The technology called carbon capture and storage is aptly named. It should capture carbon dioxide emissions from industrial sources and pump them deep underground. It was a big winner in the climate provisions of the Inflation Reduction Act passed by Congress last week and signed by President Biden on Tuesday.
What the technology, known as CCS, is also doing is enabling the continued production of oil and natural gas at a time when the world should end its reliance on fossil fuels.
The Inflation Reduction Act does more to reduce fossil fuel use and fight climate change than any previous legislation by expanding renewable energy, electric cars, heat pumps and more. But the law also contains a counterproductive waste of money, backed by the fossil fuel industry, to subsidize CCS
Fifteen years ago, before the cost of renewable energy plummeted, carbon capture seemed like a good idea. We should know: When we started a start-up 14 years ago – the first privately funded company to use CCS in the United States – the idea was that the technology could compete as a way to produce carbon-free electricity by carbon dioxide emissions emitted from power plants and burying them. But now it’s clear that we were wrong and that every dollar invested in renewable energy – rather than CCS power – will eliminate far more carbon emissions.
Still, this technology has broad political support, including from West Virginia Senator Joe Manchin, an ally of the coal industry, because it allows for the continued extraction and combustion of fossil fuels while also preventing the resulting carbon dioxide from being released into the atmosphere. Industry campaigns such as “Clean Coal” have also promoted the technology as something that could rapidly increase to bridge the gap with the deployment of large-scale renewable energy. But by promoting CCS, the fossil fuel industry is slowing down the transition from fossil fuels.
Under the Inflation Reduction Act, facilities using this technology are eligible for generous tax credits, provided they do groundbreaking work by the end of 2032 — an extension of the current 2025 deadline. Those benefits come in addition to $12 billion in government investment in CCS, as well as in technology that would take carbon dioxide directly from the air, which were included in the infrastructure bill signed by President Biden last fall.
CCS is seen as a solution to the emissions problem for a wide range of industries, from power plants powered by fossil fuels to industrial plants that produce cement, steel, iron, chemicals and fertilizers.
However, where CCS is most commonly used in the United States and elsewhere is in the production of oil and natural gas. Here’s how: Natural gas processing facilities separate carbon dioxide from methane to purify the methane for sale. These facilities then sometimes divert the “captured” carbon dioxide to so-called enhanced oil recovery projects, where it is injected into oil fields to extract additional oil that would otherwise remain underground.
Of the 12 commercial CCS projects in operation in 2021, more than 90 percent were involved in enhanced oil recovery, according to an industry report, using carbon dioxide emitted from natural gas processing facilities or from fertilizer, hydrogen or ethanol plants. That’s why we think of these ventures as oil or natural gas projects, or both, disguised as solutions to climate change.
The projects are responsible for most of the carbon dioxide now stored underground in the United States. Four projects improving both oil recovery and natural gas processing account for two-thirds to three-quarters of all estimated carbon captured in the United States, with two plants storing the most. But the net effect is hardly climate-friendly. This process produces more natural gas and oil, increases carbon dioxide emissions and moves carbon dioxide that was naturally trapped underground in one place to another elsewhere.
In an effort to capture and store carbon dioxide from power plants that burn fossil fuels, the Department of Energy has allocated billions of dollars for failed CCS demonstration projects. The bankruptcy of many of these hugely subsidized companies shows that CCS has failed to cut emissions economically.
The Kemper Power Project in Mississippi spent $7.5 billion on a coal CCS plant before CCS was abandoned in 2017 and transitioned to a gas-fired power plant without CCS. The plant was partially demolished in October 2021, less than six weeks before President Biden signed the infrastructure bill with his billions of taxpayer dollars for CCS: good money thrown after bad. The FutureGen project in Illinois started in 2003 as a low-emission coal-fired power plant with federal funds, but ultimately failed due to rising costs.
The Texas Clean Energy and Hydrogen Energy California CCS projects were collectively allocated more than half a billion dollars and were then dissolved. The list goes on, with at least 15 projects burning billions of dollars in public money without capturing any meaningful amount of carbon dioxide. Petra Nova, apparently the only recent commercial-scale electricity project to inject carbon dioxide underground into the United States (for enhanced oil recovery), was shut down in 2020 despite hundreds of millions of dollars in tax credits.
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These projects have failed because renewable electricity generation outperforms CCS. Renewable power is now cheaper than coal-fired power without CCS. Add to that the cost of the energy needed to link CCS to fossil fuels and it becomes hopelessly uncompetitive. We can only guess how much more the full cost of CCS renewable energy would exceed, because after decades of promotion and many billions of dollars spent, we still have almost no real-world data on the costs of running, maintaining and monitoring. of major CCS projects.
These CCS projects are subsidized by Section 45Q of the Federal Tax Code, which now offers businesses a tax credit for every ton of carbon dioxide injected into the ground. Those increased subsidies for oil extraction would increase from $35 to $60 per ton under the new law. The legislation also significantly expands the number of facilities that qualify for tax credits. And they can claim the tax credit through a tax refund. The 45Q program is nominally a program to combat climate change. But since almost all carbon dioxide injections subsidized by 45Q are for improved oil recovery, the 45Q program is actually an oil production subsidy.
These subsidies create a perverse incentive, because to qualify for the subsidies, carbon dioxide must be produced, captured and buried. This incentive hinders technologies that reduce carbon dioxide production in the first place, tilting the playing field against promising innovations that avoid fossil fuels in the steel, fertilizer and cement industries while blocking long-term oil and gas use.
Industry campaigns for CCS have also shifted their decades-long fight against disinformation: Instead of casting doubt on climate science, the industry is now spreading false confidence about how we can continue to burn fossil fuels while efficiently reducing emissions. For example, Exxon Mobil advertises that it has “cumulatively captured more carbon dioxide than any other company — 120 million tons.”
What Exxon Mobil isn’t saying is that this carbon dioxide was already stored underground before it “captured” it while producing natural gas and then injected it back into the ground to produce more oil. These ad campaigns support government programs to directly subsidize CCS
Solving climate change requires resources; embezzling these resources makes it more difficult to solve the problem. We have no time to lose. We must stop subsidizing oil and carbon dioxide production in the name of fighting climate change and stop burning billions of taxpayers’ money on white elephant projects. Clean flow of carbon capture and sequestration died with the success of renewable energy; it’s time to bury this technology deep underground.
