Europe and UK Face World’s Highest Carbon Capture Costs as China Gains 70% Cost Advantage

European and UK carbon capture, utilisation, and storage (CCUS) projects are currently among the most expensive in the world, driven by high energy costs, offshore storage requirements, and complex regulatory frameworks, according to a new analysis by Wood Mackenzie.

The report, CCUS and Global Power Generation, highlights stark regional disparities in CCUS economics. European utilities face capture costs exceeding US$300 per tonne of CO₂, rendering most projects uneconomic. In contrast, China reportedly builds equivalent facilities at $30-40 per tonne, creating a significant competitiveness gap.

Despite global power sector emissions of 13.5 billion tonnes annually—about one-third of total energy emissions—only two commercial-scale CCUS projects operate worldwide, with more than 50% of announced capacity for power plants delayed or cancelled over the past decade.

Regional and competitive implications

Chinese state-owned enterprises reportedly complete CCUS projects in approximately 18 months, more than twice as fast as US and European counterparts, with capital expenditures 55-70% lower per tonne captured. With five coal CCUS projects under construction in China versus only two operating elsewhere globally, the analysis warns that China’s cost advantage may reshape industrial competitiveness, especially as the EU’s Carbon Border Adjustment Mechanism comes into effect in 2026.

Peter Findlay, Director and Global Lead, CCUS Economics, Wood Mackenzie, said:
“European power generators face a stark economic reality with CCUS. While technically feasible, the costs are prohibitive without considerable government support. China’s claimed 70% cost advantage could prove as disruptive as their dominance in solar manufacturing.”

UK’s Dispatchable Power Agreement (DPA) emerges as exception

The UK stands out in Europe with its pioneering DPA model. BP’s NZT Power project represents the first commercially viable power CCUS venture on the continent, delivering an estimated 20.8% pre-tax IRR, though only with government support equivalent to £319 per tonne of CO₂. No other European nation has implemented a similar support framework.

AI power and capacity factor challenges

The growing data centre sector presents both opportunities and challenges for CCUS adoption. While companies like ExxonMobil and Chevron promote CCUS for powering AI and cloud computing facilities, hyperscalers face trade-offs between sustainability and reliable power. Gas remains a “bridge” fuel for intermittent renewables, but CCUS adds US$60-95 per MWh for combined-cycle gas turbines, and incentives like the 45Q tax credit offset only a fraction of costs.

European gas plants, increasingly used for grid balancing rather than continuous baseload, face further economic pressures due to low CO₂ concentrations (3–4%) in flue gases, significantly raising capture costs compared to coal plants. CCUS adds US$35-200 per MWh in Europe, making widespread adoption challenging.

BECCS as a viable alternative

Bioenergy with carbon capture and storage (BECCS) offers a more economically attractive route, creating negative emissions by capturing CO₂ from biomass combustion. Microsoft’s largest-ever carbon removal deal, at US$150-200 per tonne, demonstrates market appetite. BECCS projects can achieve 16-23% internal rates of return, compared to negative returns for many fossil fuel CCUS projects.

Technology outlook and strategic choices

Wood Mackenzie projects that next-generation CCUS technologies could reduce capture costs by 50-60% by 2050, though these improvements may arrive too late to improve current project economics. Only 350 million tonnes per annum of coal and gas powerplant capture capacity is expected by 2050—about 3-4% of the global thermal fleet.

Hetal Gandhi, Lead, CCUS – Asia Pacific, Wood Mackenzie, said:
“European utilities face a strategic choice: pursue expensive CCUS projects with uncertain returns or focus on alternative decarbonisation pathways that may prove more economically viable.”

The analysis is part of Wood Mackenzie’s Power & Renewables and Lens Carbon services, aimed at helping power generators, CCUS developers, policymakers, and investors navigate the complex economics of power sector decarbonisation technologies.