Uncertainty around carbon policy is a major barrier to investment across the carbon capture and clean fuels sectors, according to Adam Forsyth, Head of Research at Longspur Capital, speaking at gasworld’s recent European CO2 Summit in Rotterdam.
While funding momentum is building in mature segments like biogas and biomethane, Forsyth warned that the carbon capture and removal space still lags in deal volume and frequency.
“We are seeing funding happening, but it’s nothing like the frequency in the biogas space,” he said.
Longspur Capital, a clean energy-focused finance and research firm, is seeing an uptick in European activity through its recently opened Amsterdam office, particularly in biogas.
Forsyth pointed to a €120m ($132m) debt raise for a large-scale biogas project as evidence of market maturity. “Interestingly, although it is a subsidised offtake, the feeling is this could have gone unsubsidised. It shows maturity from a funding point of view,” he said.
Adam Forsyth, Head of Research at Longspur Capital, speaking at gasworld’s European CO2 Summit in Rotterdam
Biomethane use in transport is also gaining traction in the UK, where a third of haulage companies are trialling biomethane-powered trucks.
“New engine types are coming through and that’s leading growth,” Forsyth said, adding that UK and European policy frameworks have played a key role in attracting investment.
In contrast, carbon capture and storage (CCS) and carbon dioxide removal projects face a tougher investment climate. While the UK’s Track-1 cluster funding has supported two major CCS deals, Forsyth noted that overall investment levels in CO2 remain modest. “If we strip out those two large deals, the funding is still much less,” he said.
For investors, policy risk is the biggest concern. Forsyth stressed the importance of mechanisms like contracts for difference (CfDs), which offer pricing certainty.
“CfDs have been hugely successful in UK renewables. And we’re now seeing similar schemes emerge in Europe and China. Investors want to know there’s a market there, with volume, price and limited risk.”
In the US, policy instability is also dampening investor appetite, particularly around the 45Q tax credit for carbon capture. A proposed repeal bill has added uncertainty, though Forsyth suggested political support from both parties may ultimately protect the incentive. “This will be an interesting test case. If the extreme proposals are blocked, that could help restore investor confidence.”
Interest in new fuel types such as methanol and e-fuel is growing, particularly in shipping, but Forsyth cautioned that deployment was still at an early stage. He pointed to one project in Spain and said regulatory mandates would be key to accelerating investment.
He also welcomed signs of support for carbon removal in new guidance from the Science Based Targets initiative, which frames ESG targets. This could help improve credibility and pricing in the voluntary carbon market.
“It’s still early days, but these frameworks are what investors are looking for.”
