Carbon capture’s next act

Two things to start: The $1tn infrastructure bill hammered out by the Biden administration and a bipartisan group of senators moved a step closer to becoming law after clearing an initial Senate vote last night. Alongside spending on roads and bridges, the proposed legislation includes $73bn for the power grid and $7bn for a national rollout of electric vehicle chargers.

And America’s oil majors report tomorrow, with Exxon and Chevron both expected to unveil bumper second-quarter earnings.

Welcome to the latest edition of Energy Source. Carbon capture is in focus in today’s newsletter. We take a look at a new analysis from the Clean Air Task Force that shows project numbers in the US are rising quickly.

And on the other side of the Atlantic, we report on the new UK government-backed task force to develop standards for the voluntary carbon offsets market as worries grow over whether standards can be agreed ahead of the COP26 conference in Glasgow.

Thanks for reading.

Carbon capture gains traction in the US

After a slow start, spending on carbon capture and storage — seen by many analysts as essential in the fight against climate change — is ratcheting up in the US.

Government incentives are coaxing investors toward the technology, which traps emissions before they can be released into the atmosphere so that they can be reused or stored. 

There were ten US carbon capture projects announced in the first half of this year, according to a new analysis by the Clean Air Task Force, an environmental group. That was more than the total number of projects announced in 2020.

“We’re just really excited about this flourishing pipeline of projects in development,” Lee Beck, international director for carbon capture at the CATF, told ES. “Since mid-2020, projects are really taking off.”

The projects are mainly split between capturing the emissions from power plants, like gas and coal, and those from industry, such as cement and ethanol production. One, backed by Occidental Petroleum, aims to deploy direct air capture technology, stripping carbon directly from the atmosphere.

The growing number of project announcements has been fuelled by a 2018 overhaul of the 45Q tax credit, which offers developers up to $50 per tonne of carbon captured and permanently stored. The pandemic, coupled with a lack of clarity over how to claim the credit, led to a slowdown in 2020 — but momentum has now returned.

“It’s really a crucial wedge of the decarbonisation portfolio,” said Beck, referring to carbon capture. “What we’re looking at is now taking it from the demo to the deployment stage to enable learning by doing and commercialising the technology to get them ready for large scale rollout.”

Silver bullet?

The oil and gas industry has voiced strong support for carbon capture, seeing it as a way for the sector to continue to play a role in a low-carbon world. Exxon recently pitched a scheme to capture and store CO2 emitted by industrial facilities around the Houston Ship Channel that it said could attract $100bn in investment (although it said such a scheme would need a carbon price of around $100 a tonne to work).

Some environmentalists are less keen, however, worried banking on a yet uncommercialised technology is an easy cop out from making the more fundamental changes to the energy system needed to slash emissions.

The International Energy Agency says carbon capture, utilisation and storage (CCUS) will be “critical for putting energy systems around the world on a sustainable path”. It points to four ways the technology can play a role:

1. Power generation: Adding carbon capture to gas and coal plants would allow them to continue to operate without pumping carbon into the atmosphere, complementing a rise in renewable generation.

2. Heavy industry: It could tackle emissions in so-called “hard to decarbonise” sectors, where there are limited (or no) alternatives such as cement and steel manufacturing.

3. Hydrogen: It could enable the production of “blue hydrogen” — produced from fossil fuels, but with emissions captured — a cheaper alternative to “green hydrogen”, which is created from renewables.

4. CO2 removal: Direct air capture would strip carbon from the atmosphere, offsetting emissions elsewhere.

Policy support

The technology is still in its relative infancy, with only around 20 commercial carbon capture operations worldwide, according to the IEA.

Policy support will be key to it playing a significant role in the coming years — both in getting the 40-odd projects in the pipeline on either side of the Atlantic across the finish line, and in driving new developments down the line.

In the US, advocates want to see a further reboot of the 45Q, including direct payments for smaller developers, higher credit values and an extended window to begin construction (currently they need to have broken ground by the end of 2025). Advocates also want support for carbon infrastructure, so that projects can be developed in any part of the country, with the CO2 transported to areas with good geological storage potential.

Carbon capture is something of a unicorn in the DC climate policy debate, drawing strong support from both sides of the political divide. That has raised hopes that incentives for the technology will survive partisan wrangling and make it into the upcoming infrastructure bill. A White House factsheet on the bill released yesterday indicated carbon capture would be included without going into details.

With proper policy support, CATF reckons carbon capture capacity in the US could grow 13-fold to enable the capture of more than 290m tonnes of CO2 by the mid 2030s.

“It’s not a silver bullet,” said Beck. “We need all the technologies to decarbonise and we need to commercialise all of them to have them available [but] in enabling that kind of fair energy transition carbon capture certainly is a piece of the puzzle.”

(Myles McCormick)

UK throws weight behind voluntary carbon offsets market

The UK government is funding a new task force to strengthen the voluntary carbon offsets market, amid mounting concerns over whether standards can be agreed ahead of the UN climate conference in Glasgow in November.

The new group, called the Voluntary Carbon Market Integrity Initiative, is emerging about a year after the formation of a similar task force headed by Mark Carney, the UK prime minister’s finance adviser for the COP26 summit.

The Carney-led initiative, the Task Force on Scaling Voluntary Carbon Markets, has attracted criticism from green groups, as well as undue attention over gaffes on climate terms by the former governor of the Bank of England.

With just three months left before COP26 begins, the voluntary carbon market is shaping up to be one of the thorniest issues the summit will address.

In contrast to the task force led by Carney, who has said the carbon offsets market could reach $100bn a year, the new initiative is primarily focused on the quality of the offsets, and is backed by governments and civil society.

Rachel Kyte, co-chair of the new group, and dean of The Fletcher School at Tufts University, denied the new initiative was set up in response to the shortcomings of the TSVCM.

“There is a close working relationship with TSVCM,” she said. “We are building a new architecture, and Carney is a very important architect,” she added, referring to voluntary carbon markets.

Kyte said the new group would focus on the “integrity” of offsets, to ensure that the use of offsets contributes to climate change goals and limiting global warming to 1.5C.

“There is some plumbing and some wiring that needs to be done, and that is what we are going to be focusing on, this is fundamental engineering that needs to happen.”

The new group is backed by the UK and UNDP, and supported by governments of offset-rich countries such as Ghana and Cambodia. It is co-chaired by Kyte and by Tariye Gbadegesin, chief executive officer at ARM-Harith Infrastructure Investment.

(Leslie Hook)

Data Drill

After being decimated during the pandemic, US energy jobs are coming back. A new report from the US Department of Energy predicts employment growth for nearly every subsector, with renewables taking the lead.

By the end of the year, wind jobs are expected to grow by 10 per cent, with solar expecting even larger gains. The only subsector not expected to experience employment growth is coal, which last year lost nearly a fifth of its jobs.

Before losing 840,000 workers in the pandemic, the energy industry grew twice as fast as the overall economy. Its jobs pay 34 per cent higher wages than the national median.

President Biden has placed jobs at the centre of his climate push, promising to create “good, union jobs that expand the middle class” as the country transitions to cleaner energy. (Amanda Chu)

Power Points

• The British government wants to tax household gas to help kickstart the hydrogen industry.

• Paradise, California, is a town traumatised by wildfire. 

• Have we moved into a more dangerous phase of climate change? 

• Our colleagues at Moral Money reported on TPG and Brookfield’s $12bn climate fund haul. (You can sign up to the Moral Money newsletter here.) 

• Renewables were responsible for 21 per cent of all the electricity generated in the US in 2020, second only to natural gas. This marks the first time renewables surpassed nuclear and coal. (US Energy Information Administration)

• In its rapid economic growth, China didn’t take climate change into account. It’s now paying the price. (NYT)