What Are The Top 5 Carbon Capture Stocks?

Top 5 Carbon Capture Stocks - Carbon Herald
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Carbon capture is one of the technologies we have today that can stop immediately emissions coming out of smokestacks. It can also remove CO2 directly from the atmosphere which is a must for a world aiming to clear up its historic emissions and limit global warming to 1.5 degrees Celsius. Carbon capture stocks are gaining popularity as the technology offers a solution that can balance out the CO2 levels in the atmosphere.

We have also identified the hydrogen industry as one of the potential growth sectors in clean energy. We’ve created a 85-page primer on the hydrogen industry and combined it with in-depth fundamental and technical analysis of five stocks – Plug Power, FuelCell Energy, Nikola, Bloom Energy and Ballard Power Systems. Click this Hydrogen Industry and Stocks Report link to learn more and download it at a discounted price of $49.99 during our holiday promotion!

Renewable energy and other clean energy alternatives like green hydrogen are set to prevail over fossil fuels in the coming decades. However, renewable energy suffers from several constraints that are slowing down the transition like availability of power, longer time needed to build the necessary capacity to cover global energy requirements, power quality issues, grid and transmission barriers, lack of storage, costs, etc. 

Relevant: 10 Best Green Energy Stocks To Invest In Now

Green hydrogen is still in its early stages of development which means it would take decades for the industry to mature. As the clean energy transition is not happening overnight, the world needs a technology right now that could stop the emissions from fossil-fuel plants from entering the atmosphere.

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The business of capturing CO2 emissions has been around for a while. It is used since the 1920s for separating CO2 sometimes found in natural gas reservoirs from the saleable methane gas. In the early 1970s, a stream of CO2 was captured from a gas processing facility in Texas and used for the first time in an oil field to boost the production of oil from the ground. 

That process is known as enhanced oil recovery and was proven successful. Since then, a lot of oil companies have been using CO2 capture technology mostly to boost oil recovery. In 1996, a new idea of carbon capture was introduced that changed the way the market looked at the technology. 

Equinor was the first company to use the existing technology in a new way – to permanently sequester the CO2 underground. It built and commissioned the first carbon capture and storage facility in the world. Since launching, it has been storing up to 1 million tons of CO2 emissions per year, cutting Norway’s total emissions by 3% over the last 20 years. 

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However, there are some obstacles staying in the way of wider deployment for the technology. It is still in its initial stage of adoption due to its high capital costs and not so many ways to generate profits for investors. The massive upfront costs required for deploying the technology are encouraging some subsidies from governments around the world, however, if carbon capture stocks are to scale, they need to reach the point of returning profits for shareholders. 

At the moment, there are almost no pure play carbon capture stocks. Most of the companies whose entire business is devoted to carbon capture are privately held and focus on the commercialization of the technology. 

Examples are Climeworks, Carbfix, Global Thermostat, Carbon Engineering – direct air capture companies and Svante, Carbon Clean, Net Zero Solutions, Recapture and others that offer carbon capture services. 

Relevant: The Top 10 Carbon Capture Companies In 2022!

Major oil companies like Exxon, Chevron and Shell have recently increased participation in major carbon capture and storage projects to reduce their emissions. The pressure on oil giants to cut emissions is increasing as the world has declared a net zero goal by 2050. 

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As it is still early days for carbon capture on a global scale, there is one carbon capture stock that stands out from all the others. Aker Carbon Capture is a publicly-traded carbon capture stock that’s listed in the US as an ADR under the ticker AKCCF, and on the Oslo Stock Exchange under the ticker ACC.OL. Another carbon capture stock is listed on the Norwegian OTC Market – CO2 Capsol under the ticker CAPSOL. 

Delta CleanTech Inc. is a pure carbon capture company providing clean energy engineering services and technology. It debuted on the Canadian Securities Exchange (CSE) on August 19th, 2021 and can be found under the ticker symbol DELT. 

The other three companies are involved in oil and gas production or services and are partly involved in carbon capture. Those oil companies do have the potential to profit from the development of the technology in the future – Occidental Petroleum (NYSE: OXY), Schlumberger Limited (NYSE: SLB), and Equinor (NYSE: EQNR). 

Aker Carbon Capture Stock

Aker Carbon Capture is perhaps the purest example of a “carbon capture stock” on this list. It’s an outstanding stock that is benefiting from Aker ASA’s more than 20 years of technology development and operational experience in the carbon capture space. Aker Carbon Capture was established only in August 2020 as part of Aker Horizons. 

Aker Horizons is an investment company consisting of clean technologies companies that solve fundamental challenges related to climate change and sustainability. Aker Horizons holds 51% of Aker Carbon Capture. Aker Horizons is 80% owned by Aker ASA – a top holding company from the Aker Group conglomerate.

Aker Carbon Capture is solely dedicated to the deployment of carbon capture and storage technologies for its clients. Its market capitalization stands at $716 million (NOK 7.13 billion) and ended Q3 2022 with a revenue of $19.64 million (NOK 203.6 million).

The company is still not profitable as it reported a net loss of $5 million (NOK51.6 million) and earnings per share of a negative NOK 0.085 for the same period. The medium/ long-term outlook seems promising but risks remain high (as well as for other carbon capture stocks) as the company is operating in an uncertain market.

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There are solid fundamentals though that are positive for the industry and the company. The current trends are showing that the price of emitting carbon is on a rapidly accelerating trajectory while the price of capturing emissions is coming down due to increased deployment over the last couple of years. 

According to data published by the Global CCS Institute in October 2022, the carbon capture and storage planned capacity grew exponentially to 244 million metric tons a year which represents a 44% increase over the past year.

A record-high of 196 commercial carbon capture and storage facilities are in the project pipeline so far – 30 projects are in operation, 11 are under construction, and 153 in development. 61 new facilities were added to the project pipeline in 2022 alone.

The carbon tax under the EU ETS also spiked in 2022 – from around €50 per ton in the summer of 2021 to an all-time high of €99 in August 2022. According to a DOE study published in 2021, commercial carbon capture technology can take out CO2 at around $58.30 per metric ton at a cost of $400 – $500 million per unit. 

The upfront costs required for the installation of the technology are still high, however, governments and private investment funds are increasing participation. Back in September 2021, Norway’s largest $1.4 trillion wealth fund committed to net zero emissions by 2050 which means Aker Carbon Capture is well-positioned to be in a country with an ESG focus. 

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The company’s main markets are the UK, Scandinavia, and Benelux – regions that are in line with Aker Carbon Capture’s objectives. The UK government has also promised $1 billion for the development of four carbon capture and storage (CCS) hubs in the country. Europe and the US are pouring money into green technologies like CCS and Aker can benefit from a great deal of financial backing. 

In 2021, the company was awarded the Brevik CCS EPC contract by Norcem HeidelbergCement, – the first carbon capture and storage project in the world in a cement facility. More partnership agreements were signed this year for the development of carbon capture solutions.

However, the MOUs that were signed do not necessarily guarantee that the revenues will be coming in, but industry connections are the first step towards a profitable carbon capture business. 

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The big question remains when will carbon capture become scalable and for how long would the business model have to be subsidized to survive. Aker Carbon Capture’s half-year financial statement shows that carbon capture cost would meet the effective carbon price in the next couple of years – a key strategic pillar that would improve the company’s economics. 

To reach the point of intersection, the world would need to invest a lot in new capacities. IEA projects that carbon capture and storage capacity would reach 310 million metric tons of CO2 per year by 2030, up from just 39 million tons in 2020. A new report also estimates that carbon capture and storage is forecasted to become a $4.9 billion market by 2027, at a CAGR of 15.1% during the forecast period; it is expected to grow to $2.4 billion in 2022 and it was valued at $1.75 billion in 2019. 

However, some analyses say that the world would have to remove 1 gigaton of emissions from the atmosphere by 2025 to have a chance of limiting global warming to 1.5 degrees Celsius. IPCC’S goal is to store 6 to 7 gigatons of CO2 per year by 2050 which means capacity would need to increase more than 200 times the forecasted levels. 

Aker Carbon Capture is positioned in a business estimated to grow exponentially over the next few decades and is also located in one of the countries with the most extensive green energy investments.

Delta CleanTech Stock

Delta CleanTech was founded in the early 2000s and has offered commercial CO2 capture technology on the market since 2005-2006. It is a Canadian company based in Calgary that is also one of the oldest companies focused on carbon capture. 

The company spun off from its parent company – HTC Extraction Systems, in January 2021 and raised a $7.5 million funding round in March to pay for the expansion of its sales and engineering teams. On March 29th, 2021, Delta CleanTech filed a prospectus with Canadian regulators to list it on the Canadian Securities Exchange (CSE).

The company announced on August 19th, 2021 that its common shares can be bought and sold on the CSE under the ticker DELT. 

Delta’s business is focused on manufacturing and providing modular equipment for CO2 capture, the LCDesign that takes out CO2 emissions from smokestacks and other sources. It is also involved in solvent and ethanol purification, hydrogen production and carbon credit certification and trading.

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The company announced in March 2021 an expansion of the Calgary headquarters soon after the Canadian government’s announcement in December 2020 that it will hike the price of carbon to $170 per ton by 2030. The increase in the price for emitting carbon is a key driver of carbon capture investments and deployment of the technology. 

The CEO also announced the company will develop sales with office locations in Calgary, Houston, London, Abu Dhabi, Beijing, and Sydney. An expansion of Delta’s carbon capture capacity is connected to the surge in new CO2 capture projects over the last months. 

The Delta CleanTech stock is also favored by the company being positioned in a country with ambitious climate change policy and targets that are also driving new investments. It is recognized globally as an expert in the field of CO2 capture and has participated in many large-scale CO2 capture projects worldwide over the last 15 years including projects in Norway, Scotland, Italy, United States, and Canada.

Occidental as a Carbon Capture Stock

Occidental Petroleum Corporation (NYSE: OXY) is the 5th largest oil and gas company in the US by market cap and one of the biggest in Texas. It is also famous for being America’s top climate-forward-looking oil company which is why we decided to include it in this list. 

So far it has been utilizing carbon capture technologies mainly for enhanced oil recovery purposes, however, it has announced recently it will not expand oil production in the next few years but instead, it will focus its resources on transitioning to the green economy. 

The company’s CO2 equivalent emissions from operations and use of power, heat and steam (Scope 1 & 2) totaled 24.46 million metric tons in 2021 which compares well to permanently storing 20 million tons of CO2 annually. 

The company is mainly driven by increasing shareholders’ returns which is why enhanced oil recovery has been predominant in its carbon capture portfolio but also does not hide ambitions in transitioning to a low-carbon future. This is also why I think it is one of the most promising companies that will make carbon capture a profitable business, actually rewarding shareholders and paying off its debt down the road. 

The company founded Oxy Low Carbon Ventures (OLCV) in 2018 which will aim to develop carbon capture utilization and storage and other technologies to help lower emissions across the industry. One of the biggest initiatives under OLCV is the direct air capture project called 1PointFive. 

When completed it is expected to be the world’s biggest direct air capture facility in the world that would take out 1 million ton of CO2 per year. Oxy uses Carbon Engineering technology and it plans to offer it to other companies.

Even though it is an oil company above all, Occidental seems to be in a good place to profit from its future development plans of CCS. The oil and gas transition stock is up 104% since January 2022 at $63 as of December 9th. It’s still not late to buy it as it has the potential to keep attracting further investors’ interest. 

Equinor Stock

Another oil and gas producer utilizing carbon capture technologies is Equinor. The Norwegian oil giant is a pioneer of carbon capture and storage as it operates the oldest CCS facility in the world. For over the last 20 years it has been developing the technology, it takes part in 40 carbon capture and storage projects including Norway’s flagship Northern Lights carbon capture and storage project with an initial planned storage capacity of 1.5 million tons of CO2 a year. 

The company is also involved in other major low carbon projects like the CCS technology fitted on the Keadby 3 plant producing energy from natural gas, the H2H Saltend facility that produces hydrogen from natural gas and captures and stores the CO2 associated with the process. It also participated in the latest funding round of Repair – an Israeli carbon removal startup developing more efficient direct air capture (DAC) technology.

Relevant: Shell, Equinor, US Steel Team Up On A Carbon Capture And Hydrogen Hub

The company is focused on the expansion of clean hydrogen and carbon capture and storage as is shown by its agreement with the United States Steel Corporation to study the development of the technologies and a deal with infrastructure company Tallgrass Energy to explore large-scale hydrogen and ammonia projects in the U.S. Equinor also joined efforts with Wintershall Dea – a German oil and gas company to support extensive carbon capture development.

Equinor stock looks healthy as it is still trading slightly lower from all-time highs ($42), around $35 as of December 9th 2022. The company is benefiting from the natural gas price surge in Europe. Since the company is a well-established player in the carbon capture space with the longest experience of operating carbon capture and storage sites, the stock could benefit from its focus on low-carbon technologies and the green transition. 

Schlumberger as a Carbon Capture Stock

Schlumberger Limited (NYSE: SLB) is a technology company that specializes in accessing energy. Clients are major oil and gas producers. The company has over 80 years of experience in mapping, measuring, and modeling underground rock formations. It also provides decarbonization technologies to its customers, taking advantage of the major role the oil and gas industry plays in the green energy transition. 

Schlumberger has been developing carbon capture projects since 2005 and participates in more than 60 carbon storage initiatives around the world, so we feel it has a place in this list of carbon capture stocks. The company established a new energy business called Schlumberger New Energy that explores new avenues of growth for the company in the emerging energy markets – hydrogen, lithium, energy storage, carbon capture and storage, geothermal power and geoenergy for heating and cooling buildings.

The company has struck partnerships with LafargeHolcim, Chevron, Microsoft, Linde, RTI International to develop carbon capture and storage solutions. It continues to invest in new energy technology ventures and innovative partnerships in strategic sectors and claims to be diversifying its clean energy portfolio of projects in selected markets and geographies where policies make them attractive. 

Conclusion

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The market is currently short of pure-play carbon capture stocks, however, certain DAC companies like Climeworks and Carbon Engineering are expected to eventually announce IPOs at some point in the near future. 

The carbon capture market is benefiting from an influx of investments and net-zero commitments of governments and companies, boosting carbon capture technology stocks. There are plenty of opportunities for growth and expansion into the market, as recent research is pointing out.

Major established players like Aker Carbon Capture, Delta CleanTech, and the CCS divisions of Equinor, Occidental, and Schlumberger are ideally positioned to drive economies of scale signing new deals and building new capacity.

Risk Disclaimer

Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Carbon Herald). I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: The information contained herein is for informational purposes only. Nothing in this article should be taken as a solicitation to purchase or sell securities. Before buying or selling any stock, you should do your own research and reach your own conclusion or consult a financial advisor. Investing includes risks, including loss of principal.

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