Toward a New Carbon Economy

As the energy transition drives reductions in fossil fuel usage, carbon will still have a role to play.

The energy transition is often described as a journey toward a zero-carbon future. This framing has been useful in highlighting the urgency of climate action and the need for emissions reductions, but when taken too literally, it creates the impression that progress means eliminating carbon from our economy.

In fact, carbon is a building block of modern life. It is the chemical foundation of plastics, synthetic fibers, adhesives, pharmaceuticals, fertilizers, and countless other materials that underpin today’s economy. As we navigate the energy transition, demand for carbon-based materials will persist, and we will need to continue to supply these products in a way that is affordable and secure.

A realistic long-term climate strategy must therefore reconcile several objectives:

1. Managing the amount of carbon in the atmosphere to stabilize the climate
2. Ensuring carbon supply as an input to essential goods, products, and services
3. Ensuring that these objectives are achieved in a way that maintains energy and material security, affordability, and reliability

The reconciliation of these goals is a new carbon economy in which carbon is deliberately sourced, transformed, transported, used, reused, and stored with intent, where carbon flows are designed rather than accidental, and where emissions are managed through infrastructure, markets, and governance.

What is the new carbon economy?

The new carbon economy is an economic system that transforms carbon dioxide from a waste product into a valuable raw material for producing fuels, materials, and food, while also achieving a net-negative emissions footprint.[1][2] It includes many of the activities traditionally associated with carbon management, including:

1. Point Source Carbon Capture (PSC) or Carbon Capture and Storage (CCS) is the process of capturing CO₂ from point sources such as power plants, industrial facilities, and any other sources of a fixed output of carbon dioxide. Typically, the CO2 in these processes is at a higher concentration than is found in ambient air.
2. Carbon Dioxide Removal (CDR) refers to activities that draw down carbon dioxide from the atmosphere. This can include processes like Direct Air Capture (DAC), enhanced rock weathering (ERW), and bioenergy with carbon capture (BECCS).
3. Carbon Utilization (CCU) refers to the use of captured CO₂ as a raw material input to the production of chemicals, fuels, and building materials.
4. Carbon Storage includes activities that keep captured CO2 out of the atmosphere or environment. For example, one option is to store it in deep geological formations, including depleted oil and gas reservoirs, saline aquifers, or unmineable coal seams.
5. Carbon Transportation is the movement of carbon between facilities and regions. Carbon can be moved as carbon dioxide, biomass, or as a hydrocarbon fuel. It can be transported on pipelines, ships, trains, or vehicles.

The new carbon economy is not just the presence of these activities, but the realization of a long-term vision that deliberately balances the roles and contributions of each activity in achieving a cost-effective, secure, net-negative future.

This new carbon economy requires organization

Advancement toward an energy-secure, climate-aligned future will require deliberate management of stocks and flows of carbon resources. For example, durable carbon removal pathways require significant infrastructure development, various end sectors such as aviation and chemicals require a large supply of non-fossil carbon to achieve their transition strategies, and transportation and storage often require coordination and shared demand to achieve scale.

Unfortunately, the ecosystem required to support these activities does not currently have a vision for achieving these outcomes. This is delaying investments in projects that can drive immediate emissions reduction, stalling critical shared infrastructure, and risking misallocation of limited carbon resources. For example:

• PSC/CCS: Some processes, such as cement and chemicals, need CCS to decarbonize. Exhaustive bans on CCS can delay opportunities for decarbonization where it is a necessary solution.
• CDR: While CDR has made great strides in recent years, many of its stakeholders have intentionally avoided other carbon management activities, thus slowing the development of shared infrastructure.
• CCU: While synthetic, carbon-based materials and fuels will be needed in the energy transition, the slow development of PSC and CDR indicates that there will not be enough supply of CO₂ to meet the wide range of CCU needs.
• Carbon storage: While there is significant global geological carbon storage potential and demand for storage, lack of coordination is slowing the development of shared storage projects.
• Carbon transportation: Most CO₂ capture and storage is vertically integrated, and demand must be pooled together to facilitate development of shared transport infrastructure.[3]

In short, while each of these five activities has natural compatibilities,[4] they too often fail to collaborate toward common goals. This lack of alignment risks mismanagement of scarce resources, delayed infrastructure investment, under-deployment of individual technologies, and lock-in with sub-optimal technologies or approaches.

In order for the world to come to a positive long-term outcome, a variety of open and unresolved questions must eventually be confronted. For example:

• Use cases of PSC: RMI analysis indicates that point source carbon capture is critical for decarbonizing cement but should not be used to extend the life of existing coal-fueled electricity generators. In between these examples lie many other cases that may or may not be strategically sound.
• Strategy for utilization: CO₂ utilization includes a range of processes with many different climate outcomes. Some, such as synthetic liquid fuels for aviation, shipping, and long haul trucking are necessary for de-fossilization of those sectors, but re-release carbon. Some, including building materials and plastics, store carbon for long durations. And some, such as Enhanced Oil Recovery, store injected CO₂ for long durations but also liberate additional fossil fuels. There are a variety of unanswered strategic and economic questions about which of these processes should be cultivated as part of a long-term vision.
• Safety: Across all of these capture and use cases lie a variety of questions around safety and environmental performance. Currently, there is a dearth of rules and regulations associated with carbon management activities, and without a more comprehensive assessment of the field, it is difficult to know where the key risks lie and what can be done to mitigate them.

As of yet, there has been relatively low interest from governments, NGOs, and academics in the new carbon economy. As a result, these questions have been primarily addressed by a few incumbent companies that represent only a small fraction of the final ecosystem and a narrow perspective of a successful vision.

Success in the new carbon economy will instead require broadening the conversation beyond today’s incumbents to a broader coalition of credible experts and civil society groups who can help define a robust vision for the new carbon economy and who can ultimately drive the new vision toward success.

RMI is working to make this a reality. We are convening technical, commercial, governmental, and non-governmental experts at the state, national, and global levels to build this vision. By proceeding in a strategic way, we believe we can help foster the development of a new carbon economy that can make our energy systems more secure, affordable, and competitive.

While the challenges posed by the new carbon economy may seem daunting, they are not insurmountable. With proper attention, a sound vision, and a collective effort, we can not only create a vision of the new carbon economy but make it a reality.

[1] In the late 2010s, many different organizations put forward definitions for the new carbon economy. Here are a few: Building a New Carbon Economy: An Innovation Plan. NREL (2018). A New Carbon Economy On The Horizon. U.S. Department of Energy, (2019). A New Carbon Economy Takes Shape. LLNL, (2019). The New Carbon Economy Consortium, (2017). Inside The New Carbon Economy, GreenBiz, (2019).

[2] Now that the world has crossed 1.5C of warming, a net-negative economy is needed in order to drawdown excess carbon dioxide in the atmosphere.

[3] According to the U.S. DOE’s Carbon Management Commercial Liftoff report, 30,000-96,000 miles of US CO2 pipelines will be needed by 2050 to support the new carbon economy. This is compared to around 5,300 miles of CO2 pipeline that are in operation in the U.S. However, very little is under development.  

[4] It may be strategic to begin building a carbon management ecosystem on top of activities that are already underway. The Denbury pipeline, for example, which crosses the US Southeast and is owned by ExxonMobil was originally built to enable PSC for enhanced oil recovery (EOR). However, this project has also given the southeast an oversized CO2 pipeline that may soon be a critical piece of infrastructure for moving carbon captured from DAC facilities to storage sites and for supplying carbon as a feedstock to SAF utilization facilities. Likewise, infrastructure that is developed today to support a blue hydrogen economy might one day enable the production of synthetic plastics and petrochemicals.