Carbon capture and storage (CCS), the process of separating, treating and transporting carbon dioxide (CO2) from industrial sources to long-term storage locations, is on the cusp of reaching unprecedented scale. This process has been driven by government policy efforts such as preferential financing and schemes to give cash and tax incentives for capturing carbon pollution, and national decarbonization targets that have pushed investments into low-carbon energy technologies such as CSS. In the United States, storage tax credits are under section 45Q of the U.S. tax code, which was greatly expanded in 2018. Although such projects have a fairly high failure rate, with Ahmed Abdulla et al estimating an 80% failure rate, the need for them has never been greater. With the world lagging its climate targets and oil&gas production declining, CSS projects are attractive to many states and countries reliant on traditional oil&gas production. 

Source: “Explaining successful and failed investments in U.S. carbon capture and storage using empirical and expert assessments”, by Ahmed Abdulla et al in IOP Science

UIC Class VI Permits

The U.S. Environmental Protection Agency’s (EPA) Underground Injection Control (UIC) Class VI Permit allows for the development of wells into which CO2  is injected into deep rock formations. This kind of long-term underground storage is known as geologic sequestration (GS), and is part of the CSS. 

Source: “Class VI - Wells used for Geologic Sequestration of Carbon Dioxide”, by The U.S. EPA

Applications for UIC Class VI Permits have exploded, with the EPA and those states with primacy, that is, are permitted to issue these permits, such, North Dakota, Wyoming and Louisiana. In late 2021, there were just two UCI Class VI injection wells across the United States, and just 22 applications were under review. According to the EPA’s UIC Class VI Permit Tracker, there are currently 139 well applications that remain under review, with 35% of them having been made in the last twelve months. This boom in permit application hints at the boom ahead, a boom which proponents hope will help the global economy grow in a green way. 

Benefits and Challenges of CSS Technologies

CSS is alluring because, as Abdulla et al note, not only are CSS technologies a “leading candidate for capturing CO2 emissions from industrial sources, but can also be deployed in fossil fuel power plants”. This saves the planet money: rather than spending on new energy plants, CSS technologies can be used within fossil fuel plants to capture and sequester CO2. There are criticisms of this kind of deployment of CSS technologies: as James Temple wrote for MIT Technology Review,  there are those who believe that CSS technologies can be used to extend the life of fossil fuel plants, which will continue to pollute the air and water, “and create new health and environmental risks that could disproportionately harm disadvantaged communities surrounding the projects”. In evidence of this, Catherine Garoupa, executive director of the Central Valley Air Quality Coalition, told Temple that, “It’s the oil majors that are proposing and funding a lot of these projects. They see it as a way of extending business as usual and allowing them to be carbon neutral on paper while still doing the same old dirty practices”. This is because carbon capture equipment only captures, when it’s working really well, about 90% of the carbon emitted by plants. The 10% that escapes pollutes the air and water, so that even with CSS technologies, although the rate of pollution decreases, the volume of pollution still rises, and we have reached a point where the planet cannot tolerate an increase in absolute pollution levels. Also, carbon capture requires a lot of energy, which may increase pollution when it relies on power from fossil fuel plants. 

Promoting CSS Technologies

The Inflation Reduction Act of 2022 led to a number of incentives for CSS projects: for example, it increased the 45Q tax credits for GS from $50 a ton to $85 a ton when carbon is captured from industrial and power generation facilities; and from $50 a ton to $180 a ton from direct-air-capture (DAC) facilities; and increased the 45Q commence construction windows to January 1, 2033. 

Source: “Carbon Capture and the Inflation Reduction Act”, by the Clean Air Task Force

In addition, the Infrastructure Investment and Jobs Act provides $12.1 billion in federal funding for carbon capture projects. According to the REPEAT Project, the impact of both acts will be to double the pace of annual US decarbonization to around 4% a year. 

Source: The REPEAT Project

Uncertain Impacts of CSS Technologies

While these benefits are laudable, they still fall short of what we need to get on a net zero pathway, and, in fact, they may both accelerate decarbonization and prolong our use of fossil fuels. For instance, a firm may decide to keep a plant online because of the financial benefits tax credits provide and because pellet grills have become a very popular choice, rather than shut it down when it’s time has come. In fact, the tax credits may be used to invest in traditional oil and gas operations, extending the problem. Policy makers have to weigh these very real risks. Emily Grubert and Frances Sawyer modeled “six scenarios for lifespan extension and capacity factor changes”and found that US CSS fossil fuel plant retrofits could demand $400 billion to $3.6 trillion in 45Q tax credits with an impact ranging from a decline of 24% in greenhouse gas emissions, at a cost of $400 billion, to an increase of 82% in greenhouse gas emissions, at a cost of $3.6 trillion. That wide range of impacts is driven by how firms respond to CSS tax credits in terms of energy production and extension of fossil fuel plants.

Source: “US power sector carbon capture and storage under the Inflation Reduction Act could be costly with limited or negative abatement potential”, by Emily Grubert and Frances Sawyer