US Climate Bill Incentivizes Carbon Capture

US Climate Bill Incentivizes Carbon Capture

Introduction

Following up on our latest article covering the passing of the Inflation Reduction Act (“IRA”), we wanted to dive deeper into a specific element of the climate bill that will be crucial for US emission reduction: Carbon Capture.

Under the new bill, carbon capture subsidies will be available to even the smallest US companies, incentivizing a wave of investment in green technologies. Under the previous system, such incentives were only available to large industrial projects that needed to capture at least 100,000 tons of Co2 a year to qualify. Under the new bill, companies need to capture just 12,500 tons per year to qualify.

Under IRA, the US government will offer a tax credit of $85 for every metric ton of carbon emissions captured and stored — up 70% from current levels. This incentive is expected to spur investments into green technologies that help reduce carbon emissions – by either collecting carbon dioxide emitted, a method that’s been around for decades, or taking it directly from the air and storing it underground.

Why Carbon Capture?

Building renewable energy infrastructure will be critical for achieving climate goals, however, current U.S. power demands can’t be met by 100% renewables and will therefore need to rely on traditional sources of energy, such as coal- and gas-fired power plants.

Flexibility for stable power. Carbon capture, storage and utilization allow power plants to continue supporting the power grid while minimizing the negative impact of emissions. Carbon capture will provide flexibility for stable power because these plants will continue to be a major source of energy during the transition to sustainable energy.

Tackling emissions from existing plants. In the near and medium term, retrofitting the power sector with carbon capture technologies addresses emissions from the existing fossil-fueled fleet of power plants. These retrofits enable owners of existing power plants to recover their investment and, in doing so, to reduce the cost of transforming our power system.

Net-zero and negative emissions. The long-term value of carbon capture technologies to the power system (and the energy system as a whole) may further increase in line with more ambitious climate goals due to its ability to enable negative emissions from power generation when combined with bioenergy. The unique ability to achieve negative emissions through bioenergy with carbon capture and storage may even mean that these plants run at high capacity factors, even in a power system with high renewable shares.

Cited Sources

US Climate Bill’s Subsidy Bonanza Gives New Allure to Carbon Capture

How carbon capture technologies support the power transition

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