Opinion | The subsidies in the climate bill keep oil and gas alive

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

What the technology known as CCS also does is allow oil and natural gas production to continue at a time when the world needs to end its reliance on fossil fuels.

The Inflation Reduction Act, which President Biden said he will sign this week, does more to reduce fossil fuel use 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, supported by the fossil fuel industry, to subsidize CCS

Fifteen years ago, before the price of renewable energy dropped, 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 the technology in the United States—the idea was that the technology could compete as a way to produce carbon-free electricity by capturing the carbon dioxide emissions emitted by power plants and they bury them. But it’s now clear that we were wrong, and that every dollar invested in renewable energy — instead of CCS energy — will eliminate far more carbon emissions.

However, the technology has broad political support, including from West Virginia Senator Joe Manchin, an ally of the coal industry, because it allows for the continued extraction and burning of fossil fuels while preventing the resulting carbon dioxide from entering the atmosphere. Industry campaigns such as Clean Coal are also promoting the technology as something that can be developed quickly to bridge the gap to large-scale renewable energy deployment. But by promoting CCS, the fossil fuel industry is slowing the transition away from fossil fuels.

Under the Inflation Reduction Act, facilities using this technology would be eligible for generous tax credits, provided they are up and running by the end of 2032 — an extension of the current 2025 deadline. These benefits come in addition to the $12 billion in state investments in CCS, as well as technology that will extract carbon dioxide directly from the air, that 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 fossil fuel-fired power plants to industrial facilities that produce cement, steel, iron, chemicals and fertilizers.

Where CCS is most widely used in the United States and elsewhere, however, is in oil and natural gas production. Here’s how: Natural gas processing facilities separate the carbon dioxide from the methane to purify the methane for sale. These facilities then sometimes channel the “captured” carbon dioxide into so-called enhanced oil recovery projects, where the carbon dioxide is injected into oil fields to extract additional oil that would otherwise be trapped underground.

Of the 12 commercial CCS projects in operation in 2021, more than 90 percent are committed to improving oil recovery using carbon dioxide emitted from natural gas processing facilities or from fertilizer, hydrogen or ethanol plants, according to a report by the industry. That is why we believe that these oil or natural gas projects, or both, are masquerading as solutions to climate change.

The projects are responsible for most of the carbon dioxide now being sequestered underground in the United States. Four projects that do both enhanced oil recovery and natural gas processing account for two-thirds to three-quarters of all projected carbon emissions in the United States, with two plants storing the most. But the end effect is hardly favorable for the climate. This process produces more natural gas and oil, increases carbon dioxide emissions, and transfers carbon dioxide that was naturally locked underground in one place to another.

In an effort to capture and store carbon dioxide from fossil-fueled power plants, the Department of Energy allocated billions to failed CCS demonstration projects. The failure of many of these heavily subsidized utilities makes clear the failure of CCS to reduce emissions economically.

Mississippi’s Kemper Power project spent $7.5 billion on a coal-fired CCS plant before abandoning CCS in 2017 and switching to a non-CCS gas-fired plant. The plant was partially demolished in October 2021, less than six weeks before President Biden signed the infrastructure bill with his billions of taxpayer dollars for CCS: good money thrown after bad. The FutureGen project in Illinois began as a low-emissions coal-fired power plant in 2003 with federal funds, but ultimately failed as a result of rising costs.

The Texas Clean Power and California Hydrogen Power CCS projects were awarded a total of more than half a billion dollars, then canceled. The list goes on with at least 15 projects that burn through billions of dollars of public money without emitting 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), was shelved in 2020 despite hundreds of millions of dollars in tax credits.

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These projects have failed because renewable electricity generation is outpacing CCS Renewable energy is now cheaper than coal power without CCS Add in the cost of energy required to combine CCS with fossil fuel power and it becomes hopelessly uncompetitive. We can only guess how much more the full costs of CCS would exceed renewable energy, because after decades of promotion and many billions of dollars spent, we still have almost no real data on the costs of operating, maintaining and monitoring large CCS projects.

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

These subsidies create a perverse incentive because in order for companies to receive the subsidies, carbon dioxide must be produced, then captured and buried. This incentive impedes 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 locking in the long-term use of oil and gas.

Industry CCS campaigns have also reversed their decades-long fight against disinformation: instead of spreading doubt about climate science, industry is now spreading false confidence about how we can keep burning 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 doesn’t say is that this carbon dioxide was already sequestered underground before it “captured” it while producing natural gas and then injected it back into the ground to produce more oil. These advertising campaigns support government programs to directly subsidize CCS

Addressing climate change requires resources; misuse of these resources makes solving the problem more difficult. We have no time to waste. We need to stop subsidizing oil extraction and carbon dioxide production in the name of fighting climate change and stop burning billions of taxpayers’ money on white elephant projects. Clean energy from carbon capture and sequestration died with the success of renewable energy; it’s time to bury this technology deep underground.

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