New law incentivizes carbon capture, use and storage
THANKS TO BIPARTISAN action in Congress, critical technologies that can prevent human-caused carbon dioxide from being emitted into the atmosphere — or that can remove CO2 directly from the air — are more likely to be developed and widely deployed, with far-reaching implications for the climate, jobs and the economy.
Congress’ passage of the FUTURE Act, signed by President Trump as part of a broader budget bill in February, expands and improves upon U.S. Tax Code Section 45Q, which provides tax credits for capturing and storing CO2. Although 45Q as originally enacted in 2008 has proven useful, especially for companies that inject CO2 underground for enhanced oil recovery (EOR), the provision lacked the strong financial incentives or scope to drive widespread adaptation of carbon capture, use and storage (CCUS) technologies.
The FUTURE Act addresses those deficiencies in six key ways:
- It more than doubles the tax credits (from $20 per metric ton to $50 per metric ton) for capturing and permanently storing carbon dioxide in geologic formations.
- It more than doubles the tax credits (from $10 per metric ton to $35 per metric ton) for capturing and storing CO2 used for EOR.
- It expands qualifying projects to include technologies that create products from CO2, such as cement blocks, chemicals, plastics and fuels (same tax credit as EOR).
- It expands qualifying projects to include direct air capture of CO2.
- It extends the construction window for carbon capture projects from five years to seven.
- It extends the term that tax credits can be claimed (from 10 years to 12 years) and removes the program cap for eligible projects.
These changes offer developers and investors more certainty that federal support will be available to them as they test, prove and scale technologies for commercial use. And they offer hope that America’s abundant fossil fuels can remain in our energy mix for some time to come.
What the FUTURE Act means for the climate
THE FUTURE ACT is a recognition that renewables, although an essential component of climate change mitigation, cannot alone achieve climate targets. CCUS must also be part of the solution. It offers the financial incentives needed to kick-start CCUS in the same way that government subsidies did for renewables.
Source: U.S. Environmental Protection Agency
A growing body of climate experts and prominent climate organizations, such as the Intergovernmental Panel on Climate Change (IPCC), the International Energy Agency (IEA) and the Global CCS Institute, stress that while renewables may displace fossil fuel power generation, they cannot remove CO2 produced by operational power plants, industrial processes or other sources. In other words, renewables can only address part of the problem.
According to the U.S. Environmental Protection Agency, electricity generation accounts for just 29 percent of U.S. greenhouse gas emissions. Another 27 percent comes from transportation, 21 percent from industry, 12 percent from buildings and 9 percent from agriculture. The capability to decarbonize mankind’s CO2 emissions from these various sources is only possible through CCUS.
Political leadership paved way for CCUS tax credits
A COALITION OF pro-CCUS organizations — including the Boilermakers and other labor unions, coal companies, utilities and industry and environmental groups — lobbied hard for federal support of CCUS. But it took political leadership to introduce the needed legislation and move it through both houses of Congress. In the Senate, lead sponsors included Heidi Heitkamp (D-ND), Shelley Moore Capito (R-WV), Sheldon Whitehouse (D-RI) and John Barrasso (R-WY). In the House, Mike Conaway (R-TX) led the effort. Some two dozen other sponsors from both sides of the aisle helped ensure that the legislation was truly a bipartisan effort.
With this vital legislation in place, it is now up to technology developers, investors and industry to move forward. Today, there are a mere 17 large-scale carbon capture plants operating worldwide and another eight in development. By some estimates, more than 2,000 such projects worldwide must be developed to meet climate mitigation targets.
That’s a tall order, to be sure, but not an insurmountable one. Carbon dioxide has been captured and used for enhanced oil recovery for decades, and dozens of nascent technologies promise new ways to use captured CO2. Large-scale projects like Sask Power’s Boundary Dam plant in Saskatchewan, Shell’s Quest project in Alberta and NRG’s Petra Nova plant in Texas prove the technologies work.
Expanded CCUS will be good for jobs, economy
UNLEASHING CCUS THROUGH tax credits is a smart move not only for the climate but also for jobs and the economy. Workers will be needed to build the carbon capture equipment and machinery, install it and maintain it. Those kinds of jobs are highly-skilled, blue-collar positions — the kind that pay good wages and support middle class families.
According to Julio Friedmann, CEO of Carbon Wrangler (and a former Principal Deputy Assistant Secretary for Fossil Energy with the Department of Energy), the FUTURE Act could herald an explosion of work opportunities. In an interview for a Boilermaker film project, Friedmann stated, “We’re going to see dozens and dozens of new projects that involve power plants, heavy industry, pipelines, drilling — all these things that many economies want to have. We’re going to see all of that work going forward in the next five years.”
Friedmann added, “The fact that the Boilermakers are so enthusiastic about this technology just makes me happy…but by no means should other unions imagine that CCUS excludes them in some way. It’s quite the opposite. We’re going to need the other crafts. We’re going to need steel workers. We’re going to need electricians. We’re going to need miners. We’re going to need power plant operators. We’re going to need people who are skilled at working with heavy equipment and building stuff, and I see a natural fit between the needs of unions these days, the needs to preserve communities as a whole and the opportunity that [CCUS] provides.”
New investment, new technologies and new jobs will spur rapid economic development that not only benefits the United States but also leads to practical, affordable climate solutions that can be replicated around the globe. The FUTURE Act opens the door, but even more can be done to promote CCUS through proactive government policies and a broader public understanding of what CCUS is and why it is essential to our future.
As we prepare to converge on Capitol Hill for our 50th LEAP (Legislative Education Action Program) Conference, progress with the FUTURE Act should serve as both motivation and a reminder: Our union has a seat at the table to influence crucial decisions that affect our members’ livelihoods and our world. And when we make our position known, the Boilermaker voice is heard.