Harvard Case - Carbon Capture, Utilization, and Storage: Separating Fact From Fiction
"Carbon Capture, Utilization, and Storage: Separating Fact From Fiction" Harvard business case study is written by Andrew Isaacs, Natalia Costa i Coromina, Aditya Aggarwal. It deals with the challenges in the field of Strategy. The case study is 8 page(s) long and it was first published on : Dec 31, 2022
At Fern Fort University, we recommend a multifaceted approach for Carbon Engineering (CE) to capitalize on the burgeoning carbon capture, utilization, and storage (CCUS) market. This strategy involves a combination of strategic alliances, product diversification, and global expansion to achieve sustainable competitive advantage and address the pressing need for climate action.
2. Background
Carbon Engineering is a Canadian company pioneering direct air capture (DAC) technology, a process that removes carbon dioxide directly from the atmosphere. The case study highlights the significant potential of this technology in mitigating climate change, but also underscores the challenges CE faces in scaling up its operations and achieving commercial viability.
The main protagonists are:
- Carbon Engineering: A company with a groundbreaking technology but facing significant challenges in scaling up and achieving profitability.
- Investors: Seeking returns on their investment and a clear path to profitability for CE.
- Governments: Concerned about climate change and looking for solutions to reduce emissions.
- The Public: Increasingly aware of climate change and demanding action from companies and governments.
3. Analysis of the Case Study
To analyze the case, we employ a combination of frameworks:
Porter's Five Forces:
- Threat of new entrants: High - The technology is complex but not unique, with potential for competitors to enter the market.
- Bargaining power of buyers: Moderate - CE's customers are diverse (governments, industries, individuals), with varying needs and price sensitivity.
- Bargaining power of suppliers: Low - CE relies on readily available materials and technologies.
- Threat of substitute products: High - Other carbon capture technologies, such as biomass energy with carbon capture and storage (BECCS), present competitive alternatives.
- Rivalry among existing competitors: Moderate - The CCUS market is still developing, with few established players, but competition is expected to intensify as the market grows.
SWOT Analysis:
- Strengths:
- Pioneering DAC technology with a clear environmental benefit.
- Strong intellectual property portfolio.
- Growing global awareness of climate change.
- Potential for government subsidies and incentives.
- Weaknesses:
- High capital costs for plant construction and operation.
- Limited market penetration and revenue generation.
- Uncertain regulatory environment for carbon pricing and storage.
- Potential for public resistance to large-scale carbon capture projects.
- Opportunities:
- Growing demand for carbon capture solutions from governments and industries.
- Expanding markets in emerging economies with high carbon emissions.
- Potential for partnerships with energy companies and other stakeholders.
- Technological advancements in DAC and carbon utilization.
- Threats:
- Competition from other carbon capture technologies.
- Fluctuating carbon prices and regulatory uncertainty.
- Public perception of carbon capture as a 'techno-fix' for climate change.
- Potential for technological disruption by new, more efficient solutions.
Value Chain Analysis:
CE's value chain consists of:
- Research & Development: Developing and improving DAC technology.
- Plant Construction & Operation: Building and operating large-scale carbon capture facilities.
- Carbon Utilization & Storage: Developing and implementing solutions for carbon utilization and storage.
- Marketing & Sales: Promoting CE's technology and securing customers.
Business Model Innovation:
CE needs to explore innovative business models to achieve profitability, including:
- Subscription-based services: Offering carbon capture services to industries on a subscription basis.
- Carbon offsetting: Selling carbon credits to companies seeking to offset their emissions.
- Carbon utilization: Developing and commercializing products made from captured carbon.
- Strategic partnerships: Collaborating with energy companies and other stakeholders to leverage their expertise and resources.
4. Recommendations
To achieve sustainable growth and profitability, CE should adopt the following strategies:
1. Strategic Alliances:
- Partner with energy companies: Collaborate with oil and gas companies to capture carbon from their emissions and utilize it for enhanced oil recovery (EOR) or other applications.
- Form strategic alliances with governments: Secure government support for carbon capture projects through subsidies, tax incentives, and regulatory frameworks.
- Partner with technology companies: Collaborate with IT companies to develop innovative solutions for monitoring, controlling, and optimizing carbon capture operations.
2. Product Diversification:
- Expand into carbon utilization: Develop and commercialize products made from captured carbon, such as synthetic fuels, building materials, and chemicals.
- Offer carbon capture services to diverse industries: Target industries beyond oil and gas, including cement, steel, and power generation.
- Develop new technologies for carbon capture: Invest in R&D to improve the efficiency and cost-effectiveness of DAC technology.
3. Global Expansion:
- Target emerging markets: Expand into countries with high carbon emissions and strong government support for climate action, such as China, India, and Brazil.
- Establish partnerships with local companies: Collaborate with local companies to leverage their expertise and market access.
- Develop a global strategy for carbon capture: Develop a comprehensive strategy for global expansion, considering regulatory frameworks, market demand, and potential for collaboration.
5. Basis of Recommendations
These recommendations are based on the following considerations:
- Core competencies and consistency with mission: CE's core competency lies in its advanced DAC technology, which aligns with its mission of mitigating climate change.
- External customers and internal clients: The recommendations address the needs of diverse customers, including governments, industries, and individuals.
- Competitors: The recommendations aim to differentiate CE from its competitors by focusing on product diversification, global expansion, and strategic alliances.
- Attractiveness: The recommendations are expected to lead to increased revenue, market share, and profitability, ultimately contributing to CE's long-term success.
6. Conclusion
CE has a unique opportunity to lead the CCUS revolution and contribute significantly to climate action. By adopting a strategy of strategic alliances, product diversification, and global expansion, CE can overcome its challenges and achieve sustainable growth and profitability.
7. Discussion
Alternatives not selected:
- Focusing solely on DAC: This strategy would limit CE's growth potential and expose it to greater competition from other carbon capture technologies.
- Merging with a larger company: While this could provide access to capital and resources, it could also compromise CE's independence and innovative spirit.
Risks and key assumptions:
- Technology risk: The success of CE's strategy hinges on the continued development and improvement of its DAC technology.
- Market risk: The growth of the CCUS market is uncertain and dependent on government policies, carbon pricing mechanisms, and public acceptance.
- Financial risk: CE's strategy requires significant capital investment, which could be difficult to secure in the current economic climate.
Options Grid:
| Option | Advantages | Disadvantages | Risks |
|---|---|---|---|
| Strategic Alliances | Access to capital, resources, and expertise | Loss of control, potential conflicts of interest | Partnering with companies with conflicting interests |
| Product Diversification | Increased revenue streams, reduced dependence on a single technology | Increased complexity, potential for cannibalization | Developing new technologies and markets |
| Global Expansion | Access to new markets, increased revenue potential | Regulatory challenges, cultural differences | Entering unfamiliar markets with uncertain regulatory environments |
8. Next Steps
- Develop a detailed strategic plan: Outline specific goals, timelines, and resources required for implementing the recommendations.
- Identify and secure strategic partners: Begin negotiations with potential partners in energy, technology, and government sectors.
- Develop a global expansion strategy: Identify target markets, conduct market research, and establish partnerships with local companies.
- Invest in R&D: Continue developing and improving DAC technology and explore new applications for captured carbon.
- Communicate with stakeholders: Engage with governments, industry leaders, and the public to build support for CE's technology and its role in addressing climate change.
By taking these steps, CE can position itself as a leader in the CCUS market and make a significant contribution to a sustainable future.
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Case Description
In 1992, 179 countries effectively agreed to end the fossil-fuel age at the United Nations Conference on Environment and Development. Yet thirty years later, the Earth Summit's ""new blueprint for international action"" had not stopped the increase of long-lived greenhouse-gas concentrations. In 2022, the United Nations stated ""carbon capture, use and storage (CCUS) can play a significant role in mitigating carbon emissions."" Some climate experts considered CCUS necessary for reaching net-zero Greenhouse gas emissions. Others thought technology and infrastructure were too nascent to make a difference. Had decades-old pledges to stop fossil fuel use been replaced by capturing emissions?
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