Why the carbon capture subsidies in the climate bill are good news for emissions

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But in the fierce debate over carbon capture, it’s often lost that the technology can also play crucial roles in accelerating emissions reductions across a variety of industries. That includes cleaning up heavily polluting industrial sectors like cement, steel, and fertilizer. The measures can also support the development of low-emissions fuels and what’s known as bioenergy with carbon capture and storage, or BECCS, which the UN climate panel’s models rely on heavily in sketching out feasible scenarios that prevent the planet from warming more than 2 ˚C above preindustrial levels.

Finally, the subsidies should spur the development of carbon dioxide pipelines and storage facilities that will be necessary to move and reliably sequester growing volumes of carbon dioxide in the coming decades, says Paulina Jaramillo, a professor of engineering and public policy at Carnegie Mellon University. 

That will be critical for driving down the cost of other carbon capture efforts, making it more affordable to clean up a broader array of products. It will also provide a big boost to the growing efforts to suck the greenhouse gas out of the atmosphere on massive scales, which a growing body of research finds will also be essential for keeping global warming in check. (This type of technology, known as carbon removal, is distinct from capturing emissions before they leave a power plant or factory.)

The Repeat Project, a Princeton-based effort to model the impact of climate policies, estimates that the package will drive about $28 billion in annual capital investments in carbon dioxide transportation and storage projects, as well as power plants with carbon capture equipment, by 2030. At that point, US facilities would trap and sequester some 200 million metric tons of carbon dioxide per year, a 13-fold increase over what would likely occur with just the infrastructure bill that passed last year. The amount of captured carbon will more than double again by 2035, according to the analysis. (By way of comparison, the nation’s greenhouse-gas emissions totaled about 5.6 billion tons in 2021.)

“The IRA creates an opportunity for the US to do [carbon capture and storage] right,” says Julio Friedmann, chief scientist at Carbon Direct, a research, investment, and advisory firm focused on carbon removal. “It provides opportunities to reduce pollution in communities, to grow and test technologies, to create clean jobs, and to be globally competitive on trade and technology.”

The details

The IRA includes hundreds of billions in grants, loans, federal procurements, and tax credits designed to drive research and development efforts, renewable-energy projects,  electric-vehicle sales, buildup of a clean-energy manufacturing sector, and more. In addition, it could accelerate the development of carbon capture and storage in several ways.

Most notably, it increases the so-called 45Q tax credits for projects that capture, remove, and store away carbon. With those bigger subsidies, companies in certain sectors could break even or even profit from adding the necessary equipment and managing the resulting carbon.

Specifically, the credit increases from $50 a metric ton to $85 a ton for industrial facilities and power plants that permanently sequester carbon dioxide in deep underground geological reservoirs, according to an analysis by the law firm Gibson Dunn. It also raises that credit from $50 to $180 for facilities that remove carbon dioxide from the air and store it away permanently, a process known as direct air capture.