Standard Chartered: Scaling Carbon Capture & Clean Steel

Carbon capture and storage (CCS) technologies play a significant role in many net zero plans, including that of the IEA.

However, these technologies are still new and need financing to develop to the scale required for global net zero.

Wood Mackenzie estimates that CCS could account for a third of the emissions reduction required to meet net zero globally by 2050.

Standard Chartered has developed a Transition Finance Insight looking at the opportunities for CCS in Asia.

“In markets like Singapore, for example, CCS technologies are being considered as part of comprehensive strategies to support decarbonisation where economies and supply chains are still intertwined with carbon intensive industries,” says Ben Daly, Managing Director and Global Head of Transition Finance at Standard Chartered.

“Across our global network, we have deep local expertise in our home markets in Asia. Given this, combined with our CCS expertise, our first Transition Finance Insight focuses on the factors at play around CCS in Asia - and specifically across ASEAN.”

See the full story in Issue 67 of Sustainability Magazine.

What are the types of CCS?

Post-combustion capture is commonly used in existing power plants and factories, scrubbing CO₂ out of flue gas after fuel is burned with chemical solvents like amines.

Pre-combustion capture is used in industrial processes like hydrogen production. Fuel is partially oxidised to create syngas and CO₂ is removed before then hydrogen is used for power or heat.

Oxy-fuel combustion sees fuel burned in nearly pure oxygen instead of air, producing a waste stream of almost pure CO₂ and water vapor. 

Direct air capture (DAC) is a technology that pulls CO₂ from ambient air using giant fans and chemical solvents.

Geological storage injects CO₂ into deep underground rock formations like saline aquifers or depleted oil and gas reservoirs. At depths of 1 km or more, pressure keeps the CO₂ in a supercritical state where it behaves like a liquid. 

The opportunity for CCS in Asia

Standard Chartered’s report says that markets across Asia, including India, China and Indonesia, have some of the highest carbon emissions globally.

Much of the emissions in these markets come from power generation alongside industries like petrochemicals, steel and cement.

For some of these industries, complete decarbonisation may not be immediately possible – power demand is growing and many new technologies are not yet economically viable. 

Where decarbonisation is challenging, CCS could provide a solution that allows these industries to continue while emissions are reduced.

Singapore, for example, has limited access to renewable energy and heavily relies on natural gas for its power supply.

The S-Hub cross-border initiative, with ExxonMobil Asia Pacific and Shell Singapore involved, tools to develop a CCS project that can capture and permanently store at least 2.5 million tonnes of CO₂ each year by 2030.

This project includes work with Indonesia, Japan and Malaysia as part of the country’s plan to decarbonise hard-to-abate sectors.

Challenges for CCS in Asia

Standard Chartered’s report says there are three core challenges when scaling CCS:

• Insufficient or unclear frameworks
• A lack of cross-border regulatory alignment
• Supply chain readiness
• A roll out of CCS regulation will be needed to support CCS development including CO₂ criteria and cross-border conditions. 

Since 2023, Indonesia has established three ministerial and presidential CCS regulations and Malaysia’s Parliament has passed the Carbon Capture, Utilisation and Storage Bill 2025, but Standard Chartered says further implementation details and commercial structures are needed to scale CCS. 

Markets across the region are already collaborating to establish transboundary CCS and support its expansion, such as the S-Hub initiative, but to remove friction across markets it says this must go further.

Commercial partnerships will be key to supporting the build out of the value chain among emitters, transport providers and CCS operators, Standard Chartered says.

“While still nascent, CCS stands out as a strategic opportunity for Asia to accelerate decarbonisation, seek more sustainable growth and foster regional collaboration and innovation,” says Yingying Chen, Director of Transition Finance at Standard Chartered.

“We’re committed to supporting our clients on this journey, leveraging our extensive global network and in-depth sector expertise.”

While international banks, including Standard Chartered, have shown willingness to support CCS and acknowledge its potential, careful consideration of risk is needed to ensure the successful development and execution of these expensive projects.

About low carbon steel

“Steel is a critical enabler of economic development,” Ben explains.

“It’s also used in nearly every low carbon technology needed to support the transition, including wind turbines, solar infrastructure and electric vehicles.”

According to the IEA, traditional steelmaking is responsible for 7 to 8% of global CO₂ emissions, making it the largest industrial source of emissions. 

Another Transition Finance Insight from Standard Chartered looks at supporting a cross-regional low carbon steel corridor and the opportunities this could present to help accelerate low carbon growth across Europe and the Middle East.

There are a variety of methods to create low carbon steel.

Direct reduced iron (DRI) is a steelmaking feedstock produced by removing oxygen from iron ore. 

Electric arc furnaces (EAF) use an electrical arc powered by electricity to melt scrap metal for steel production, replacing coal blast furnaces. EAFs can use renewable energy.

Green hydrogen can be used as a reducing agent in DRI plants, emitting only water vapour instead of CO₂.

The low carbon steel landscape

Steel demand will increase by around 30% by 2050 according to the World Economic Forum.

Achieving this demand while facilitating a reduction in carbon emissions from steel will require around US$300bn on top of business as usual and supportive, consistent policy measures, Standard Chartered says. 

Europe is a mature steel market, relying on predominantly blast furnace steel production infrastructure.

When these furnaces reach end of life, the opportunity arises to replace them with EAFs, helping to reduce carbon emissions by up to 80%. 

The Middle East has significant incumbent DRI EAF infrastructure and a growing demand for low carbon steel as markets are looking to diversify into downstream industries.

Capital and fiscal incentives are helping to create a natural centre of gravity for low carbon steel production. 

Costs and constraints

The EU Carbon Border Adjustment Mechanism (CBAM) has introduced a carbon tariff on carbon intensive products like steel for importers bringing in more than 50 tonnes of relevant goods per calendar year.

The start of CBAM certificate sales has been pushed back from 2026 to 2027 by the Omnibus simplification package.

The EU Emissions Trading System (EU ETS) has also faced changes, excluding “downstream finishing processes” for aluminium and steel from the system boundaries of carbon calculations.

As these regulations continue to roll out, primary steel consumption could be subject to tariffs regardless of origin. 

The cost of electricity, used for EAFs, has risen sharply, bringing the cost of low carbon steel up with it.

Standard Chartered says that this dynamic could lead to a shortfall in credible low carbon feedstock and Europe could risk accelerated de-industrialisation as investments in the steel sector move to markets offering more competitive pricing. 

Low carbon steel in the Middle East

The Middle East, Standard Chartered says, has a robust volume of renewable and natural gas resources which can directly power EAFs and low carbon steel production.

The region accounts for around 40% of global DRI production and some governments have already supported large-scale, hydrogen-ready low carbon steel complexes within special economic zones. 

These conditions across Europe and the Middle East could set up the regions for a split supply chain where low carbon feedstock is produced in Middle Eastern hubs, then shipped to Europe and used to produce low carbon steel.

This corridor supports industrial transformation and helps both regions to achieve their goals. 

Vale has already signed a Memorandum of Understanding with European steelmakers to explore the long-term supply of low carbon hot briquetted iron.

This agreement aims to evaluate the construction of plants to produce DRI and other low carbon products. 

Catriona Bell, Director, Transition Finance at Standard Chartered, says: “Institutions with established franchises across the Middle East and Europe, like Standard Chartered, are well placed to provide the necessary connective tissue to facilitate a cross-regional value chain for low carbon steel.

"Our global network across high-growth markets and experience in aligning international capital with transition assets make us a natural intermediary to support a Middle East to Europe low carbon steel corridor.”

See the full story in Issue 67 of Sustainability Magazine.