Carbon Capture Build-Out Needs Policy Gains to Leverage Credits

Billions of dollars in incentives for carbon capture efforts won’t be enough to make the technologies a top-tier climate solution unless federal and state rules and environmental equity concerns are faced head-on, according to a new report.

Along with massive growth in wind and solar energy, carbon capture and storage is a critical component for meeting ambitious US decarbonization goals, including President Joe Biden’s pledge to halve US greenhouse gas emissions by 2030.

Carbon capture may also hold down the costs of even deeper cuts needed to meet the US pledge of reaching net zero emissions by 2050, particularly in heavy industries such as steel and cement where there are few other options, according to an Energy Futures Initiative report released Tuesday.

There’s room for some near-term optimism after Congress provided more than $12 billion in backing for the technologies and expanded carbon capture incentives in the 2021 infrastructure package (Public Law 117-58) and 2022 climate law (Public Law 117-169), according to the EFI, which was launched in 2017 by former Obama administration Energy Secretary Ernest Moniz. There also have been promising advances with multiple carbon capture technologies in use and thousands of miles of pipelines for injecting emissions underground.

But the technology has yet to live up to its promise, according to the report. Its use is still largely limited to petrochemical production, gas extraction, and urea production, according to the report, leaving the power sector and other big emitters unaddressed.

“Despite existing capabilities, CCS progress to date as a decarbonization solution in the U.S. has been disappointing,” the report said. Among the top hurdles remaining: the vast array of carbon capture approaches, making them difficult to replicate, and the need to untangle what is still a complex web of federal, state, and local regulations and policies.

Scaling up carbon capture efforts also will require squarely facing environmental justice concerns, the report said, including fears the technologies will only perpetuate the use of fossil fuels already warming the planet.

Environmental Justice Concerns

Challenges also include the complexity of carbon capture projects, which include four distinct projects needed to capture, transport, inject underground, and monitor emissions.

Each of those projects poses its own financial risks for project developers, and those stages are all “currently regulated relatively independently from each other, with little coordination across federal, state, and local agencies,” the report said.

Environmental justice fears, including that the installation of pipelines and other carbon capture equipment will negate any net emissions reductions, are significant obstacles. Advocates argue carbon capture will perpetuate fossil fuel extraction and the burning of fossil fuels, which would only worsen the climate crisis and would mean more air pollution compared to cleaner forms of energy.

Overcoming those concerns will require extensive data collection examining the net emissions reductions for projects but also extensive community engagement, the report said.

“If not adequately addressed by industry proponents, these objections will increasingly tarnish public perceptions” of carbon capture and storage, it said.

Addressing such concerns is a challenge but not insurmountable, according to Jeffrey Brown, one of the project leads for the report. Some communities fear carbon capture technologies will increase air pollution, though research has been sparse and conflicting.

The federal government needs more research into such concerns and needs to work to share it with environmental justice communities. “You have to have better conversations with communities but you also have to include facts in those conversations,” he said.

Some analysts project the US as a result of recently increased tax credits and other backing could be capturing and storing 450 million tons of emissions annually by 2035, but that would require billions of dollars in capital investment on top of the tax credit incentives, the report said.

But the technology is one of the few available for cutting emissions in industrial sectors such as steel and cement—carbon-intensive operations with few options for making significant emissions cuts—and the power sector, including coal-fired power plants.

Positive Trend From New Incentives

Recent wins for carbon capture under the climate legislation include a 10-year extension of tax credits and increased incentives awarding $85 per ton of emissions stored underground and more than double that for the tons directly drawn from the air.

The law also made the incentives more usable by allowing developers to transfer the credit’s value to another party to raise cash. A direct-pay option also now allows projects to monetize the value of the credit immediately.

Despite such progress, it’s still unclear whether the tax credits will mean a sea change for carbon capture, as few of the heavy industry, energy, or power generation companies considered a “natural” fit for such projects have large enough tax liabilities to make the credit a worthwhile pursuit, the report said.

“As a practical matter, the number of tax-paying entities that possess both a natural business nexus” to carbon capture but also have a large enough tax bill to use the credits “is limited,” the report said.