This week, oil giant ExxonMobil pledged $3 billion to the development of a carbon capture and storage business over the next five years — in a bid to manage its business risks associated with climate change. CEO Darren Woods noted in the company’s press release: “We are focused on proprietary projects and commercial partnerships that will have a demonstrably positive impact on our own emissions as well as those from the industrial, power generation and commercial transportation sectors, which together account for 80 percent of global CO2 emissions.”
Even Elon Musk is intrigued by the emerging market for carbon removal innovations, as his recent tweet promising $100 million for the “best carbon capture technology” well illustrates.
The good news is that even without the pocket change the Tesla billionaire is promising, 2021 is shaping up as a potential tipping point for carbon removal solutions in the United States.
The biggest breakthrough came with the passage of a two-year extension to the 45Q corporate tax credit for carbon removal projects in the dying days of the Trump administration — projects now have until Dec. 31, 2025, to commence construction — along with the publication of guidance from the Internal Revenue Service about how it can be applied. The credit allows for a deduction of up to $50 per metric ton of carbon captured and sequestered, but many viewed the earlier timing window as too restrictive to really jumpstart the market.
In our view, DAC is feasible, available and affordable.
“The final rule will provide long-overdue regulatory and financial certainty to incentivize private investment in economy-wide deployment of carbon capture, removal, transport, use and geologic storage across a range of key industries,” noted the Carbon Capture Coalition, an industry group convened by the Great Plains Institute that advocates the cause.
Like another industry group focused on advocating carbon removal solutions, Carbon 180, the coalition has some suggestions for policies it would love to see the Biden administration embrace related to the nurture of carbon capture and storage approaches that go beyond planting trees.
One argument in favor of direct air capture (DAC) investments fits well with the new president’s climate-equals-job-creation mantra: A June analysis by the Rhodium Group suggests the industry has the potential to create at least 300,000 U.S. jobs. DAC technologies remove emissions from the atmosphere, then store them geologically or use the captured CO2 as a feedstock for something else, such as fuel, chemicals or construction materials.
The need for cost-effective carbon removal solutions is urgent. The International Energy Agency reports that around 30 carbon capture and storage projects have been approved since 2017 — the ones already in operation sucked up around 40 million metric tons last year. But that’s a teeny-tiny amount compared with the roughly 35 billion metric tons of carbon the industrial and agricultural worlds spit up annually. Some models figure we need carbon removal methods to draw down at least one-quarter of the current emissions in order to really address climate targets.
It’s widely believed that the U.S. tax credit should make DAC more attractive to companies beyond the oil and gas companies, and power, chemical, cement and steel companies that typically have shown interest in the earlier projects.
The list of examples is already growing. United Airlines in December said it would become a “multimillion-dollar” investor in 1PointFive, a joint venture between Occidental Petroleum and Rusheen Capital Management developing an industrial-sized DAC plant using technology licensed from Carbon Engineering (CE). E-commerce company Shopify was actually CE’s first corporate buyer; it is investing in the Canadian company’s first commercial plant in Squamish, British Columbia, which should be up and running by August.
Other tech companies including Amazon, Microsoft and Stripe are talking up direct investments in carbon removal technologies. Last week, Microsoft announced an extensive portfolio of carbon removal projects as part of an update about its year-old carbon-negative strategy. In aggregate, the company reduced emissions by 6 percent in its first year. It also purchased the removal of 1.3 million metric tons of carbon from 15 suppliers, across 26 projects — including bioenergy, blue carbon, forestry and agricultural soil sequestration. Its nod to DAC includes a contract for 1,400 metric tons of CO2 captured by a plant being developed by Climeworks in Iceland.
“In our view, DAC is feasible, available and affordable,” says Steve Oldham, who as CEO of CE obviously has a vested interest in seeing the market move toward the mainstream.
The plant CE is planning to build in the Permian Basin of Texas, with construction scheduled to begin by the end of 2021, will be capable of removing 1 million metric tons of CO2 per year at a price of $95 to $250 per metric ton, according to Oldham. The ultimate price will depend on the financing the project receives — it will take two to three years to build it. For context, carbon capture costs easily can run $600 per metric ton. So, that’s a significant reduction.
In Oldham’s view, DAC investments are necessary to “decarbonize in parallel” with renewable energy deployment. To those who suggest carbon capture schemes perpetuate fossil fuels extraction and production, he says it’s not feasible to transition cold-turkey and that it’s imperative to finance removal alongside new generation capacity. “One plus minus-one is also zero,” he says.
As corporate climate types are aware, most strategies for carbon removal will include a portfolio or projects — including nature-based solutions such as regenerative agriculture or forests or blue carbon as well as the sorts of innovations that the DAC crowd is hoping to perpetuate.
Research published in mid-January in the journal Nature Communications suggests that creating a “wartime” response to climate change by investing 1.2 to 1.9 percent of GDP in DAC innovation and deployments could stimulate the removal of 2.2 to 2.3 gigatons of CO2 per year.
But it’s no silver bullet: Even “massive deployments” aren’t likely to start reversing concentrations until the 2070 timeframe, according to the researchers. Really, we have no time to waste, and the companies investing directly in projects are to be commended for being in the advance guard of action.
Source: Greenbiz, 2021-02-04.