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Trump’s DOE Moves to Cancel Direct Air Capture Hubs in Texas, Louisiana
A new list of grant cancellations obtained by Heatmap includes Climeworks and Heirloom projects funded by 2021 infrastructure law.
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A new list of grant cancellations obtained by Heatmap includes Climeworks and Heirloom projects funded by 2021 infrastructure law.
Plus how it’s different from carbon capture — and, while we’re at it, carbon offsets.
Especially with carbon capture tax incentives on the verge of disappearing, perhaps At One Ventures founder Tom Chi is onto something.
Direct air capture isn’t doing everything its advocates promised — yet. That doesn’t make it a scam.
That makes two direct air capture acquisitions for the oil and gas major.
Widespread federal layoffs bring even more uncertainty to the DAC hubs program.
And for his energy czar, Doug Burgum.
When Trump enters the Oval Office again in January, there are some climate change-related programs he could roll back or revise immediately, some that could take years to dismantle, and some that may well be beyond his reach. And then there’s carbon capture and storage.
For all the new regulations and funding the Biden administration issued to reduce emissions and advance the clean energy economy over the past four years, it did little to update the regulatory environment for carbon capture and storage. The Treasury Department never clarified how the changes to the 45Q tax credit for carbon capture under the Inflation Reduction Act affect eligibility. The Department of Transportation has not published its proposal for new safety rules for pipelines that transport carbon dioxide. And the Environmental Protection Agency has yet to determine whether it will give Texas permission to regulate its own carbon dioxide storage wells, a scenario that some of the state’s own representatives advise against.
That means, as the BloombergNEF policy associate Derrick Flakoll put it in an analysis published prior to the election, “the next administration and Congress will encounter a blank canvas of carbon capture infrastructure rules they can shape freely.”
Carbon capture is unique among climate technologies because it is, in most cases, a pure cost with no monetizable benefit. That means the policy environment — that great big blank canvas — is essential to determining which projects actually get built and whether the ones that do are actually useful for fighting climate change.
The next administration may or may not decide to take an interest in carbon capture, of course, but there’s reason to expect it will. Doug Burgum, Trump’s pick for the Department of the Interior who will also head up a new National Energy Council, has been a vocal supporter of carbon capture projects in his home state of North Dakota. Although Trump’s team will be looking for subsidies to cut in order to offset the tax breaks he has promised, his deep-pocketed supporters in the oil and gas industry who have made major investments in carbon capture based, in part, on the 45Q tax credit, will not want to see it on the chopping block. And carbon capture typically enjoys bipartisan support in Congress.
Congress first created the carbon capture tax credit in 2008, under the auspices of cleaning up the image of coal plants. Lawmakers updated the credit in 2018, and then again in 2022 with the Inflation Reduction Act, each iteration increasing the credit amount and expanding the types of projects that are eligible. Companies can now get up to $85 for every ton of CO2 captured from an industrial plant and sequestered underground, and $180 for every ton captured directly from the air. Combined with grants and loans in the 2021 Bipartisan Infrastructure Law, the changes have driven a surge in carbon capture and storage projects in the United States. More than 150 projects have been announced since the start of 2022, according to a database maintained by the International Energy Agency, compared to fewer than 100 over the four years prior.
Many of these projects are notably different from what has been proposed and tried in the past. Historically in the U.S., carbon capture has been used on coal-fired power plants, ethanol refineries, and at natural gas processing facilities, and almost all of the captured gas has been pumped into aging oil fields to help push more fuel out of the ground. But the new policy environment spurred at least some proposals in industries with few other options to decarbonize, including cement, hydrogen, and steel production. It also catalyzed projects that suck carbon directly from the air, versus capturing emissions at the source. Most developers now say they plan to sequester captured carbon underground rather than use it to drill for oil.
Only a handful of projects are actually under construction, however, and the prospects for others reaching that point are far from guaranteed. Inflation has eroded the value of the 45Q tax credit, Madelyn Morrison, the government affairs director for the Carbon Capture Coalition, told me. “Coupled with that, project deployment costs have really skyrocketed over the past several years. Some folks have said that equipment costs have gone up upwards of 50%,” she said.
Others aren’t sure whether they’ll even qualify, Flakoll told me. “There is a sort of shadow struggle going on over how permissive the credit is going to be in practice,” he said. For example, the IRA says that power plants have to capture 75% of their baseline emissions to be eligible, but it doesn’t specify how to calculate those baseline emissions. The Treasury solicited input on these questions and others shortly after the IRA passed. Comments raised concerns about how projects that share pipeline infrastructure should track and report their carbon sequestration claims. Environmental groups sought updates to the reporting and verification requirements to prevent taxpayer money from funding false or inflated claims. A 2020 investigation by the inspector general for tax administration found that during the first decade of the program, nearly $900 million in tax credits were claimed for projects that did not comply with EPA reporting requirements. But the Treasury never followed up its request for comment with a proposed rule.
Permitting for carbon sequestration sites has also lagged. The Environmental Protection Agency has issued final permits for just one carbon sequestration project over the past four years, with a total of two wells. Fifty-five applications are currently under review.
Carbon dioxide pipeline projects have also faced opposition from local governments and landowners. In California, where lawmakers have generally supported the use of carbon capture for achieving state climate goals, and where more than a dozen projects have been announced, the legislature placed a moratorium on CO2 pipeline development until the federal government updates its safety regulations.
The incoming Congress and presidential administration could clear away some of these hurdles. Congress is already expected to get rid of or rewrite many of the IRA’s tax credit programs when it opens the tax code to address other provisions that expire next year. The Carbon Capture Coalition and other proponents are advocating for another increase to the value of the 45Q tax credit to adjust it for inflation. Trump’s Treasury department will have free rein to issue rules that make the credit as cheap and easy as possible to claim. The EPA, under new leadership, could also speed up carbon storage permitting or, perhaps more likely, grant primacy over permitting to the states.
But other Trump administration priorities could end up hurting carbon capture development. The projects with the surest path forward are the ones with the lowest cost of capture and multiple pathways for revenue generation, Rohan Dighe, a research analyst at Wood Mackenzie told me. For example, ethanol plants emit a relatively pure stream of CO2 that’s easy to capture, and doing so enables producers to access low-carbon fuel markets in California and Washington. Carbon capture at a steel plant or power plant is much more difficult, by contrast, as the flue gas contains a mix of pollutants.
On those facilities, the 45Q tax credit is too low to justify the cost, Dighe said, and other sources of revenue such as price premiums for green products are uncertain. “The Trump administration's been pretty clear in terms of wanting to deregulate, broadly speaking,” Dighe said, pointing to plans to axe the EPA’s power plant rules and the Securities and Exchange Commission’s climate disclosure requirements. “So those sorts of drivers for some of these projects moving forward are going to be removed.”
That means projects will depend more on voluntary corporate sustainability initiatives to justify investment. Does Amazon want to build a data center in West Texas? Is it willing to pay a premium for clean electricity from a natural gas plant that captures and stores its carbon?
But the regulatory environment still matters. Flakoll will be watching to see whether lax monitoring and reporting rules for carbon capture, if enacted, will hurt trust and acceptance of carbon capture projects to the point that companies find it difficult to find buyers for their products or insurance companies to underwrite them.
“There will be a more of a policy push for [CCS] to enter the market,” Flakoll said. “But it takes two to tango, and there's a question of how much the private sector will respond to that.”
A conversation with Kajsa Hendrickson, Carbon180’s director of policy
This week I spoke with Kajsa Hendrickson, director of policy at Carbon180, about why they’re eager to talk about the social concerns involved in direct air capture (DAC) and how conflicts over carbon pipelines are hurting DAC projects too. We talk a lot about renewables here on The Fight but DAC is a crucial part of decarbonization and it has a host of conflicts that’ll be familiar to our readers.
The following is an abridged version of our conversation. Let’s get started…
How do the conflicts over DAC compare to fights against solar and wind farms?
“There are a lot of overlaps in the conflicts that can exist between DAC and more traditional energy systems. That is the reality. The difference is, so much of DAC is being funded by the federal government so we want to see those higher standards come into play about where communities should be engaged, what engagement should entail.”
“Plus, DAC is fundamentally a public good. The goal of it is to do something that is benefiting all of us writ large and that’s why it can’t follow traditional extractive models coming out of even some of the solar industry.”
What do you mean by solar being extractive?
“The approach to communities tends to be, cool, his project is coming in, there’s going to be some jobs, here’s how it’s going. And there might be a community benefits process there.
“What we’d like to see with DAC, whether it’s funded by DOE or not, is ideally communities get a choice as to whether or not a project comes to them. Communities get some form of prior engagement in determining whether or not they’d like to host a DAC site.”
How does the conflict over the Summit Carbon Solutions CO2 pipeline impact local support for other forms of carbon management, especially DAC?
“Infrastructure around CO2 is going to be a pain point. We at Carbon180 don’t really advocate for or support CCS. That being said, how the pipelines are being deployed, how developers engage with communities on CCS, is going to very much influence DAC. We fundamentally see DAC as serving a public good and CCS not necessary, but that doesn’t change the fact they’re likely going to have shared infrastructure and that the two of them are often going to be paired together.”
“I can’t speak to any of the particular specific details on the Summit pipeline other than that we have been hearing concerns about that, and concerns about what that means for the CO2 landscape as a whole. Just like any other burgeoning industry, negative handling of any particular project is going to look bad for the rest of them. I’d love to see developers proactively engage communities effectively, focusing on their rights, to allow CO2 storage.”
So there’s a blast radius from Summit’s controversy?
“Very much so. DAC and CCS often get conflated. Well informed organizations still refer to them interchangeably. Regardless of whether we like it or not, pipelines are going to be an extremely big expense for DAC, something that doesn’t have as much of an immediate [thing] it’s selling – it’s already facing an uphill financial battle.”
Some in the environmental justice activism space are against DAC. What would you say to an activist who is a no on DAC?
“It’s funny because I actually have several friends who work in environmental justice and I have this conversation with them.”
“What I would say is that we’re a boat in the middle of the ocean. We have holes in the middle of the boat that are the carbon coming into the air. And first thing, foremost, we’ve got to plug the holes. You don’t prioritize bailing out the water before closing the holes. That’s why decarbonization and DAC have to go hand in hand, it can’t be one or the other.”
“I understand where the criticisms come from. Is DAC a false climate solution? Is this something that’s going to allow us to continue to perpetuate fossil fuels?”
“As we are decarbonizing, by the time we get decarbonized, we won’t be able to just scale up DAC at that point. We have to scale up now so by the time we get decarbonized we’re able to get those legacy emissions.”