Policy Support for Carbon Capture Critical to Clean Energy Future

Analysis by both the Intergovernmental Panel on Climate Change and International Energy Agency shows that achieving a zero-carbon energy system by 2050 will require large-scale deployment of carbon capture technology in the electric power generation and industrial sectors. Commercial-scale carbon capture has been deployed for decades in some industries, and commercial-scale post-combustion carbon capture retrofits of power plants are operating successfully in the U.S. and Canada. Now, the world needs to accelerate and deploy projects across industry sectors to achieve a critical mass of commercial deployment by 2030 sufficient to reach the economywide scale needed to meet midcentury decarbonization targets.

Economywide deployment is possible, yet can only be realized through increased public and private investments. Carbon capture deployment can sustain and create high-wage jobs while reducing emissions from key sectors, including industries that are otherwise difficult to decarbonize.

Role of Federal Policy in Increasing U.S. Deployment

The primary challenges to carbon capture are not technical but of public policy and political will. A portfolio of federal policy support comparable to what has fostered the commercialization of other low- and zero-carbon technologies could reduce uncertainty among investors and project developers about applying carbon capture in specific industries, build out infrastructure, support the expansion of saline geologic storage, and grow new markets for captured carbon (carbon dioxide and carbon monoxide).

Carbon capture projects are capital intensive and take years to develop. Despite decades of commercial experience, the large-scale application of capture technologies in some sectors (such as power generation) remains relatively recent, creating uncertainty and risk. More infrastructure is also needed to link carbon capture facilities to geologic storage or beneficial use locations.

Federal policy could play a critical role in leveraging increased private investment in projects and infrastructure, spur innovation, and reduce costs. It could also support emerging industries that use captured carbon for beneficial use. Incentivizing early commercial deployment is especially important in industries that lack readily-available emissions reduction alternatives, including industrial processes where carbon emissions are inherent to the chemistry of the process.

Bipartisan Support and Multisector Interest Grow

Fortunately, a remarkably broad set of interests and a growing number of leaders from both political parties in Congress are working on policies to support carbon capture, building on the successful reform and expansion of the 45Q tax credit for carbon capture in 2018 that laid the foundation for jump-starting the U.S. industry. In May 2019, the Carbon Capture Coalition (convened by the Great Plains Institute) released a “Federal Policy Blueprint” outlining the portfolio of policies needed to achieve economywide deployment, reflecting a consensus of the Coalition’s more than 70 companies, unions, and non-governmental organizations. In a sign of progress, several bipartisan bills have been introduced in Congress to build on 45Q. They include:

USE IT Act (Utilizing Significant Emissions with Innovative Technologies). Expands federal support for research, development, and demonstration of carbon utilization and direct air capture technologies, and aims to streamline the planning, siting, and permitting of pipeline infrastructure.

Carbon Capture Modernization Act. Reforms the Section 48A tax credit to improve access to available incentives for carbon capture retrofits of existing coal-fired facilities.

Carbon Capture Improvement Act. Authorizes the use of tax-exempt private activity bonds to finance carbon capture equipment installed at power plants and industrial facilities.

Fossil Energy Research and Development Act/EFFECT Act (Enhancing Fossil Fuel Energy Carbon Technology Act). Increases funding for federal research, development, and demonstration and retooling efforts at the federal level to advance carbon capture, use, removal, and geologic storage.

LEADING Act (Launching Energy Advancement and Development Through Innovations for Natural Gas). Complements the EFFECT Act and establishes a federal program to support greater research and development for carbon capture in natural gas facilities.

Financing Our Energy Future Act. Supports project financing by expanding eligibility for master limited partnerships to include carbon capture and utilization projects, along with other low- and zero-carbon energy technologies.

Clean Industrial Technology Act. Establishes a federal program to develop and deploy industrial emissions reduction technologies and provide technical assistance for commercial application of such technologies.

Policy incentives are starting to spark project investment. Just recently, the Global CCS Institute announced updates to its global project database, including eight U.S. projects. While 45Q is a game-changer, a delay in U.S. Department of Treasury and IRS guidance has put project deployment potential in jeopardy.

While IRS guidance is anticipated soon, the delay has limited the credit’s impact because projects must begin construction before Jan. 1, 2024, yet lack the rules of the road. The Carbon Capture and Sequestration Extension Act was recently introduced in the U.S. House of Representatives to extend the 45Q commence construction date by one year, which would restore one of the two years lost to guidance delay.

Carbon capture is ready for deployment—the question now is whether leaders will marshal sufficient support for economywide deployment in time to meet decarbonization targets. ■

Jennifer Christensen is managing editor and senior writer at the Great Plains Institute, a nonpartisan, nonprofit organization.

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