ASEAN CCS Deployment Framework and Roadmap

Executive Summary

Almost unimaginable amounts of energy are required to fuel the rapid economic growth currently taking place in the Association of Southeast Asia Nations (ASEAN). Projected to be the fifth largest economy in the world by 2050, ASEAN’s total primary energy supply is projected to increase to 1,823 Mtoe by 2050 from 698 Mtoe in 2022.

Fossil fuels have dominated the region’s energy mix, accounting for about 82% in 2022. The share of fossil fuels is expected to reach 76% by 2050, even assuming the most aggressive renewable energy and energy efficiency policies and measures. Oil is the largest component, followed by natural gas and coal.

Consequently, ASEAN’s energy-related greenhouse gas emissions have been high, amounting to 2,215 million metric tons of CO2 equivalent in 2020, equivalent to 4.3% of the world’s total emissions. To date, nine out of ten ASEAN Member States (AMS) have recently updated their Nationally Determined Contributions (NDCs) in adherence to the Paris Agreement. Regionally, ASEAN established its Carbon Neutrality Strategy in 2023, charting strategies to be conducted up to 2050.

However, given that the AMS are mostly developing economies, the balance between energy transition and energy security must be taken into particular consideration. Due to its abundance and affordability, coal has been fundamental in supplying electricity. An abrupt energy transition from fossil fuels to renewable forms of energy could jeopardise the region’s energy security, especially given the intermittency issues of renewable energy. Moreover, ASEAN’s coal power plants are relatively young with still many years of economic life ahead. Early retirement of these plants would mean buying out future coal generation based on their contracts with power utility companies that would amount to billions of US dollars. At the same time, governments would need billions of dollars to invest in grid upgrades and battery storage for the variable renewable energy. The heavy industries such as cement, steel and chemical production are extremely energy intensive and hard-to-abate, emitting over 17% of the CO2 emissions.

As energy consumption and CO2 emissions continue to rise, mitigation measures must be applied that do not compromise energy security. This is where carbon capture and storage (CCS) comes in. ASEAN has also acknowledged the crucial role of CCS and has embedded CCS policies into its regional commitment through the 41st ASEAN Ministers on Energy Meeting (AMEM), ASEAN Carbon Neutrality Strategy 2023 and ASEAN Plan of Action for Energy Cooperation (APAEC) Phase II: 2021 – 2025. CCS has been a priority of the ASEAN Chairmanship each year since 2022.

Despite the strong support and significant potential of CCS (particularly in Indonesia, Malaysia, Thailand and Viet Nam), the deployment of CCS in the region is stagnating due to challenges surrounding its economic viability, long lead times, project complexity and innovation gaps.

Therefore, to accelerate the deployment of CCS, this report aims first to assess the current status of three key CCS pillars in ASEAN: (i) policy; (ii) legal and regulatory framework; and (iii) storage. The assessments were based on discussions conducted at the Southeast Asia CCS Accelerator (SEACA) 2023 workshops organised by the Global CCS Institute in collaboration with ACE, desk research, online questionnaires, and closed-door focus group discussions with representatives from all of the AMS. The assessment of the three pillars is the basis of the Framework section of the Report. From the Framework, a CCS Deployment Roadmap is developed, along with policy recommendations.

Under the policy pillar (Chapter 3), it is apparent that the AMS exhibit varying levels of readiness and commitment across the policies enabling CCS deployment. Indonesia and Malaysia (Sarawak) lead in implementing specific legal framework and policies to support CCS projects, which include financial measures such as grants/tax incentives, monetisation and carbon pricing, while Thailand and Viet Nam are still focusing on research and development. In terms of cost reduction measures, the AMS are employing a mix of grants and tax credits to alleviate the capital-intensive nature of CCS deployment. Indonesia and Malaysia for example, have opted for revenue support through a regulated asset base model to support CCS projects in infrastructure-heavy sectors. The involvement of state-owned enterprises (SOEs) and therefore the regulation of industrial activities are also crucial to reduce the costs of CCS by potentially mitigating the investment risks. Finally, strategic signalling, the amount of CCS policy integration into national strategies, varies among the AMS, epitomised by the amount of CCS integration into the national strategies. The way forward for the policy pillar involves enhanced policy coordination among stakeholders, as well as increased financial incentives to accelerate the adoption of the CCS technologies.

With regards to the legal and regulatory framework pillar (Chapter 4), Indonesia and Malaysia (Sarawak) are the front runners among the AMS, with the former having established national legal frameworks specifically addressing CCS activities in the upstream oil and gas sector. Examples are the MEMR Regulation No. 2/2023 and Presidential Regulation No. 14/2024. The latter established the 2022 Land Code (Carbon Storage) Rules, which regulate the use of land offshore and onshore for the development of carbon storage sites. In both countries, the regulation extends to outlining the ownership of CO2 and ownership responsibilities, measures to ensure safe and secure storage throughout the facilities’ lifecycles, the long-term liabilities associated with CO2 storage sites, and the obligatory environmental reviews and permitting. Indonesia even goes further by including a framework for transboundary CO2 transport, paving the way for an ASEAN CCS hub. As the formulation of complex regulations for CCS involves effective coordination among multiple stakeholders, a mapping of the tasks that the stakeholders are responsible for is also provided in this report to assist them in developing a coordination plan.

As for the storage pillar (Chapter 5), CO2 storage potential is evaluated primarily in three geological media: saline aquifers, depleted oil and gas reservoirs, and coal beds with three identification phases to be identified: (i) storage location, (ii) storage capacity and (iii) storage suitability. Although all of the AMS are still in the early stages of developing their CO2 storage projects, five countries, namely Indonesia, Malaysia, Philippines, Thailand and Viet Nam have completed all three steps of the identification phase, with seven having at least reached a realistic/effective CO2 storage capacity assessment level which is one level above the theoretical capacity. To better identify storage capacity, access to storage or geological data must be open. Effective collaboration and the sharing of information and plans among stakeholders would significantly impact the effectiveness and accuracy of CO2 storage characterisation.

As for the key challenges of CCS deployment (Chapter 6) in the region, economic viability is found to be the most difficult one to resolve. Most of AMS representatives believe that the high costs of CCS technologies (especially the upfront costs) are prohibitive, but that financial support could become available from carbon pricing and/or the provision of subsidies, grants and procurement-based contracts. Long lead times and project complexity (including project risk) are other key challenges that need to be addressed. Finally, solving the wide innovation gaps is also crucial if CCS projects in ASEAN are to become viable.

From the above pillar frameworks aligned with the key challenges of CCS deployment, the following recommendations are proposed as part of the ASEAN CCS Roadmap Deployment:

• Enhancing the economic viability of CCS development with aim to reduce the high capital costs and improve the competitiveness of CCS compared to other emerging technologies. Key measures include: (i) implementing carbon pricing to support the local CCS ecosystem, (ii) providing financial incentives such as grants and tax credits, and (iii) offering revenue support through contracts and procurement processes. Engaging state-owned utilities in CCS projects during the short and medium terms is also essential.
• Shortening the lead times of CCS projects and accelerating the domestic deployment of CCS through fostering close coordination among stakeholders when they formulate the plans, timelines and targets for CCS deployment in ASEAN. These efforts need to be continued through the medium and long terms, especially when it comes to setting clear regulations for the permitting and licensing of CCS projects including transboundary CO2 movements in the region.
• Managing project complexity and derisking CCS deployments through a top-down approach which aims to strengthen legislation, public policies and regulations related to CCS projects in the region. Over the short-term stage (the market creation stage), a robust legal framework is needed to define and classify CO2, including its ownership across the CCS value chain. Long-term post-site closure regulations and financial assurances are also necessary. In the mid-term, the necessary actions include ensuring storage site safety, conducting leakage risk assessments and harmonising regional technical codes and safety standards. By the end of the long-term period, ongoing monitoring and maintenance of CCS projects are recommended. This must involve public engagement with all the relevant stakeholders set by the government.
• Narrowing the technology innovation gaps by conducting feasibility studies on technological readiness, socio-economic impacts, and greenhouse gas emissions during the short-term period. In the medium and long terms, the establishment of standards and certifications for CO2 removal (CDR) and their inclusion into the legal and regulatory framework of CCS are essential for reliability, effectiveness and safety.
• Facilitating CCS hubs and international transboundary CO2 movements by establishing in the short term a CCS database to map potential source and sink locations, as well as CCS hubs in the region. The regulation regarding access to shared transport and storage infrastructure, cross-border CO2 transportation, and compliance with international law needs to be developed fully during the medium term. To support the smooth implementation of measures for the long term, a close coordination among relevant stakeholders is necessary.