If the world is going to reduce greenhouse gas (GHG) emissions to net-zero levels by 2050, a lot of things need to go right, with the success of the International Energy Agency’s (IEA) long-term plan balancing on three different pillars. First, there are emissions reductions from improvements to fossil fuels and processes, such as power generation and industrial production. Next, there are advancements in bioenergy, a category that includes biofuels like ethanol, sustainable aviation fuel (SAF), and renewable diesel (RD). And then there’s direct air capture (DAC) — a minor factor so far, but one with the potential for significant growth, especially given the billions in U.S. funding already set aside for it. In today’s RBN blog, we look at U.S. plans to develop four regional DAC hubs, how those proposals will be evaluated, and the likely timeline for their development.
Creation of a strategy to achieve net-zero GHG emissions has been an important goal of the Biden administration, with long-term decarbonization efforts at the heart of its two most significant legislative achievements to date. The first of those bills to pass, 2021’s Infrastructure Investment and Jobs Act (IIJA), better known as the Bipartisan Infrastructure Law, set aside $3.5 billion for the creation of the DAC hubs we will explore in greater detail today. It also included $65 billion in funding for clean energy transmission and the power grid, and $7.5 billion to build a nationwide network of electric vehicle (EV) chargers (see our One Shining Moment series for more on EVs), along with a host of other clean-energy priorities. Further, the IIJA provided the Department of Energy (DOE) with $8 billion to support the development of several regional hydrogen hubs — an initiative similar to the DAC hubs which are the focus of today’s blog — that we’ve detailed in a series of blogs and a Drill Down Report. (For the latest on how that process is playing out, see The Contenders.)
The more recent of those two game-changing bills is 2022’s Inflation Reduction Act (IRA), which includes major revisions to the federal 45Q tax credit for carbon capture and sequestration (CCS), a topic we’ve written about extensively in our Way Down in the Hole series. Under the IRA, the credits jumped to $85/metric ton (MT) for CCS and $60/MT for carbon capture use and sequestration (CCUS) for enhanced oil recovery (EOR). Under the previous law, those credits were scheduled to top out at $50/MT and $35/MT, respectively, in 2026. To claim the higher credits, prevailing-wage (typically union scale) and apprenticeship requirements need to be met during construction and for each year of the 12-year credit period. (The “base credits” if those criteria are not met are 80% lower, at $17/MT for CCS and $12/MT for CCUS, which essentially makes all carbon-capture projects uneconomic.) DAC gets the biggest boost from the IRA, with credits rising to $180/MT for CCS and $130/MT for CCUS, although the base credits would also be much lower, at $36/MT for CCS and $26/MT for CCUS.
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