Recent raft of policy proposals encourages US deployment of CCS

Organisation: Global CCS Institute

Carbon capture and storage (CCS) policy in the United States (US) was front and center in a May 15, 2014 Capitol Hill 'CCS Facts and Policy Forum' involving more than 100 CCS stakeholders and policy experts. This Insight by the Institute's Diane Teigiser outlines some of the main points of discussion at the high profile event which was sponsored by the Global CCS Institute, Atlantic Council and the ENGO Network On CCS.

The US leads the world in the number of large-scale CCS demonstration projects, with 19 so far, including Southern Company’s Kemper County IGCC Project in Mississippi, one of the world's first large-scale CCS projects in the power sector. The utilisation of carbon dioxide (CO2) for enhanced oil recovery (EOR) has been an important enabler for CCS in the US. However many experts agree, next-generation technology development leading to the widespread commercial deployment of CCS could be in jeopardy without further policy incentives to encourage investment in, and sustain a business case for, CCS – hence the importance of the CCS Facts and Policy Forum and similar events.

"Technology needs policy"

Speaking before more than 100 CCS stakeholders and policy experts at a Capitol Hill CCS Get the Facts and Policy Forum, sponsored by the Global CCS Institute, Atlantic Council and ENGO Network on CCS, Dr Julio Friedmann, Deputy Assistant Secretary for Clean Coal at the US Department of Energy (DOE), said CCS, a key climate mitigation technology needed to meet greenhouse gas (GHG) emission reduction targets, is central to Obama's Climate Action Plan and part of the President’s 'all of the above' approach to energy security.

Friedmann predicted that CCS would be a low cost, turn-key operation by 2030. He cited DOE’s strong progress in the past 17 years, including 12 large-scale demonstration projects done in partnership with industry, identified savings that will reduce cost for next-gen projects, and the development of international partnerships and best practices. However, Friedmann acknowledged, “technology needs policy” to drive down cost, reduce liability, and spur investment in CCS.

Several developments within the past few months could provide a policy framework to spur CCS development and deployment. Two US senators, both from coal-rich states, have recently introduced legislation to encourage investment in CCS, and two environmental NGOs have offered policy recommendations in support of CCS as a critical climate mitigation tool.

Heitkamp proposes ACCTION Act

US Senator Heidi Heitkamp (D-ND) recently proposed the Advanced Clean Coal Technology Investment in Our Nation (ACCTION) Act, a funding bill summarised here that would incentivise utilities to invest in technologies that reduce the carbon footprint of coal-fired power through an increase in the US Government’s support of innovative coal technologies, federal support for private investment in CCS, and increased public transparency in advancements of CCS projects and new coal technologies. The bill recognises the need for coal as part of the energy mix, and provides a technological 'glide path' to advance the commercial deployment of CCS while providing American consumers with reliable sources of energy at reasonable cost.

Photo courtesy of the Atlantic Council. From left to right: The Hon. Heidi Heitkamp, Ambassador Paula Dobriansky, Kurt Waltzer, Dr. Julio Friedmann, Karl Moor and Patrick Falwell

Rockefeller legislation expands, reforms tax credits

Two pieces of legislation that would expand and reform tax credits for CCS have been proposed by US Senator Jay Rockefeller (D-WV).

The Expanding Carbon Capture through Enhanced Oil Recovery Act of 2014 would expand and reform the existing Section 45Q tax credit for CCS to help advance CCS technology development and increase American oil production through the greater use of CO2-EOR.

The bill, summarised here, would expand the 45Q Tax Credit beyond the current authorisation for 75 million tonnes of CO2. New 45Q tax credits would be awarded through competitive bidding and separate tranches to ensure credits are available for a range of man-made sources of CO2, including lower and higher-cost industrial projects and electric power.

The bill would also provide more certainty for CO2 capture project developers through reform of the 45Q tax credit. CO2 capture projects would be able to reserve the newly-created 45Q tax credits through a certification process and help projects obtain private sector investment by reserving 45Q tax credits for future use, thus helping to ensure that projects move forward to completion.

The Carbon Capture and Sequestration Deployment Act of 2014 would facilitate CCS development and deployment through a US$1 billion CCS innovation program administered by the Department of Energy, modify the existing Carbon Dioxide Sequestration Credit (45Q) by limiting the amount of credits any given project can receive (increasing the opportunity for multiple projects to receive credits) and allow projects to apply for a guaranteed allocation of credits for future use, paving the way for businesses to take the credits into consideration in their financing structures, and also authorise US$20 billion in loan guarantees for construction of new-build commercial-scale industrial facilities or power plants with CCS.

Over the next 40 years, the expansion of the 45Q Tax Credit is projected to spur US oil production by 8 billion barrels while safely storing four billion tons of CO2. The tax credit would pay for itself within 10 years through the federal revenue generated from new domestic oil production.

The proposed legislation, summarised here, adopts many of the recommendations made by NEORI, a coalition of industry executives, state officials, labor representatives and environmental groups, who welcomed the bills. Statements of support were also received from NEORI members.

ENGOs recommend policies in support of CCS

The Clean Air Task Force and Natural Resources Defense Council, two key members of the Environmental Nongovernmental Organization (ENGO) Network on CCS, have offered specific policy recommendations to accelerate the commercial deployment of CCS in the Americas, with an emphasis on the US.

The recommendations reaffirm their support for CCS as an important and complementary part of a portfolio of low-carbon energy options need to combat climate change and require the use of CCS on all new coal-fired power plants built in developed countries. They also call out the need for regulatory mandates and market incentives to facilitate wide-scale CCS deployment, recommend CO2-EOR be encouraged through federal tax incentives, and require CO2-EOR operators to closely measure, report and verify that injected CO2 will be retained permanently. The recommendations call on governments around the world to proactively institute post-closure programs for decommissioned storage sites to ensure proper environmental performance in the event an operator is no longer capable of doing so, and call on states to clarify property rights surrounding CO2 injection and sub-surface pore space and their relationship to mineral rights.

Introductions: Pamela Tomski, Senior Advisor, Policy and Regulatory – Global CCS Institute and Nonresident Senior Fellow, Energy and Environment Program – Atlantic Council

Opening remarks and panel moderation: Ambassador Paula Dobriansky, Senior Fellow, JFK Belfer Center for Science and International Affairs – Harvard University, National Board of Directors of the World Affairs Councils of America, and Board Member – Atlantic Council.

Keynote address: The Honorable Heidi Heitkamp, US Senator, North Dakota.

Panelists: Dr Julio Friedmann, Deputy Assistant Secretary for Clean Coal – US Department of Energy, Karl Moor, Senior Vice President and Chief Environmental Counsel – Southern Company, Kurt Waltzer, Managing Director, Fossil Transition Project – Clean Air Task Force, and Patrick Falwell, Solutions Fellow – Center for Climate and Energy Solutions.