[C Tech Now] "CCUS, If Cost Issues Are Not Solved, It's Futile... Carbon Contract for Difference System Must Be Introduced"

Interview with Professor Yudongheon of Konkuk University

"Building Carbon Capture, Utilization, and Storage (CCUS) facilities requires enormous costs. While overseas there are means to pass on these costs, Korea does not have such mechanisms. If this issue is not resolved, CCUS will inevitably remain an empty promise."

Professor Yoo Dong-heon, a key industry-academia cooperation professor at Konkuk University, emphasized in an interview on the 9th that to solve the economic feasibility issue of CCUS, a Carbon Contract for Difference (CCfD) system should be introduced domestically, similar to Europe. Professor Yoo serves as the expert committee chair of the K-CCUS Promotion Group launched in 2021. Previously, he conducted long-term energy policy research at the Korea Energy Economics Institute.

The biggest obstacle to CCUS is that while facility construction involves enormous costs, there is no suitable revenue model, resulting in poor economic feasibility. In the United States, this issue is addressed by using captured carbon dioxide for Enhanced Oil Recovery (EOR). In Europe, high carbon taxes and expensive emission permit prices provide companies with incentives to invest in CCUS.

On the other hand, domestic companies lack sufficient justification to invest in CCUS. Unlike Europe, where emission permit prices fluctuate around 100 euros per ton, domestic permit prices remain at the level of 1 to 3 dollars per ton. There is also no method to utilize captured carbon dioxide like EOR.

In this situation, the government has rather raised the CCUS targets. According to the '1st National Carbon Neutrality and Green Growth Basic Plan' announced in March last year, the carbon emission reduction target using Carbon Capture and Storage (CCS) technology is 11.2 million tons by 2030. The previous target was 10.3 million tons.

However, the domestic CCUS-related technology level and related systems are insufficient compared to advanced countries. The Korea Institute of S&T Planning and Evaluation (KISTEP) evaluated that domestic CCUS technology is at 80% of the U.S. level, with a technological gap of five years.

Nonetheless, with the whole world investing in CCUS, Korea cannot just stand by. Professor Yoo stressed, "We cannot neglect CCUS technology development just because there is no immediate business model." If advanced-level technology is secured quickly and business experience is leveraged, profits can be generated overseas.

Professor Yoo pointed out that institutional support is necessary for companies to develop CCUS technology in Korea, where the emission trading market is not active. What he proposes is the Carbon Contract for Difference system. This system allows companies to agree with the government on a carbon price when investing in reduction facilities, and if the emission permit price is lower than the contract price, the government compensates the difference. Companies can invest in greenhouse gas reduction facilities without worrying about economic losses.

The Netherlands, Germany, and France have introduced or plan to introduce the Carbon Contract for Difference system. Considering the government's carbon capture target (11.2 million tons annually), Professor Yoo estimated that subsidies of 500 billion to 2 trillion won per year will be needed. He said, "Domestic CCS technology is at 80% of the EU level, and carbon prices are only one-tenth, making it difficult to proceed without initial government support. It is necessary to introduce the Carbon Contract for Difference system by referring to major countries' cases to alleviate the burden on private companies."