International Energy Agency

USA - U.S. Leading Global Carbon Capture Race, and Deep-Pocketed Energy Firms Likely to Benefit

Every energy company, it seems, wants to get into the act to advance carbon capture for their natural gas and oil operations, as well as their petrochemical facilities. Dozens of U.S. projects are on the design table, but many remain in limbo, as investors await clarity about permitting, financing and tax breaks.

Many energy industry experts view carbon capture utilization and sequestration (CCUS) as a necessary component for the world to achieve its net-zero carbon ambitions by mid-century. Is it possible? According to Wood Mackenzie researchers, it is, but there are hurdles to jump.

“Energy efficiencies, renewables and alternative fuels will not be enough to meet net zero by 2050,” said Wood Mackenzie’s Mhairidh Evans, who leads the CCUS global research. “We need a huge amount of carbon to be captured out of our industries, and the power sector to decarbonize the last miles that can’t be easily reached by green electrification or alternatives.”

One study conducted by Rhodium Group for the Regional Carbon Capture Deployment Initiative found that investing in Texas CCUS projects alone could create $60 billion in private investment, 18,000-plus jobs over a 15-year period and more than 9,000 ongoing positions.

“We do see an exciting project pipeline, and some markets are well-positioned for strong growth, particularly the U.S,” said Evans. “While no country has the perfect approach, the U.S. market stands out as the global leader in many ways,” with about one-third of all the projects on the drawing board.

“There is substantial support for emitters to decarbonize,” including the Biden administration’s  Inflation Reduction Act (IRA) 45Q tax credit. In addition, U.S. companies may be able to “build out the infrastructure value chain of CO2 transport and storage” using funds from the Bipartisan Infrastructure Investment and Jobs Act of 2021.


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The United States has “vast geological carbon storage resources that can be developed by companies with upstream oil and gas know-how,” the Wood Mackenzie researcher noted. “It is really the most attractive market in the world to start a CCUS business right now.”

Big Opportunities, Big Challenges

The potential is huge, but it’s not going to be a cake walk. Clearing financial hurdles puts many potential projects out of reach for many smaller investors. Like many infrastructure expansions, there also is a “not in my backyard” or NIMBY component. In addition, environmental concerns have been raised by residents who could be impacted by the projects.

Still, financing may be at the top of the list as only a handful of final investment decisions for CCUS have been made.

Wood Mackenzie’s Peter Findlay, director of CCUS Economics, said most carbon capture capacity projected remains in the early stages, “before material money is spent on front-end engineering and design.” For now, “CCUS is mostly not economic. Consequently, its raison d’être is primarily waste management, at least for now.”

Sponsors need not only government incentives but “customers prepared to pay a premium” for the products, Findlay noted.

“Is this enough to cover CCUS capital, operating and financing costs? By and large, it is not. Added to this, the costs and complexity of CCUS are still too high.”

CCUS costs are projected to decline, “potentially up to 30% this decade,” Evans noted. “However, with the 45Q tax credit being open to projects starting construction as far away as 2033, companies could decide to wait for costs to fall before committing. This would mean a delayed impact of projects, and climate change is not waiting.”

Another hurdle for project approvals is obtaining the required underground injection control (UIC) well permit to bury the carbon underground through Class VI regulations. The UIC program is administered by the U.S. Environmental Protection Agency (EPA). Unless a state has been granted primacy, as North Dakota and Wyoming have, EPA holds sole authority for permitting the Class VI wells.

At least eight other states are “actively working on primacy applications or have expressed interest in preparing primacy applications,” EPA said. And to that end, federal officials in April proposed granting Louisiana primacy.

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