How risk management unlocks financing and builds resilience for carbon capture and storage projects

Carbon capture and storage investment in Asia is projected to reach US$622 billion by 2050. Yet many projects still struggle to secure financing

As the world races towards net-zero emissions by 2050, the pressure to cut carbon footprints has never been greater. In Asia, governments are tightening related policies, with Singapore raising its carbon tax and Japan proposing similar measures to encourage companies to cut emissions. For hard-to-abate industries including oil and gas, steel, cement, and petrochemicals, which are hard to decarbonise, carbon capture and storage (CCS) is becoming a vital part of the solution.

CCS is expected to contribute to approximately 8% of global emissions reductions by 2050, making it a growing component of many corporate decarbonisation strategies. In the Asia Pacific alone, investment in CCS is projected to reach a staggering US$622 billion by 2050. Yet, despite this promising outlook, many CCS projects struggle to get the financing they need to move forward.

Understanding the risks behind these projects — and how they can be managed — will be critical to unlocking capital and getting projects on track.

Why are organisations struggling to secure financing for CCS projects?

Low investor confidence

CCS projects remain difficult for investors to evaluate because of unclear carbon pricing, shifting regulations, and the complexity of transporting and storing carbon across borders. These projects require significant upfront investments and are highly sensitive to changes in regulation and policy, making future returns uncertain. Evolving carbon markets and economic volatility further increase the perception of risk.

Furthermore, costs for CCS can rise if projects are poorly managed, making commercial viability a key consideration for investors. Combined with long development timelines, these factors create uncertainty over future returns, making it harder for developers to secure third-party financing.

Underperformance of technology in capture facilities

One of the biggest worries for investors is when carbon capture technology doesn’t perform as expected. Scaling up these technologies is new territory, and several flagship projects have failed or been suspended after operating below their designed capacity. 

When capture facilities underperform, carbon capture volumes fall, reducing potential revenue and carbon-credit generation. This can throw off contracts and financial plans, making it harder to keep the project on track.

For companies that market their products or energy as ‘net zero’, failing to meet capture goals can lead to reputational damage and potential regulatory or financial penalties. The complexity of the carbon capture process — from capture to transport and storage — further complicates risk allocation, making it difficult to find insurance solutions that cover all exposures.

How risk management helps CCS projects unlock capital and build resilience

Many CCS projects are unable to achieve the Final Investment Decision (FID), leading to delays or cancellations, often due to misunderstood risks, murky regulations and nascent end markets that make securing third-party capital difficult. Identifying risks early and allocating them appropriately among stakeholders helps reduce uncertainty and improve insurability, strengthen investor confidence, enabling projects to move forward and stay on schedule, and ensuring they perform reliably over time.

Early project stage: Strengthen investor confidence

Early-stage risk assessments and staying up to date with changing regulations help quantify exposures and establish clear risk profiles. This provides investors and lenders greater clarity on project viability, while identifying which risks can be insured and where other risk transfer solutions may be required. By turning uncertainty into measurable and manageable risks, organisations can attract capital and build investor confidence.

Design and development stage: Build climate resilience

In the next stage, understanding exposures to catastrophe risk becomes crucial, particularly as climate change accelerates the frequency and severity of certain perils. As many CCS facilities are in areas exposed to extreme weather or seismic activity, assessing these hazards early allows developers to strengthen infrastructure resilience and incorporate mitigation measures into project design. Demonstrating engineered resilience through risk engineering design review in early stages of the project can help critical assets fortify against extreme natural perils to improve insurability and enable organisations to secure more favourable terms in the long term.

Construction-related risks can also be addressed through construction-all-risks and delay-in-start-up insurance, providing additional financial protection during project development. Surety solutions can further strengthen financial stability by ensuring that funds are available to meet contractual obligations while preserving liquidity.

Operational stage: Protect technology performance and revenue streams

Once operational, projects face risks such as physical damage that can disrupt operations. Business interruption coverage can safeguard revenue streams, while performance guarantee parametric insurance and carbon-credit insurance address more specialised risks — shielding against losses from technology failures and the invalidation of carbon credits, respectively.

By integrating these risk management strategies through the asset’s lifecycle, CCS developers and project owners can reduce uncertainty, transfer risks, and strengthen stakeholder confidence, all of which support long-term decarbonisation goals.