Pathways 4