The forces shaping the future of carbon management

The market for solutions to manage carbon emissions is experiencing rapid growth, yet this is only the beginning. We estimate that carbon capture, utilisation and storage (CCUS) represents a US$1.2 trillion investment opportunity to 2050, while opportunities in carbon offset will amount to a further US$168 billion. 

In a recent webinar, we used data from our Lens Carbon platform to assess what the future holds for CCUS and carbon offset. Fill out the form to watch the full webinar recording, or read on for some key insights from the presentation. 

Carbon offset 

For carbon offset, we expect a period of modest market growth to 2030 to be followed by a substantial acceleration to 2050, driven by both volume and price increases. 

Voluntary demand drivers 

Demand for carbon offsets has traditionally come from the voluntary carbon market. This will continue to be the main source of demand thanks to the strong net-zero climate commitments being made by many companies; for many corporates, addressing scope 3 indirect emissions along their value chains is a significant challenge that can only be met in the short-to-medium term through offsetting. 

As well as direct emissions compensations, low-carbon products and beyond value chain mitigation (BVCM) will also contribute to voluntary demand. The latter comprises additional emissions mitigation actions proactively taken by a company above and beyond their science-based reduction targets.  

Compliance-driven demand 

A second, fast-growing source of offset demand is coming from the use of carbon offsets in compliance at both a national and international level.  

At a national level, compliance drivers can include carbon pricing regimes like carbon taxes or emissions trading systems that allow a certain percentage of compliance obligations to be met through the use of carbon offsets. Internationally, schemes such as the Carbon Offsetting and Reduction Mechanism for International Aviation (CORSIA) will become increasingly important in driving demand. Being mandatory in nature, this compliance-driven demand should support a more stable price signal, providing an important level of stability and robustness to the offsetting market. 

Finally, while still very much under development, the rules governing an international carbon market outlined in Article 6.4 of the Paris Agreement could significantly boost offsetting supply and demand. 

CCUS 

CCUS is an expensive technology, and its use will therefore be selective. Nevertheless, we expect the carbon capture and removal market to see robust growth through to 2050. Current capacity stands at around 75 million tonnes per annum (Mtpa); based on our project database, which covers more than 1,500 projects, we expect capacity to more than triple by 2030, and to surpass 2,000 Mtpa by 2050. 

Energy (point source) emissions 

Energy (point source) emissions include those from natural gas production and processing, power generation, hydrogen and refining. In the short-term, energy-related emissions removal — particularly from upstream pre-combustion capture — will dominate CCUS. From 2030 onwards, hydrogen will account for an increasing share of energy-related CCUS as the cost of blue hydrogen becomes more competitive (the term blue hydrogen is used to describe hydrogen produced from natural gas where the resulting CO2 emissions are captured and stored). Only from 2040 onwards will the use of more expensive post-combustion capture in sectors such as power generation become predominant. 

Industry (point source) emissions 

Industry (point source) emissions include direct emissions captured at source from the production of cement, steel, chemicals, glass, ceramics and other industrial products. CCUS for these types of emissions will start to become significant from the 2030s, rising to make up around 35% of total CCUS use by 2050. 

Engineered removals 

Engineered carbon dioxide removals (CDR) currently mainly take the form of either direct air capture and carbon storage (DACCS) or bioenergy with carbon capture and storage (BECCS). DACCS involves removing carbon from ambient air in the atmosphere (rather than from a concentrated emission source), while in the BECCS process, plants absorb atmospheric CO2 before being used as an energy source, with the CO2 released being captured and stored. Engineered removals will grow to make up around 15% of total CCUS by 2050. 

Risks and uncertainties 

While the long-term outlook for CCUS is healthy, in the short term, policy uncertainty is a key risk — particularly in the US. This has contributed to an unfortunate short-term trend for delays to projects. In theory, 2025 is set to be a bumper year for CCUS, with around 270 Mtpa of projects targeting FID. However, as of August, only about 10% of decisions had been taken.  

Our analysis suggests that in the long term, however, sentiment towards CCUS may actually improve, since lower investment in renewables and green hydrogen could boost demand for blue hydrogen. Improved incentives for enhanced oil recovery (EOR), could also favour CCUS, since CO2 injection is the most common method used. 

Wood Mackenzie’s Lens Carbon platform provides access to regularly updated data and analysis on over 1,500 CCUS projects and more than 24,000 carbon offset projects globally. Get in touch to find out more or request a demo — and don’t forget to fill in the form at the top of the page to access the full webinar recording, which covers this topic in detail.