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IEA Greenhouse Gas R&D Programme

Background to the Study


The aim of this study is to assess the feasibility of select carbon capture and utilisation (CCU) routes based upon CO2 conversion through hydrogenation, in terms of their climate change mitigation potential. The commodities selected for investigation were methanol, formic acid, and middle distillate hydrocarbons (synthetic fuels: diesel, gasoline, jet fuel). The results of this study will be of interest to organisations/individuals involved with climate-change scenario modelling, as well as RD&D financial sponsors. 



CO2 can be transformed into a wide range of value-added products, acting as an alternative carbon source to fossil carbon. These CO2 ‘conversion’ utilisation routes are of increasing interest due to considerations related to climate change, avoidance of fossil fuels, and the circular economy. Carbon capture and utilisation (CCU) uses CO2 captured from industrial emissions or directly from the atmosphere, thus having potential to reduce net CO2 emissions relative to conventional production routes. CCU can be used to produce chemicals, materials, polymers and fuels that are direct replacements for existing products, conventionally produced from fossil feedstocks. Therefore, CCU can offer a means of producing conventional products whilst avoiding fossil extraction. 

The evaluation of CCU routes is often complex, with emissions and costs variable with feedstock assumptions, and ‘benefits’ dependent upon comparison to a counterfactual. There is currently a lack of information and/or uncertainty around the role that CCU technologies might play in emissions mitigation and the potential scale of CCU deployment. The assessment of these factors requires an understanding of the total emissions associated with CCU products, the costs, and the energy demands. Depending on the product being investigated, estimates of these factors can vary considerably due to a range of potential options for CCU conversion technology, the origins of feedstocks and energy, and geographical factors. In addition, quantification of emissions mitigation requires assumptions around the counterfactual case for comparison, adding complexity. The allocation of costs and emissions across different aspects of the value-chain also adds uncertainty.   

The aim of this study is to assess the feasibility of select CCU routes based upon CO2 conversion through hydrogenation, in terms of their climate change mitigation potential. The commodities selected for investigation were methanol, formic acid, and middle distillate hydrocarbons (synthetic fuels: diesel, gasoline, jet fuel), with a focus on catalytic hydrogenation pathways. Of particular interest is the impact of different feedstock choices (hydrogen, electricity, CO2 capture) on costs, energy demand and CO2 emissions.


Key messages

  • Hydrogenation routes require a supply of hydrogen and CO2, and the origins of these feedstocks impact the overall cost and emissions of CCU pathways. Hydrogen is the most significant cost and emission component for both methanol and middle distillate hydrocarbon CCU production routes.
  • Production of commodities via CCU routes is more expensive than fossil routes. All realistic combinations of feedstocks result in higher costs than the counterfactual route under both near- (2020s) and long-term (2050s) assumptions. In the near-term, CCU commodities were found to be at least twice the cost of their fossil counterparts. In the long-term, cost premiums can decrease significantly due to reductions in the cost of green hydrogen and CO2 capture.
  • Economic competitiveness of CCU routes is reliant on a ‘cost of emission’ being applied. For the optimal pathways considered, cost parity could be achieved in the long-term by implementing a cost of emissions between USD 120-225/tCO2.
  • CCU can offer a lower emission commodity production pathway provided a low-emission electricity source is used for green hydrogen production. Using grid electricity (representative of current European grid mixes) for electrolysis is expected to result in CCU methanol and middle distillate hydrocarbon routes having greater emissions than their fossil counterparts, the same applies to the use of unabated fossil hydrogen production.
  • The method of accounting for utilised CO2 has important consequences. For routes with higher production emissions than their counterfactual, CCU commodities can only claim to have lower emissions than the counterfactual commodities if they are able to account for the utilised CO2 as offsetting some of their production or end-of-life emissions.
  • Avoiding > 1 GtCO2 requires very high levels of market penetration. CCU methanol and middle distillate hydrocarbons have the potential to abate over 1 GtCO2 but only if methanol captures the entirety of the current market and then expands into the heavy-duty trucks market plus the plastics markets, and if middle distillate hydrocarbons capture the entirety of today’s aviation fuels and heavy-duty trucks market. Formic acid does not have the potential to reach 1 GtCO2 as even if the CCU product were to penetrate the entire formic acid market, the abatement currently achievable is limited to approximately 2 MtCO2.
  • Energy demands might become a barrier limiting large-scale CCU deployment. Under the investigated ‘ambitious CCU’ scenario, middle distillate hydrocarbons would require about 26,000 TWh of electricity, almost the entire current electricity production globally.
  • CCU pathways must be designed carefully to ensure lower life cycle emissions than the counterfactual. Co-location of assets may reduce costs, particularly in regions with high potential for renewable electricity. CCU could provide an attractive solution in regions with limited CO2 storage, or with cost or public acceptance challenges for carbon capture and storage (CCS).
  • Recommendations:


    • Lab scale research and pilot-demonstrations are necessary to address technical barriers.
    • More life cycle assessment (LCA) and techno-economic assessment (TEA) studies are needed, especially on hydrogen and renewable electricity production.
    • Policies are required to mandate the use of low-carbon products and to increase the cost-competitiveness of CCU products.
    • Streamlining approval processes and standards could help enable timely market entry for new CCU products.
    • Further clarity and global consistency of the accounting of CO2 in CCU routes is needed.
    • CCU pathways can benefit from advances in CO2 capture and hydrogen production as well as the sharing of infrastructure with large-scale CCS projects.

To request a copy of the report, please email This email address is being protected from spambots. You need JavaScript enabled to view it. with the report reference number (2021-03).