Over the last decade, billions in federal dollars have supported carbon capture projects targeted at difficult to decarbonize sectors — like steel, cement, oil refining, and petrochemicals.
This is because these projects present unique challenges that the current tax credit regime is ill-suited to address.
Grants and tax credits are an inefficient tool for targeting carbon dioxied eductions via carbon capture.
The clearest example of this regulatory challenge is the energy industry’s experience with carbon capture to facilitate enhanced oil recovery — still the most common destination for carbon dioxide from US carbon capture projects.
Because of high costs to install and operate carbon capture equipment at industrial facilities, energy firms have instead tapped naturally occurring sources of carbon dioxide from underground domes found in Colorado, New Mexico and Mississippi, among other sites.
Carbon capture developers have more in common with waste management firms that are paid for remediation of a waste stream.
Projects with strong corporate backing or particularly attractive economics may move forward, but private capital will hesitate to fund an industry-wide buildout without a clear and sustainable business model that doesn’t rely exclusively on tax credits.