With a 45% carbon intensity reduction target by 2030, CCS is not optional for Malaysian industry.

Carbon capture and storage (CCS) is no longer a technology of the future. Across Asia and beyond, projects are moving from feasibility to final investment decisions, while pressure on heavy industry to decarbonise is intensifying. For hard-to-abate sectors such as cement, steel, chemicals, and waste-to-energy, CCS is fast becoming central to any credible net-zero pathway.

Yet for all this momentum, a critical gap persists between ambition and execution. Capital is available and technology is maturing. What remains underdeveloped is a robust framework to allocate, manage, and transfer the complex risks inherent in CCS. This is where insurance—and the innovation taking place within it—is becoming decisive.

The risks in CCS are not unfamiliar in isolation. Construction, technology, environmental liability, and counterparty risks exist across many industrial sectors. What makes CCS different is the interdependent nature of its value chain: capturing CO₂ at source, compressing it, transporting it, and ultimately storing it underground—often across jurisdictions and under separate ownership structures.

This creates “cross-chain” or “project-on-project” risk. An off-specification CO₂ stream from one emitter can disrupt the entire network. A failure at the storage stage can prevent emitters from meeting regulatory obligations, even if their own operations are sound. With limited redundancy at this stage of development, downtime in one part of the chain can cascade across the system.

A joint report by Howden and Energex, Closing the Risk Gap, examines these challenges and highlights where insurance innovation is crucial. Its central argument is clear: without new approaches to risk management, capital deployment will remain constrained, and the sector could stall just as it gains traction.

CO₂ has been captured and injected underground since the 1970s, primarily for enhanced oil recovery. But today’s CCS projects differ significantly in scale, distance, and complexity. CO₂ also behaves differently from natural gas—the closest industry analogue. It is denser, can be more corrosive under certain conditions, and behaves differently in pipelines and under pressure. Risk frameworks borrowed from LNG or upstream oil and gas cannot simply be applied.

For Howden, working across the CCS value chain, this distinction is critical. Vipul Shetty, Head of Energy Transition for Howden Asia, notes that companies increasingly recognise the need for environmental liability insurance alongside conventional construction and operational cover. Incidents at operating CCS sites—where CO₂ has been vented instead of stored, triggering regulatory and financial penalties—demonstrate that these risks are real, not theoretical.

The Closing the Risk Gap report outlines three approaches to CCS risk management: take, treat, and transfer.

At one end, an emitter retains most risks on its balance sheet, accepting minimal guarantees and exposure to downstream failures. While this reduces upfront costs, it is rarely acceptable to lenders and typically viable only for large organisations with strong balance sheets.

At the other extreme, risk is extensively treated and transferred through contractual protections, performance warranties, and insurance coverage spanning construction delays, leakage, and consequential losses. This offers comprehensive protection but increases project costs, which are ultimately passed on to end users.

Most projects will sit between these extremes. The key question is which combination of commercial structuring and insurance makes a project bankable. The answer varies by project, but one principle holds: insurance cannot compensate for weak underlying risk management. Treatment and transfer must operate together.

Encouragingly, the insurance market is responding. Howden launched a dedicated ⁴carbon leakage facility in 2024, backed by SCOR’s syndicate at Lloyd’s and supported by multiple markets. It provides cover for environmental damage and revenue loss resulting from sudden or gradual CO₂ leakage—previously an uninsurable risk at scale.

Beyond leakage, new solutions are emerging. Technology performance guarantees are helping bridge gaps where equipment providers lack the balance sheet strength to support large projects. Surety products are being developed for EPC contractors and transport operators. Cross-chain liability coverage is evolving to address contingent business interruption risks across multi-owner CCS networks.

These innovations build on established expertise from LNG and upstream oil and gas but are adapted for CO₂-specific risks. While the toolkit is expanding, gaps remain. Carbon leakage capacity must grow to match potential liabilities, and securing consequential loss cover—such as loss of green premiums or underlying business revenue—remains challenging.

For Malaysia and Southeast Asia, the stakes are significant. The region generates over one gigaton of point-source emissions annually, and estimates suggest that capturing just 10–20% could create US$5–10 billion in annual revenue between 2030 and 2040¹. Malaysia has committed to reducing its economy-wide carbon intensity by 45 percent by 2030 compared to 2005 levels². CCS will be a critical part of that equation for energy-intensive industries.

Unlike the UK or Norway, however, government support in Asia is likely to be more limited. The UK has committed approximately £21.7 billion (approximately RM130 billion) over 25 years to CCS clusters³, while Norway’s Longship project received roughly NOK 22 billion (around RM9.2 billion) in grants. In Asia, the private sector will need to carry a larger share of risk.

This makes insurance even more critical. Without a public sector “insurer of last resort,” commercial insurance must bridge the gap. If risks cannot be adequately transferred or mitigated, projects may not proceed.

CCS will not scale on technical capability alone. It will scale when the balance of risk and return becomes acceptable across the value chain—for emitters, storage providers, investors, and lenders alike. Achieving this requires close collaboration between project sponsors, insurers, and governments to develop credible, project-specific risk frameworks.

Howden is working with clients across the CCS landscape to structure construction and operational insurance, develop carbon leakage solutions, address technology performance risks, and navigate complex multi-party contracts. The Closing the Risk Gap report outlines this evolving landscape and underscores the urgency of action.

The capital is available. The technology is advancing. Regulation is tightening. What CCS needs now is the risk infrastructure to match its ambition. Insurance innovation is no longer peripheral—it is increasingly the linchpin.