Reviews | Climate bill subsidies keep oil and gas alive

The technology called carbon capture and storage is aptly named. It’s supposed to capture carbon dioxide emissions from industrial sources and pump them deep underground. It was a big winner in the climate provisions of the Cut Inflation Act passed by Congress last week.

What the technology, known as CCS, also makes it possible to continue the production of oil and natural gas at a time when the world should end its dependence on fossil fuels.

The Cut Inflation Act, which President Biden announced he will sign this week, does more to reduce the use of fossil fuels 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 renewables plummeted, carbon capture seemed like a good idea. We should know: When we launched a startup 14 years ago – the first privately funded company to use technology in the United States – the idea was that technology could be competitive as a means of producing carbon-free electricity by capturing carbon dioxide emissions from power plants and their landfill. But now it is clear that we were wrong and that every dollar invested in renewable energy – instead of CCS – will eliminate many more carbon emissions.

Even so, the technology enjoys broad political support, including from Senator Joe Manchin of West Virginia, a coal industry ally, as it allows for the continuous extraction and burning of fossil fuels while preventing carbon dioxide. of carbon resulting from entering the atmosphere. Industry campaigns such as “Clean Coal” have also promoted the technology as something that could accelerate rapidly to close the gap with large-scale renewable energy deployment. But by promoting CCS, the fossil fuel industry is slowing down the transition from fossil fuels.

Under the Reducing Inflation Act, facilities using the technology will be eligible for generous tax credits provided they start work by the end of 2032 – an extension of the deadline current from 2025. These benefits are in addition to the $12 billion in government investments in CCS, as well as technology that would extract 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 range of industries, from power plants powered by fossil fuels to industrial facilities that produce cement, steel, iron, chemicals and fertilizers.

However, where CCS has been most widely 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 methane for sale. These facilities then sometimes route the “captured” carbon dioxide to what are called enhanced oil recovery projects, where the carbon dioxide is injected into the oil fields to extract additional oil that would otherwise be trapped underground.

According to an industry report, of the 12 commercial CCS projects in operation in 2021, more than 90% are engaged in enhanced oil recovery, using carbon dioxide emitted from natural gas processing facilities or by fertilizer, hydrogen or ethanol plants. That’s why we view these oil or natural gas projects, or both, as solutions to climate change.

The projects are responsible for most of the carbon dioxide currently sequestered underground in the United States. Four projects that perform both enhanced oil recovery and natural gas processing account for two-thirds to three-quarters of all estimated carbon sequestered 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 transfers carbon dioxide that was naturally locked underground from one location to another elsewhere.

In an effort to capture and store carbon dioxide from fossil fuel power plants, the Department of Energy has allocated billions for failed CCS demonstration projects. The failure of many of these heavily subsidized companies highlights the inability of CCS to reduce emissions economically.

The Kemper Power project in Mississippi spent $7.5 billion on a coal-fired CCS plant before abandoning CCS in 2017 and switching to a gas-fired plant without CCS. The plant was partially demolished in October 2021, less than six weeks before President Biden signed off on the infrastructure. bill with its billions of taxpayers’ money for CCS: good money thrown after the bad. The FutureGen project in Illinois began as a low-emissions coal-fired power plant in 2003 with federal funds, but ultimately failed due to rising costs.

The Texas Clean Energy and Hydrogen Energy California CCS projects collectively received over half a billion dollars and then dissolved. The list goes on, with at least 15 projects burning billions of dollars of public money without sequestering any significant amount of carbon dioxide. Petro Nova, apparently the only recent commercial-scale energy project to inject carbon dioxide underground in the United States (for enhanced oil recovery), closed in 2020 despite hundreds of millions of dollars in credits of tax.

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These projects have failed because renewable electricity generation outperforms CCS Renewable energy is now cheaper than coal-fired electricity without CCS Add the cost of energy needed to couple CCS to fossil fuel and it becomes hopelessly uncompetitive. We can only guess how far the total costs of CCS would exceed renewable energy because, after decades of promotion and billions of dollars spent, we still have virtually no real data on the costs of operation, maintenance and monitoring of large CSCs. projects.

These CCS projects are subsidized by Section 45Q of the federal tax code, which now provides companies with a tax credit for each ton of carbon dioxide injected into the ground. These enhanced oil recovery grants would increase under the new law from $35 to $60 per tonne. The legislation also significantly expands the number of facilities eligible for tax credits. And these facilities will be able to claim the tax credit through a tax refund. The 45Q program is theoretically a climate change program. But since almost all carbon dioxide injections subsidized by 45Q are for enhanced oil recovery, the 45Q program is actually a subsidy to oil production.

These subsidies create a perverse incentive because for companies to qualify for subsidies, carbon dioxide must be produced, then captured and buried. This incentive handicaps 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 the use long-term oil and gas.

Industry campaigns for CCS have also changed their decades-long fight against misinformation: instead of casting doubt on climate science, industry is now spreading false confidence about how we can continue to burn fossil fuels while effectively reducing emissions. For example, Exxon Mobil advertises that it has “cumulatively captured more carbon dioxide than any other company – 120 million metric tons.”

What Exxon Mobil does not say is that this carbon dioxide was already sequestered underground before “capturing” it during natural gas production and then pumping it back into the ground to produce more oil. These ad campaigns support government programs to directly subsidize CCS

Solving climate change requires resources; the diversion of these resources makes solving the problem more difficult. We do not have time to lose. We need to stop subsidizing oil extraction and carbon dioxide production in the name of fighting climate change and stop burning billions of taxpayer dollars into white elephant projects. Clean energy from carbon capture and sequestration is dead with the success of renewables; it’s time to bury this technology deep underground.