- If we are going to hit our decarbonization target in the next quarter or half century, industries in partnership with governments worldwide need to collectively start to plan and begin the transition to capture carbon emissions from the industrial processes and power plants that depend on energy-dense fossil fuels.
- Carbon capture technology is decades-old but expensive to implement at the scale we need, and market forces alone are not enough to incentivize the advancements that would lower the cost.
- An enhanced tax credit portfolio, direct pay programs for small projects, and national and international carbon policies are needed to support the commercialization of capture technologies and related infrastructure.
According to Climate Watch, the electricity and heating sector introduced 15.01 billion metric tons (mtons) global of carbon dioxide to the atmosphere in 2016, equivalent to the emissions of 6.5 billion regular passenger vehicles (or about three times the number of cars currently on the road). In order to reach net zero carbon emissions and reduce the impact of these emissions on climate change, our first step should be to decarbonize the industrial processes and large-scale power plants for which renewable energy is currently impractical. While the effort to increase use of renewable energy sources is an important part of the energy transition, it is impractical to think we can shift entirely away from fossil fuels in the next quarter or half century in the sectors that rely on their high energy density and reliability. Instead, industries and governments worldwide need to partner to make large-scale carbon capture, utilization, and storage (CCUS) affordable in these indispensable industrial sectors.
The Readiness of Carbon Capture Technology
A well-understood problem, carbon capture has been available as a technology since the 1970s. Fundamentally, CCUS is based on the science of gas separation. The most mature technology today uses amine solvents, but recent advancements in membranes and solid absorbents hold great promise for the diverse range of carbon-intensive industrial and power processes.
The sticking point, then, is not in the effectiveness of these technologies, which uniformly remove more than 90% of the carbon monoxide and carbon dioxide (hereafter referred to just as CO2 for simplicity) in emissions. The problem is the cost. Stripping carbon out of industrial emissions is itself an energy-intensive process both to build and to run. In addition, the amount and quality of CO2 in emissions varies greatly by industry. Processes with purer CO2 exhaust streams or that operate at higher pressure require less energy and lower capital costs to remove the CO2 before it reaches the atmosphere. Some processes, such as purification of ethanol and other biofuels, produce almost pure streams of CO2, making it relatively easy to capture and either repurpose or sequester their CO2.
However, the effort required to remove CO2 increases as the fraction of CO2 and the operational pressure in the exhaust diminish, thus raising the costs well past the point where industry alone can justify the expense to capture the carbon compared with atmospheric release.
According to the National Petroleum Council, the lowest capacity cost per metric ton for processing with carbon capture begins with ethanol and ammonia production at around $53/mton, followed by natural gas processing ($60/mton), hydrogen production ($147/mton), cement production ($150/mton), steel production ($206/mton), coal-fired power plants ($245/mton), and gas-fired power plants ($265/mton). (Note that none of these figures incorporate the cost to remove sulfur compounds and are based on the use of facilities that are often 20 to 30 years old.) Given the lack of financial incentives for and emissions limits on these processes, it is understandable that many otherwise green-minded companies find the economics just don’t work out.
How We Can Lower the Cost to Capture
A significant factor to consider when evaluating pragmatic solutions is that venting to the atmosphere is often the only solution that industrial processors and large-scale power producers can afford. If we want to spur the kind of innovation that will reduce emissions in diverse market segments, we need greater governmental regulation and financial incentives.
Currently the only U.S. federal revenue stream that supports carbon capture and sequestration projects exists in the Section 45Q tax credit. Proposed in 2018 and since extended, the credit is valued at $50/mton of CO2 removed for geological storage, and qualified projects have until the end of 2026 to begin construction (potentially longer, depending on the final details of the upcoming Build Back Better Act). However, not every emitter can take advantage of this incentive mechanism to support their decarbonization efforts. If we want to facilitate private investment in carbon capture, we need to expand the policy framework to support further innovation—just as the production tax credit (PTC) and investment tax credit (ITC) have helped foster the development and commercialization of wind and solar technologies. Countries in Europe as well as Canada have similar incentives in place or are in the process of implementing them.
Also, because different types of emissions sources have different capture costs, the value of the carbon tax credit should start higher to be more in line with development costs at $85/mton and should scale up for higher-cost processes in order to stimulate private investment and risk-taking. Similarly, the eligibility thresholds for emissions should be lowered to encourage smaller emitters to innovate as well.
Additionally, the U.S. needs to implement direct pay programs for smaller developers. Many small projects don’t meet the volume requirements to qualify for 45Q. Switching to a direct payment system and lowering the volume requirements would provide these innovators the full credit value for their project as well as inspire greater investor confidence in the opportunities to be found in smaller ventures.
But more support will be needed. 45Q is only meant to be a stopgap measure to kickstart CCUS technology. Similar to the problem of SOx and NOx emissions in the 1970s, industry needs a federal portfolio of policies to support long-term change, including:
- A definitive expanded time frame for 45Q construction start dates
- Funding incentives for R&D
- Financing and grants for the buildout of CO2 transport and storage infrastructure
Finally, to support long-term private investment incentives, governments need to implement an emissions trading policy or carbon tax. In March 2021, the American Petroleum Institute declared its support for market-based carbon pricing, which would provide fossil fuel producers with greater cost certainty when developing advanced technologies. And global carbon trade tariffs would put Western industrial manufacturers on a level playing field with manufacturers in developing nations such as China and India, where emissions are currently soaring.
The Market Opportunities of Carbon Capture
The natural market space in which to begin deploying large-scale CCS is ethanol. The United States produced about 16 billion gallons of ethanol in 2017, and almost all of the associated emissions were vented to the atmosphere. Between ethanol’s relatively pure stream of CO2 exhaust and the current tax credits program, as well as incentives from low-carbon fuel standards and expected future financial incentives, CCS could quickly be profitable for this industry.
Developers and investors have taken note of this opportunity. Recently both Summit Carbon Solutions and Navigator CO2 Ventures have announced pipeline infrastructure projects, which will be used to connect ethanol processors that lack suitable nearby sequestration sites to safe storage locations in other regions.
Ammonia processing is similar to ethanol in its percentage of exhaust CO2. With a global market size of $67 billion in 2020, ammonia is an integral chemical in fertilizers, plastics, fabrics, and pesticides that also has potential as a green shipping fuel. Developing cost-effective CCUS in ammonia processing would decarbonize a significant portion of our agricultural, industrial, and global transportation emissions.
The potential for stripping CO2 from natural gas processing is also within economic reach. The processing of natural gas produces a high percentage of CO2 in its waste stream, and the U.S. market is estimated to be $58 billion in 2021, with a growth rate of 17%. The opportunity for this industry, which remains a crucial part of our transportation, heating, and power sectors, has drivers from many directions that would stimulate innovation up and down the supply chain, should decarbonization at the source become cost-effective.
Other market segments and technologies are not far behind. Thanks to research at institutions such as the DOE’s National Carbon Capture Center, membrane and solid solvent technologies for example, are already being evaluated for low-carbon cement production. Other promising research includes cost-efficient capture at both coal-fired and natural gas power plants and even direct air capture at scale.
Cement, the literal building block of the construction industry, is a particularly critical sector in carbon capture advancements. A $314 billion global market in 2020, with burgeoning demand particularly in industrializing nations, this industry is one of the largest sources of industrial CO2 emissions. Accelerating the greening of this globally ubiquitous material would contribute substantially to climate protection efforts.
Why Carbon Capture Is Not Greenwashing
Renewables have great potential as energy generation sources, but no technological solution is perfectly clean. Wind turbines and solar panels require fossil fuels for their manufacture, and mining lithium and cobalt for battery storage is ecologically costly. Because of its immediate emissions benefits, carbon capture moves us further and faster toward a lower carbon footprint than we could achieve without it. Simply put, CCUS technologies can help us accelerate our decarbonization efforts because they reduce carbon emissions from the industrial and power production that humanity relies on and will continue to rely on in the coming decades.
Furthermore, developing and implementing new climate solutions on a global scale are costly and time-consuming endeavors. But with the right regulatory and economic push, carbon capture technologies can be deployed relatively quickly. If we can achieve a critical mass of carbon capture projects by 2030, CCS will have the technical maturity, ease of construction, affordability, and effective and timely permitting necessary to reach the goal of net-zero emissions by 2050.