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Institute holds 8th Annual DC Forum on CCS – New Perspectives for a Decarbonized Economy

7th April 2019

The Global CCS Institute hosted its 8th annual DC Forum on CCS in Washington, DC on March 18, 2019.  In a sense, the day was a microcosm of the current state of CCS in the United States.  Following is my perspective on the trajectory of carbon capture in the US, after listening to and engaging with the participants at our Forum.

A growing wave

If audience size is any indication of interest, then interest in carbon capture is definitely growing – with an expectation that investment will follow. The conference room was well beyond full – about 20% more attended than anticipated.  The room was filled with a diverse crowd that included representatives from government, business, NGOs, consultancies, academia and thinktanks. NGOs were well-represented not only in the audience, but at the podium as well: four major organizations– the Aspen Institute, Clean Air Task Force, Natural Resources Defense Council, and Center for Climate and Energy Solutions – spoke supportively on various aspects of carbon capture as part of the climate solution. The climate math is compelling evidence to NGOs that carbon capture must be part of a low-carbon future, and the recent spate of severe weather in the US has brought home the consequences of a warmer world.

The Business of Decarbonizing

Business is engaged as well.  It was clear from the numerous panel discussions that business wants to decarbonize, in part because their customers, employees and investors are demanding it, and in part because they understand the risks of climate change. But they do need to be able to justify their investments with a positive return.  That may come in the form of increased revenue, lower costs, reduced tax payments, or less risk.  Many businesses, and not just those in the power sector or fossil fuel producers, are preparing for a dramatically lower-carbon economy, and they see carbon capture as essential for deep decarbonization.  Multinationals expect a significant price on carbon in many of the markets in which they operate.

But the transition won’t come easy, and it won’t come quickly.  As one of our panelists noted, “oil is a tough competitor.”  It is energy dense, easy to transport, and deeply embedded in our economy.  Nearly all of our current transportation fuel is petroleum-based.  That is expected to change – a more diverse mix of transportation fuels should emerge over the next decade – including electrification, biofuels, hydrogen and low-carbon petroleum, each of which can be produced with the application of carbon capture and storage.

Governments Get It
The US Department of Energy continues its strong support for CCUS.  Lou Hrkman, Deputy Assistant Secretary in the Office of Fossil Energy, joined the Global CCS Institute’s CEO Brad Page for an on-stage conversation.  Mr. Hrkman noted the global interest in the 45Q tax legislation, which was enacted in 2018 and is expected to drive a significant number of new CCS projects in the US –pending Internal Revenue Service guidance on implementation. Like the rest of us, DOE is waiting anxiously, and in the meantime continuing to issue grants to advance CCS technology and drive down costs.  Cognizant of the need to bring CCS skeptics and coal opponents on board, Mr. Hrkman signaled a shift in language, dropping the “clean coal” moniker and adopting “carbon-free fossil energy”.

At the state level, California is leading the country with aggressive climate change goals, including 100% zero-carbon electricity and a carbon-neutral economy by 2045.  Our panel described how these ambitious high-level goals are creating CCS opportunities – and challenges – in the state.  California’s Low Carbon Fuel Standard (LCSF) includes tradeable credits for CO2 reductions, currently trading at approximately $200 per tonne.  In late 2018 the state amended the LCFS with a CCS protocol describing how companies can utilize fuel produced with carbon capture to participate in the LCFS market.  The LCSF, stacked with the federal 45Q credit ultimately eventually worth $35 to $50 per tonne, creates a big opportunity for CCS in California, and for direct air capture (DAC) projects anywhere in the world.  However, despite 300 years of geological storage capacity in the state, public opposition to all things fossil and some stiff monitoring requirements in the LCSF will make it challenging to get CCS facilities, pipelines and storage sites built in California.

Policies to Drive Investment

While (some) governments may “get it”, there is still a need for the adoption of policies that will drive more investment – both public and private sector – to carbon capture.  Alex Zapantis, the Institute’s General Manager, Commercial, presented the key findings of our most recent thought leadership report,  titled Policy Priorities to Incentivise Large Scale Deployment of CCS, followed by a panel discussion.  Alex kicked off by declaring “where good policy exists, capital will arrive.”  Good policy must result in a value on carbon, he said, while noting that there are numerous mechanisms to create that value.  The 45Q legislation was mentioned (by many throughout the day) as a great example of good policy to attract investment to carbon capture – one of our panelists cited a recent analysis by Clean Air Task Force that demonstrates that 45Q can result in 49 million metric tonnes per year of additional storage in the power sector alone.

Any project contains numerous risks, and those risks add to the cost of financing.  “Hard to reduce risks” are those for which governments can play a particularly valuable role by risk sharing.  Long-term liability for CO2 storage is one example: Australia has addressed this by transferring responsibility to the government after 15 years of post-injection monitoring.  Government equity investment in pipelines is another example of reducing risk and consequently the cost of financing.

Communication is Key

The Institute’s Senior Client Engagement Lead Patricia Loria, along with Bill Dalbec from communication consultancy APCO Worldwide, presented preliminary results from a soon-to-be released survey of Washington policy influencers.  The good news is that there has been a significant shift in the debate over climate change since last November.  Denying the reality of climate change, and humankind’s role in it, is no longer a winning issue in the US.  So the debate is moving from “is climate change real?” to “what should we do about it?”  A refreshing shift indeed.  The survey reflects that we still have much work to do on Capitol Hill – less than half of respondents to the survey knew what “CCS” meant (in the context of energy and climate change), and many misperceptions about CCS persist.  But there are important lessons in the survey that proponents of carbon capture should keep in mind.  For example, the positive affiliations that CCS has with climate and CO2 reduction goals, and carbon utilization and direct air capture.  We have also made some headway with the understanding that carbon capture has broad application in the industrial sector as well as power.

The Next Big Thing

We wrapped up the day with a look to the future.  Toyota gave us a glimpse of the future of transportation, and the key role that carbon capture can play in it.  They have aggressive 2050 carbon reduction goals, including a 90% reduction in tailpipe emissions, and eliminating all CO2 emissions from the manufacturing of all parts and materials, and from all Toyota facilities.  Vehicles powered by hydrogen are expected to make a substantial contribution to that goal (hydrogen make from methane with CCS is much less expensive that hydrogen from hydrolysis powered by renewables).

LanzaTech described their process of adding microbes to industrial exhausts that contain carbon monoxide to create ethanol, diesel or jet fuel. They have a system that has been in operation on a steel plant in China for nearly a year now, and their process is applicable to many other industrial waste streams.  In October 2018 Virgin Atlantic used a batch of LanzaTech jet fuel on a commercial flight from Florida to the UK – an industry first. More applications are certain to come – LanzaTech claims 50 fermentation products that currently can be produced from industrial emissions.

Carbon Engineering has attracted a great deal of interest – and investment – of late by combining direct air capture (DAC) with carbon utilization to “make fuels from thin air”, as they say. Carbon Engineering is seeking to be the first DAC company to claim credits under the California LCSF. While current volumes of CO2 removed from the atmosphere are small and the cost is high, DAC, or carbon removal, is expected to play a significant role in climate stabilization in the decades to come.

After a day that filled my head with new information and fresh ideas, I am both encouraged by the progress we have made, and daunted by the challenges that lie ahead. That is, I am sure, what keeps many of us doing what we do.

This insight was written by Jeff Erikson, General Manager, Client Engagement.

 

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