By Rory Jacobson
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 the budget 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 from both 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 as carbon 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 in underground storage, $35 per ton for either utilization or 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 agree that cleaning up past emissions of carbon dioxide is essential to meeting safe 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. ClimeWorks is one of three startups--along with Global Thermostat and Carbon Engineering--to pull it off: Their negative emissions plant in Iceland “stores the air-captured CO2 safely and permanently in basalt, leading us closer to our efforts to achieve global warming targets.”
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 beneficial recycling or utilization of captured CO2 emissions. 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 a recent study.
CarbonCure makes a stronger, faster-curing cement by injecting 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.
Strange bedfellows 45Q gathered diverse backers, 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 important pathway 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 diverse coalition, 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:
Image credit: ClimeWorks, used with permission