The US has sanctioned billions of dollars in new subsidies for carbon capture technology. It is a signature part of the climate package that President Biden signed into law in August. Proponents claim that the $370 billion sanction will help America meet its climate goal. And this claim is coming in from both sides of the political divide.
Both the Democrats and the Republicans claim that the pipelines and tax credits could bring will help Americans earn a handsome profit and help the US meet its climate goals.
But with years of bad results behind them, such carbon capture experimentation hits many climate scholars as a gift to chemical, industrial agriculture, and fossil fuel companies. These companies have been seeking a lucrative way to be perceived as green. The steep increase in tax credits, which has been pursued by every major fuel company, will go for a technology that has not been promising in many of the trials.
These incentives of tax credits are already propelling the oil and gas giants. What is at stake is the chances of an even bigger carbon footprint. The companies include Sempra, ExxonMobil, and Occidental Petroleum. All three are poised to send out huge payments in tax rebates.
The American government is giving a huge government subsidy so that its environmental targets are met. And in exchange, the companies have promised huge tax rebates to landowners who will be affected by the pipelines that will crisscross the Midwest landscape.
But while the ruling Democrats led by President Biden expected the billions of dollars in subsidies to bring about meaningful climate action. But what many activists and politicians overlooked was that good money was spent on bad decisions to win the huge investments in renewable energy and electric vehicles.
Occidental Petroleum, for instance, would be able to use tens of millions, and even hundreds, of dollars of federal subsidies to trap carbon that will be injected into wells to extract what it calls net-zero oil. This has led critics to call it brazenly misleading.
There are close to thirty gas, oil, and petrochemical facilities in America that have proposed carbon capture projects that could be eligible for huge tax credit payments attached to the Inflation Reduction Act.
Record Points To Non-performance Leading To Concerns Despite Huge Tax Credits
Despite huge promises of tax credits, the carbon capture operations have a questionable track record. Proponents say that some of the critiques that we are now hearing about carbon capture were also made about solar and wind power in the early 2000s. But those subsidized technologies, which were heavily subsidized in the initial years, overcame the early troubles and flourished to become an efficient bulwark against climate change. They say that the same thing can and will happen with carbon management technology.
Senator Joe Manchin’s office has said that while thee is no surefire method to curb climate change, the new federal legislation will strive to advance a host of technologies that will in the long run enhance energy security and curb emission.
The Inflation Reduction Act also boots by around 70% of the tax credit for the troubled legacy carbon capture technologies that companies have traditionally used to extract more from the depths, thus increasing it to $60 a ton.
Federal Tax Credits Could Be As Much As Billions Of Dollars
The major expansion of federal tax credit in the 2022 Democratic climate law has spurred thousands of miles of pipelines to carry carbon dioxide to underground storage facilities. It is slated to bring in billions of dollars in tax credits. It will benefit the strong ethanol industry in the Midwest. But the proposal continues to worry landowners and has led to intense differences with the developers of the pipeline system.
So critics aver that spelling out the total spending budget of the federal government on tax credits would be a difficult task at such an early stage. It is also difficult to say if the oil companies who are part of the operation are really earning them. And finally, there is whether the pipelines will be that influential in removing carbon and slowing climate change.
The climate law is among those tax credits that are part of multiple clean energy projects. It is seen as the biggest effort by the federal government to address imminent climate change. The major expansion of the tax credits for carbon sequestration was among the tax credits. This technique is used to remove carbon emissions from any industrial process.
The law in 2022 increased the tax credit to $85 from the previous amount of $50 for every metric ton of gas that is stored underground. The law has also extended the construction deadline that allows the direct payment of tax credits. This makes it simpler for companies to make changes and take advantage of other changes that incentivize the storage of carbon.
The proposed carbon dioxide pipelines intend to carry the gas from ethanol plants in the Midwest. The gases will be transported to huge underground reservoirs where they will remain trapped.
The main point of apprehension over the transport of the gas is that will this process could put groundwater quality at risk. The other misgiving is why is carbon dioxide being transported through the pipelines away from places and not stored locally. The question also arises where were the gases transported if they are not stored underground?
The ethanol byproduct is easier to transport. Sequestration of carbon has also been cheaper than for the concrete manufacturing industry and for coal plants. For ethanol producers, the sequestration cost is about $36 to $41 for a metric ton. Thus, $50 in tax credit is way more profitable for the industry in normal circumstances.
But then costs fluctuate depending on demand and other factors. There are variables factored in such as the length of the pipeline. The higher tax credit of $85 per ton provides a higher incentive and also makes most proposals profitable.
The tax credits would provide a much larger economic opportunity for more facilities for carbon capture in the Midwest region. Experts feel that the economics are promising.