Federal Budget Bill Includes Massive Tax Credits for Carbon Capture
Friday’s short government shutdown culminated in a potentially huge win for the climate, business and investors. Among a slew of spending and tax credits tucked into thebudget bill signed by U.S. President Trump, one of them,known as 45Q, expands tax incentives for carbon capture, including from the air. With advocates fromboth sides of the aisle, the act shows bipartisan support for carbon capture technology. The policy also signals a shift toward greater development and deployment for something known ascarbon dioxide removal.
Broadly speaking, carbon dioxide removal involves two crucial steps: trapping carbon dioxide (the main greenhouse gas causing climate change) and reliably storing it. For every qualifying project, 45Q generates a tax credit: $50 per ton of carbon dioxide (CO2) buried inunderground storage, $35 per ton for eitherutilizationor enhanced oil recovery.
With no cap on the available tax credits and 12 years to claim them, 45Q is poised to do for carbon capture what similar incentives did for wind and solar power: unleash private sector investments that catapult the technology into its maturity. Tax credits are the first step in that direction. The policy makes a stronger business case for development, which in turn will drive necessary innovations that make it easier and more attractive to take these technologies to scale.
This scaling is vital.Scientists agreethat cleaning up past emissions of carbon dioxide is essential to meetingsafe climate targets. And 45Q is the first federal acknowledgement of the role that carbon utilization and air capture technologies will play in getting us there.
Money for mechanical trees Direct air capture(DAC) is a method for literally removing carbon from the atmosphere. Mechanical trees suck in ambient air and chemically separate out the carbon dioxide. From there, the captured CO2 is pumped deep underground into sealed chambers. The end result of direct air capture, in other words, is permanently stored CO2.
The best part? This technology is far from theoretical.ClimeWorksis one of three startups–along withGlobal ThermostatandCarbon Engineering–to pull it off: Theirnegative emissions plantin Iceland “stores the air-captured CO2 safely and permanently in basalt, leading us closer to our efforts to achieve global warming targets.”
ClimeWorks’ direct air capture machine in Switzerland could allow companies to earn up to $50 per ton of CO2, depending on where it is stored after capture.
Thus far, however, all of ClimeWorks plants have been located outside the U.S and have been highly subsidized. Direct air capture has a near limitless potential for carbon removal, making it a critical tool for carbon dioxide removal. But the high cost of the technology in pilot projects has been a barrier to wide adoption. 45Q takes an important step toward lowering these costs. As the first instance of explicit federal support, the bill sends a clear signal to DAC investors to continue funding innovations that further bring down costs.
Waste to value 45Q designates a $35 per ton tax credit for the beneficialrecycling or utilization of captured CO2emissions.Rather than storing emissions underground, CarbonTech businesses recycle waste carbon dioxide by converting it into consumer products and materials like plastics, transportation fuels, and chemicals. That credit is likely to drive a handful of industrial carbon capture projects, according to arecent study.
CarbonCure makes a stronger, faster-curing cement by injectingwaste carbon dioxide into cement mixers. CarbonCure’s technology repurposes greenhouse gas emissions, injecting them into concrete to yield a superior and greener product. Positively, the extension of 45Q will incentivize more companies to reuse CO2 in novel and creative ways by making the processes and technologies more investable and affordable. In turn, this can help build early markets and broader political will for carbon removal.
Public money unlocks private dollars Even before the extension of 45Q, innovative investors, corporations, and startups were already working to build an industry around recycling carbon emissions. More than $2 billion dollars in private capital gathered at Center for Carbon Removal’s CarbonTech Investor Roundtable last week to explore investment opportunities. They asked for more CarbonTech businesses. They also said policy support is critical to creating large markets for CarbonTech, in turn increasing revenue and mitigating climate change.
It’s like the bipartisan authors of 45Q were in the room. With federal support for carbon recycling, building a business or investing in the carbon recycling space is less risky and potentially more profitable than ever before.
Strange bedfellows 45Q gathered diversebackers, ranging from fossil fuel companies to unions and environmentalists. While these stakeholders touted different benefits for the economy and the environment, they generally agreed on the importance of federal incentives for carbon capture and utilization. Enhanced oil recovery (EOR), an importantpathway to geologic carbon dioxide sequestration, will likely receive many of the 45Q tax credits.
But even EOR projects would help carbon capture companies reduce their costs and get to scale.
With these learnings from EOR projects under their belt, carbon capture companies could more easily transition to storing CO2 underground without EOR when carbon prices increase to make such standalone sequestration economically viable
Cementing the victory Here at Center for Carbon Removal, we work to grow nascent carbon removal activities into large-scale climate solutions. Technological, commercial, and policy barriers must be overcome in order to do so. 45Q starts to tackle all three of these obstacles by reducing the risks and increasing the profitability of carbon removal. This is why CCR, as part of a diversecoalition, has advocated for this policy for years.
This victory calls for even more tenacious work on carbon removal. Center for Carbon Removal invite you to join us in pioneering the future of carbon removal. We need your intellect, passion and expertise. Here is how you can get involved:
SubscribeThis Week in Carbon Removalto keep abreast of the latest carbon removal news, events, job postings, and journal articles.
Join Center for Carbon RemovalInvestor Networkfor exclusive connections to other investors and the hottest startups.
Got a good CarbonTech business idea? Sign up to compete inCarbon Removal Labsbusiness accelerator.
Rory Jacobson is a Policy Analyst at the Center for Carbon Removal where he researches policies with the potential to support carbon removal solutions.
Elizabeth Reali is a Communications Intern at the Center for Carbon Removal, where they work to build out educational materials, design digital assets, and communicate with stakeholders about carbon removal.
For me the key thing was for the first time DAC was included . This will enable a level playing field with CCS (flue) and i predict will result in finally getting rid of the fantasy of clean coal
(or natural gas for that matter) as both the ecomomic and environmetal benefits of DAC followed by beneficial use are demonstrated . We at GT are in the process of demonstrating CO2 from air to plastic and to
fertizer (replacing the energy intensive Haber Bosch process) and producing biochar that seqiesters the carbon.. Carbon fiber from CO2 from the air is not too far in the future . In the end i hope only negative carbon will qualify for credits and LAC will be truly cradle to grave and show what a farce EOR really is
It boggles my minfd that you can take CO2 out of a natural dome , pipe line it for many hundreds of miles , stick it underground where it started and push out oil that burns and adds CO2 and gets tax credit for ptting about 30% of it
where it started . This is the legacy we live with because of the many years of policy and DOE focus on clean coal .
On Wed, Feb 14, 2018 at 2:29 PM, Hawkins, David <dhaw...@nrdc.org> wrote:
It's a bit more complicated.
Yes, a tax credit for CCS with no EOR eligible would be better. Better still would be a bill requiring CCS on fossil plants older than X years. But such bills can't be enacted this year and won't be until there is a big shift in US politics. So choice for this year was this bill or nothing. Opinions can (and do ) differ on this choice. But there is value in buying down the cost of CCS. As for impact on oil production: a barrel of EOR oil incented by this bill will be coupled with a CO2 reduction from industrial capture and thus have a lower CO2 intensity than any other barrel of oil. So the net CO2 impact will be driven by the amount of other oil the incremental EOR barrel displaces. This is uncertain but the math is easy to figure out how much displacement is required to achieve net reductions.
One additional point to note: there is a lot of EOR going on today in the US. 80% of the CO2 used for that production is extracted from natural reservoirs. The tax credit in the bill for captured CO2 makes captured CO2 less costly than buying "natural reservoir" CO2. Shifting from natural to captured CO2 for whatever EOR happens is also a plus.
The bill requires regulations be written to demand a demonstration of secure geological storage for any CO2 used in EOR. David
So yes there is money for CC, and no money or help for decreasing emissions.
And not surprisingly "Enhanced oil recovery (EOR), an important pathway to geologic carbon dioxide sequestration" in other words using CO2 to increase oil production and produce more emissions, probably without bothering to see whether the CO2 being used stays down the wells or not?
This could be a political decision to keep pollution going, rather than to increase research.
With no cap on the available tax credits and 12 years to claim them, 45Q is poised to do for carbon capture what similar incentives did for wind and solar power: unleash private sector investments that catapult the technology into its maturity. Tax credits are the first step in that direction. The policy makes a stronger business case for development, which in turn will drive necessary innovations that make it easier and more attractive to take these technologies to scale.
Money for mechanical trees
Direct air capture<http://www.centerforcarbonremoval.org/blog-posts/2015/9/20/direct-air-capture-explained-in-10-questions> (DAC) is a method for literally removing carbon from the atmosphere. Mechanical trees suck in ambient air and chemically separate out the carbon dioxide. From there, the captured CO2 is pumped deep underground into sealed chambers. The end result of direct air capture, in other words, is permanently stored CO2.
Thus far, however, all of ClimeWorks plants have been located outside the U.S and have been highly subsidized. Direct air capture has a near limitless potential for carbon removal, making it a critical tool for carbon dioxide removal. But the high cost of the technology in pilot projects has been a barrier to wide adoption. 45Q takes an important step toward lowering these costs. As the first instance of explicit federal support, the bill sends a clear signal to DAC investors to continue funding innovations that further bring down costs.
CarbonCure makes a stronger, faster-curing cement by injecting <http://carboncure.com/> waste carbon dioxide into cement mixers. CarbonCure’s technology repurposes greenhouse gas emissions, injecting them into concrete to yield a superior and greener product. Positively, the extension of 45Q will incentivize more companies to reuse CO2 in novel and creative ways by making the processes and technologies more investable and affordable. In turn, this can help build early markets and broader political will for carbon removal.
Public money unlocks private dollars
Even before the extension of 45Q, innovative investors, corporations, and startups were already working to build an industry around recycling carbon emissions. More than $2 billion dollars in private capital gathered at Center for Carbon Removal’s CarbonTech Investor Roundtable last week to explore investment opportunities. They asked for more CarbonTech businesses. They also said policy support is critical to creating large markets for CarbonTech, in turn increasing revenue and mitigating climate change.
It’s like the bipartisan authors of 45Q were in the room. With federal support for carbon recycling, building a business or investing in the carbon recycling space is less risky and potentially more profitable than ever before.
But even EOR projects would help carbon capture companies reduce their costs and get to scale.
With these learnings from EOR projects under their belt, carbon capture companies could more easily transition to storing CO2 underground without EOR when carbon prices increase to make such standalone sequestration economically viable
Cementing the victory
Here at Center for Carbon Removal, we work to grow nascent carbon removal activities into large-scale climate solutions. Technological, commercial, and policy barriers must be overcome in order to do so. 45Q starts to tackle all three of these obstacles by reducing the risks and increasing the profitability of carbon removal. This is why CCR, as part of a diverse coalition<http://neori.org/>, has advocated for this policy for years.
This victory calls for even more tenacious work on carbon removal. Center for Carbon Removal invite you to join us in pioneering the future of carbon removal. We need your intellect, passion and expertise. Here is how you can get involved:
Rory Jacobson is a Policy Analyst at the Center for Carbon Removal where he researches policies with the potential to support carbon removal solutions.
Elizabeth Reali is a Communications Intern at the Center for Carbon Removal, where they work to build out educational materials, design digital assets, and communicate with stakeholders about carbon removal.
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Feb 15, 2018, 4:20:19 AM2/15/18
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NRDC still seem to be pursuing the mantra that-
a barrel of EOR oil incented by this bill will be coupled with a CO2 reduction from industrial capture and thus have a lower CO2 intensity than any other barrel of oil.
despite the evidence that oil using EOR is actually a net source of CO2, as shown by Armstrong and Styring, table 4 - attached
plus the fanciful notion that old fossil plants could ever be re-engineered and connected to a sequestration pipeline
Better still would be a bill requiring CCS on fossil plants older than X years
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Hi Folks,
This language is obviously biased against non geological storage and ignores methods of capture which are not point source or DAC.
However, that bias can be proven out in short order and the more effective systems can then gain support. Having this framework to put in front of investors will help.
This law is obviously about money and not nuanced science and tech. A number of the non point sourced, geological storage, or DAC methods can be the most profitable.
If the tax payers are to pay for CDR, they will want to get the best bang for their buck.
Best,
Greg Rau
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Feb 15, 2018, 2:39:04 PM2/15/18
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to Carbon Dioxide Removal, Geoengineering
If fossil CO2 storage is credited at $50/tonne CO2, while use in EOR is credited at $35/tonne CO2, this implies that the benefit of CCS-EOR is 100x(50-35)/50 = 30% less than straight sequestration. I believe this is a significant overestimate of the benefit of CCS-EOR given estimates I've seen of only 40% effective net CO2 reduction, so I need to learn how that $35/tonne was arrived at (aside from behind closed doors).
It's also interesting (perverse) that the industry most responsible for the CO2 problem must be the first one to benefit from a CO2 credit: CO2 management technology cannot proceed without first benefiting (tithing) the fossil fuel industry, irrespective of potentially cheaper and higher capacity options. That technology developed here will translate to solving the bigger problem seems a very large gamble, namely that making concentrated CO2 will be the best (only) way to to manage//remove CO2.
Let me clarify that my posts on this list are my personal views, not necessarily NRDC's position.
As to the substance, you are confusing the carbon intensity of a barrel of oil from EOR with the net impacts on total GHG emissions from all oil production and use due to production of an incremental barrel of oil from
EOR.
My statement related to the effective carbon intensity of a barrel of oil produced as a result of the capture tax credit.The paper you cite does not contradict my statement; when the emissions avoided by capturing CO2
are accounted for, the carbon intensity of the EOR barrel is less than other oil. (This does not hold for EOR barrels produced by using "natural" CO2 mined from geologic formations. As discussed below, the tax credit bill can shift some EOR from using to
natural CO2 to using captured CO2, resulting in additional avoided emissions.)
The system impact of producing an incremental barrel of oil from EOR depends on what fraction of a barrel of an alternative source of oil is displaced by the incremental EOR barrel. That fraction is somewhere between
zero and one, with a wide range of estimates. In a glut oil market, the displacement factor is estimated to lie in the higher end of the range but no one knows for certain what the displacement will be in the real world. What we can say is that oil consumption
is the product of a large number of factors, with incremental supply being only one of them.
To be clear, my view is that producing an incremental barrel of any oil is bad for the climate and that we need a more serious program to reduce oil consumption much more rapidly. So any incremental production induced
by this tax credit is a cost to the climate. But there is an asymmetry of costs and benefits with this tax credits. If there is some induced oil consumption, it will be a tiny fraction of global oil consumption. On the other hand, if the credit induces
only 5-10 carbon capture projects in key industrial sectors, that will be a several-fold increase in experience for a number of industry categories. While that does not guarantee cost reductions through learning, it improves our chances compared to the status
quo.
Another likely benefit of the credit is to shift the EOR market away from using natural CO2 to using captured CO2. Even without the tax credit provision, EIA projects an increase in EOR, with most of that increase choosing
natural CO2. With the tax credit, captured CO2 will be less costly to purchase than natural CO2 and it is reasonable to expect a shift to captured CO2 for new projects and perhaps for some existing projects that have contract flexibility.
Both the emissions costs and benefits of this bill are not hard values. Assessing them requires exercising some judgment about the quality of the estimates. You can decide whether the benefits likely outweigh the costs.
Regarding a requirement to retrofit older plants, I think you missed my point. Adopting a policy that requires an existing unit to clean up or shutdown by a certain age (or a certain calendar date) may or may not result
in the installation of CC on a particular unit. But it will achieve a substantial emission reduction, either through the use of CC or from shutdown of the unit. The political likelihood of adopting such a policy depends on a number of factors, among them
the costs of CC and the emergence of norms of good practices in operating high carbon intensity sources. A capture tax credit provision is directionally correct on both of these counts.
a barrel of EOR oil incented by this bill will be coupled with a CO2 reduction from industrial capture and thus have a lower CO2 intensity than any other barrel of oil.
despite the evidence that oil using EOR is actually a net source of CO2, as shown by Armstrong and Styring, table 4 - attached
plus the fanciful notion that old fossil plants could ever be re-engineered and connected to a sequestration pipeline
Better still would be a bill requiring CCS on fossil plants older than X years
LDM
On Wednesday, February 14, 2018 at 10:07:20 PM UTC, Andrew Lockley wrote:
