Government Policy Accelerating the Market for Carbon Capture, Utilization, and Storage

By Bob Van Heuvelen, Principal, the Vogel Group, & Sam Yntema, Director, the Vogel Group

Carbon capture, utilization, and sequestration (CCUS) has been developed, researched, and used in the United States for several decades. In fact, the first successful CCUS pilot project in the U.S. took place in 1972. The technology is proven to be safe and effective at preventing carbon dioxide from escaping into the atmosphere from industrial and power generation activities. Over the course of the last 50 years, multiple CCUS projects have been advanced by the U.S. Department of Energy (DOE). In the last few years, there has been a dramatic increase in the level of interest in CCUS due to the growing recognition for the need to address climate-warming emissions from sources that are difficult or impossible to decarbonize by only switching to renewable electricity.

In fact, according to the Intergovernmental Panel on Climate Change (IPCC), widespread deployment of CCUS will be necessary to achieve a net-zero global economy by 2050 and keep global warming at or below two degrees Celsius. The U.S., through the enactment of the Infrastructure Investment and Jobs Act (IIJA) and the Inflation Reduction Act (IRA), now occupies the global leadership role in CCUS development and deployment.

Recent Government Action to Accelerate Deployment of CCUS

The IIJA, otherwise known as the “Bipartisan Infrastructure Law” was signed into law by President Biden on November 15, 2021. This bipartisan compromise constitutes the first major investment in U.S. infrastructure in several decades and includes an unprecedented level of funding for CCUS research, development, demonstration, and commercial-scale deployment. The IIJA provides more than $12 billion in CCUS investments, rolled out over the course of several fiscal years. Some of the key investments are listed below:

Carbon Capture Pilot and Demonstration Program: Appropriates more than $3.47 billion over the course of four years to support CCUS pilot and demonstration projects that can scale-up the technology for commercial deployment.
Carbon Capture Technology Program: Appropriates $100 million for a front-end engineering and design (FEED) program to support deployment of the U.S. CO₂ transport pipeline network.
CO₂ Storage Commercialization Program: Authorizes $2.5 billion for the Large-Scale Carbon Storage Commercialization Program at DOE. The objective is to provide grant funding for the development of new or expanded commercial large-scale CO₂ sequestration projects and CO₂ transport infrastructure.
Carbon Capture Transportation Infrastructure Program: Provides $2.1 billion in loans and grants to build new CO₂ transport infrastructure.

Established Minimum Metric Ton Price for Carbon

The IRA, which was signed into law on August 16, 2022, is a landmark piece of legislation for the advancement of CCUS in the United States. Through changes to Section 45Q of the tax code, the federal government now incentivizes CCUS at an unprecedented level. The IRA extended and enhanced the existing Section 45Q credit program for CCUS for facilities that begin construction by the end of 2032.

Credit Rates:
- Sequestration in Geological Storage:
  - $85 per metric ton of CO₂ (increased from $50 per metric ton)
  - For Direct Air Capture: $180 per metric ton of CO₂ (increased from $50 per metric ton)
- Utilization or Enhanced Oil and Natural Gas Recovery:
  - $60 per metric ton of CO₂ (increased from $35 per metric ton)
  - For Direct Air Capture: $130 per metric ton of CO₂ (increased from $35 per metric ton)
- Minimum Capture Requirements:
  - Direct Air Capture: 1,000 metric tons of CO₂ annually from baseline
  - Electricity Generating Facilities:
    - No less than 18,750 metric tons of CO₂ annually from baseline
    - Over 75% of baseline carbon emissions from each unit on which carbon capture equipment is installed
  - Other Facilities: No less than 12,500 metric tons of CO₂ annually from baseline
- Key Date:
  - Commence Construction Deadline: December 31, 2032

Implications for Carbon GeoCapture

These combined government actions are creating a much more favorable business atmosphere for CCUS in the U.S. Specifically for Carbon GeoCapture, with the update to Section 45Q, the federal government has set a floor price for captured CO₂. Carbon GeoCapture is especially well-positioned to take advantage of this because its sequestration technology enables dramatic cost savings across all facets of project development (capture, transportation, and sequestration) when compared to traditional CCUS technologies. Those cost savings enable Carbon GeoCapture to effectively deploy CCUS technology at scale, while having the projects’ gross profit margins guaranteed by the federal government.

About the Authors:

Bob Van Heuvelen is a Principal at the Vogel Group. Bob joined the Vogel Group after serving as CEO of VH Strategies which he founded in 2007, following a distinguished 32-year career in the federal government. He has achieved positive client outcomes on a wide array of issues, including obtaining federal funding, tax incentives and tax relief, regulatory victories, and targeted legislation to meet clients’ policy objectives. Bob has been consistently recognized as a “Top Lobbyist” by The Hill and represents clients in the energy and environment, trade, healthcare, and financial services sectors.

Sam Yntema is a Director at the Vogel Group, taking an active role in representing Vogel Group’s clients on Capitol Hill and in the administration. His work at the nexus of business and federal policy focuses on climate solutions, trade, energy, financial services, tax, and appropriations issues. Sam has a keen understanding of both big picture politics and how the nuances of intersecting forces and interests can drive policy decisions.

Bob Van Heuvelen and Sam Yntema are shareholders of Carbon GeoCapture.