As industry leaders and policy makers increasingly confront the challenges of battling climate change triggered by an excess amount of carbon dioxide (CO₂) and other greenhouse gases in the atmosphere, they are increasingly turning to an old idea whose time seems to have come – removing emitted CO₂ from the air and storing it where it can’t do any damage, or turning it to some useful purpose.
Carbon capture technology has been used for years to extract CO₂ from point sources, such as ethanol plants. The CO₂ can be used in industrial applications — such as being injected into the ground to aid in the production of oil — or food processing — such as adding fizz to sodas.
However, climate experts warn that much more has to be done to remove CO₂ from the atmosphere. The Intergovernmental Panel on Climate Change (IPCC) in a 2018 report said that in addition to limiting greenhouse gas emissions, the world’s industrial nations will need to adopt carbon-capture technologies on a massive scale, in order to achieve the goal of limiting global warming to 1.5 degrees Celsius above pre-industrial levels by 2050 as outlined in the Paris climate accord.
45Q tax credit
Building carbon capture plants on a scale that would meet the IPCC goal has remained an elusive target for U.S. industries, as without government subsidies, such projects are far from being economical. In 2018 Congress enhanced the existing 45Q tax credit to incentivize companies to build commercial-scale carbon capture plants. More than two dozen projects have been proposed to take advantage of the credit, but experts say more federal incentives are needed to really kick-start the build-out of CO₂ projects. To that end congressional lawmakers have proposed several bipartisan bills to provide those additional incentives.
“We’ve seen new technologies come up when they’ve had a long-term, steady incentive for their early deployment,” Rich Powell executive director of ClearPath, which bills itself as a conservative clean-energy advocacy group, said in an interview.
Section 45Q provides a tax credit on a per-ton basis for CO₂ that is sequestered. With the passage of the Bipartisan Budget Act of 2018 Congress more than doubled the existing credit for CO₂ injected into geologic storage, from $20 per metric ton to $50, and increased the credit for CO₂ used for enhanced oil recovery (EOR) from $10 per metric ton to $35. The $35 tax credit is also available for non-EOR CO₂ utilization and direct-air capture projects.
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The credit is available for a 12-year period, beginning when equipment is placed in service, for projects on which construction begins by January 1, 2024.
The Carbon Capture Coalition is tracking the progress of between 30 and 35 U.S. carbon capture projects that are being proposed as a direct result of the 45Q expansion. Director Brad Crabtree said carbon capture advocates are calling for Congress to extend the credit beyond its current deadline.
“If you’re a project developer, you have to begin construction of your project by the end of 2023,” he said. “We’re working very hard to get Congress to pass a multi-year extension.”
He said there is growing bipartisan support in Congress to extend the deadline for the credit. “To achieve the intended effect of stimulating investment technologies across multiple industries, more time is needed for planning, engineering, permitting and financing these projects,” he said.
In addition to the proposed extension of the 45Q credit, Congress is considering several other bipartisan bills to provide incentives for carbon capture projects.
One such bill is the Launching Energy Advancement and Development through Innovations for Natural Gas LEADING Act, sponsored in the Senate by Texas Republican Senator John Cornyn and Chris Coons, a Democrat from Delaware, and in the House by two Texas representatives, Republican Dan Crenshaw and Democrat Henry Cuellar.
The bill would direct the secretary of Energy to establish a program for the research, development and demonstration of commercially viable carbon capture technologies for natural gas-fired power plants, with pilot projects to be built by September 30, 2025.
Powell likened the bill to a “moon shot,” for developing carbon-capture technologies specifically for gas-fired power plants. He said the legislation has garnered a great deal of support among players in the natural gas and electric power industries. “There’s just so much gas. Electric utilities want to see a route for that; the oil and gas majors want to see a route for that,” he said.
He said there’s a good chance that Congress will pass the LEADING Act, despite the highly charged partisan atmosphere in Washington. “In fact with the election there’s a better chance of passage,” Powell said. There is even a chance that the legislation will be passed in the lame duck session of Congress, in which case President Trump is likely to sign it as one of his last official acts as president.
Other proposed incentives
Other bills pending before Congress would provide additional sweeteners for carbon capture project developers. The Growing Renewable Energy and Efficiency Now (GREEN) Act, sponsored by Rep. Mike Thompson, a conservative California Democrat, would allow project developers to take 85% of the 45Q tax credit and request a refund of any resulting overpayment of tax, rather than opting to carry forward credits to years when their credits exceed their tax liability.
The Redeeming Effectiveness to Carbon Oxide Utilization Plus Sequestration Act of 2020 or the RECOUPS Act, sponsored by Michigan Republican Representative Jack Bergman, would allow project developers who claim a CO2 sequestration tax credit to elect to treat the credit as a payment in excess of their tax liability. This would allow the developer to receive a direct payment of 90% of the dollar amount of the credit.
In addition, Chapter 12 of the Moving Forward Act, the ambitious $1.5 trillion energy and infrastructure legislation, calls on the secretary of Energy to establish a carbon capture and utilization technology commercialization program. The bill would establish funding for front end engineering design (FEED) studies for commercial demonstration projects for at least three types of advanced carbon capture technologies and at least one type of direct-air capture technology.
The ambitious legislation has been passed by the House and is awaiting action in the Senate.
John Thompson, technology and markets director of the Clean Air Task Force, said a variety of different credit and incentive programs likely will be needed to help secure funding for the various types of carbon capture projects under consideration.
“Usually 45Q works best with very concentrated sources, like ethanol plants, ammonia plants, chemical applications and natural gas processing, where you basically have almost a pure CO₂ stream, that needs minimal cleanup,” he said. But as sources of the CO₂ become more dilute, and as the percentage of carbon emissions the technology is able to capture diminishes, the less economic carbon capture projects become.
“When you stop getting from 80% to 100%, down to 50%, or 20% or 12%, as in a coal plant, or 3% as in a natural gas plant, 45Q by itself it gets harder and harder to make the economics work. You either need some kind of grant program or something else,” he said.
Source: Forbes – Business