According to oil and gas supporters, tax credits in the $430 billion U.S. climate and tax measure likely to be signed into law this week will jumpstart carbon sequestration projects, offsetting startup costs for some anti-pollution initiatives.
Carbon capture and storage hubs that accept gases from chemical, power, and gas companies, as well as oil refineries, have emerged as the energy industry’s favored method of combating climate change. However, large-scale development has been hampered by high expenses and a lack of assured revenue.
The Biden administration’s Inflation Reduction Act, which legislators adopted last week, gives a tax credit of up to $85 per ton for burying carbon dioxide (CO2) created by industrial activities and up to $180 per ton for collecting CO2 from the air.
The bill also authorizes new leases of federal land for oil and gas extraction, with no regard for climate implications. Importantly, it automatically authorized high bids from an offshore auction in November 2021 that included a drilling project for a carbon-burying plan.
Over the previous two decades, firms have attempted and mostly failed to earn a profit by exploiting CO2 to improve oil production. Recently, large investors have demanded that companies address global warming, and the oil industry wants to demonstrate that it takes climate change seriously.
Carbon sequestration centres have been suggested all around the world, including Alberta, Canada, Rotterdam, the Netherlands, and Huizhou, China. Another type of carbon capture is being studied, which directly captures greenhouse gases from the atmosphere rather than from industrial activity. more info
According to the International Energy Agency, a substantial expansion of carbon capture is critical to achieve net-zero emissions by 2050. (IEA). The industry must transition from holding roughly 40 million tonnes to 7.6 billion tonnes per year.
The new tax breaks imply that “a number of small to mid-scale projects have a better chance of becoming economical,” according to Frederik Majkut, senior vice president of Schlumberger’s (SLB.N) Carbon Solutions unit.
Each year, around 5 billion tons of carbon are released in the United States, which may be absorbed by these sequestration techniques. Previously, very little of that could be cheaply captured, according to Milestone’s Davis.
“With $85 a ton, I think you can get another billion tons,” he remarked. “It starts to look like an attractive investment.”