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  • Writer's pictureTerri Pugh

April 5, 2023 - Your Scoop in CDR!

Environmental Groups Call Out US Carbon Capture Tax Credit … More than 100 environmental organizations are opposing a new US legislative proposal aimed at boosting the 45Q tax credit for carbon capture and utilization (CCU), claiming it would further incentivize greenwashing practices in the oil and gas industry, independent news outlet Common Dreams reported.

The bill, which was introduced last week, seeks “to match the incentives for carbon capture and storage (CCS) for both direct air capture (DAC) and the power and industrial sectors.”

In a joint letter the environmental organizations urged the four congressional sponsors of the Captured Carbon Utilization Parity Act (S. 542/H.R. 1262) —

(D-R.I.) and Bill Cassidy (R-La.) and Representatives David Schweikert (R-Ariz.) and Terri Sewell (D-Ala.) — to rather focus on advancing other climate actions that are more cost-efficient and less harmful.

Carbon capture, unlike other solutions such as solar power and batteries, does not get significantly cheaper over time which makes it easier to become dependent on increasing public subsidies, the groups explained, citing a report by the UN Intergovernmental Panel on Climate Change (IPCC).

“Promoting the utilization of captured CO2 in petrochemicals, plastics, and fuels, as your legislation would encourage, will perpetuate environmental justice harms and subsidize the oil and gas industry to do it,” the letter said. Furthermore, investigations by the U.S. Treasury Inspector General for Tax Administration have revealed widespread cases of improperly claimed credits under the 45Q tax credit scheme.

“The entire 45Q tax credit program turns sound environmental policy on its head: Instead of requiring the polluter to pay for its damage, 45Q tax credits pay the polluter to pollute,” Common Dreams quoted Carolyn Raffensperger, executive director at Science and Environmental Health Network (SEHN), as saying in a comment to the initiative.

The opponents of the bill, which in addition to SEHN also include, Beyond Plastics, Center for Biological Diversity, Food & Water Watch, Indigenous Environmental Network, Michigan Environmental Justice Coalition (MEJC) Action!, Physicians for Social Responsibility, and Waterspirit, are suggesting that focus be shifted towards alternative solutions like renewable energy and storage, electrification, energy efficiency, real zero-waste materials systems, agroecology, among others.

A Carbon Capture Credit with Huge Returns - YouTube 4 minute video explaining the positives

45Q Fact Sheet Clean Air Task Force 3 pager • To incentivize carbon capture, the tax credits go directly to the entity doing the capture (i.e., the owner of the capture facility). This could be anthropogenic CO2 sources such as ethanol plants, steel mills, coal or gas power plants, bioenergy power plants, direct air capture facilities, etc.

• Once captured, the facility can choose to permanently store the CO2 in deep saline formations or store the CO2 by providing it to companies that will utilize it in the production of products ranging from plastics, concrete, other commercial materials, and enhanced oil recovery (EOR). In the case of saline formations and EOR, the CO2 is injected deep underground (multiple miles) to isolate it from the atmosphere. For other forms of utilization, the products must also provide a net reduction of emissions.

• The value of the tax credit depends upon the type of CO2 storage. CO2 used for saline storage would receive $50 per tonne of CO2 stored while utilization in products, including EOR, would receive only $35 per tonne of CO2.

• Saline storage earns a higher $/tonne CO2 storage credit than utilization because saline operations do not generate a marketable product, and therefore require a higher incentive level to be economic.

• The credits last for up to 12 years for projects started within the specified time period. After that period, the credits end.

Climate and Economic Benefits of 45Q Incentives

• Modeling conducted by DOE during the Obama Administration examined various carbon capture incentives, including 45Q. DOE’s modeling concluded that at credit levels found in the proposed bills:

o CO2 emissions in the power sector would drop by about 50 million tonnes per year by 2030 and decline by nearly 70 million tonnes per year in 2040.

o The U.S. EOR industry would grow by more than 400,000 barrels per day per year by 2035. DOE modeling confirmed that the additional EOR did not result in a net increase in oil consumption. DOE noted,

To place these values in perspective, 50 million/tonnes per year is about 1/5th of the total CO2 reduction expected to be achieved by the Obama Clean Power Plan in 2025.

“The increase in EOR production predominately displaces crude from other sources, and U.S. crude production is similar across all cases.” This finding is consistent with other studies that considered the impact of using CO2 for EOR. For example, in 2015, the International Energy Agency (IEA) concluded that each barrel of oil produced by CO2 EOR would displace more than 80 percent of an existing barrel of oil. IEA estimated, after accounting for such a displacement and global market effects, that anthropogenic CO2 from an emissions source (like a coal plant) that is used in CO2 EOR provides a net 63% reduction in the source’s emissions. If a typical barrel of oil is used as the benchmark, then oil produced through anthropogenic CO2 EOR is responsible for 37% less CO2 emissions than the conventional barrel on a life cycle basis.

• The 45Q incentives are comparable to the emissions reductions benefits of the production tax credits for renewable energy.

Here is a link to Sheldon Whitehouse's stand on protecting the environment from his website. It would be wise to look at anything he introduces and analyze it carefully before dismissing it as not being environmental enough.

Weight it out carefully before deciding one way or another. Our goal is to remove the legacy greenhouse gases by 2050.

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