Federal Policy Blueprint 1 FEBRUARY 2021

FEBRUARY 2021 Federal Policy Blueprint 1 FEBRUARY 2021

BLUEPRINT

FEDERAL POLICY Membership

Participants Observers Accelergy International Brotherhood Algae Biomass Organization AFL-CIO of Boilermakers Biomass Power Association Air Liquide International Brotherhood Brown Brothers Energy Air Products of Electrical Workers & Environment, LLC AK Steel Jackson Hole Center Carbon Engineering Alto Ingredients for Global Affairs Carbon Utilization American Carbon Registry Jupiter Oxygen Corporation Research Council ArcelorMittal Lake Charles Methanol Chart Industries Arch Resources LanzaTech ClearPath

Archer Daniels Midland Co. Linde, Inc. Cornerpost CO2 LLC Baker Hughes Mitsubishi Heavy Industries Enhanced Oil Recovery Institute, Bipartisan Policy Center America, Inc. University of Wyoming Calpine National Farmers Union Environmental Defense Fund Capital Power National Wildlife Federation Growth Energy Carbon180 NET Power LLC Institute of Clean Air Companies Carbon America New Energy Risk Melzer Consulting Carbon Wrangler LLC New Steel International, Inc. National Audubon Society Center for Climate NRG Energy Portland Cement Association and Energy Solutions Occidental Renewable Fuels Association Citizens for Responsible Energy Peabody Republic Services Solutions Forum Prairie State Generating Company School of Energy Resources, Clean Air Task Force Praxair, Inc. University of Wyoming Conestoga Energy Partners Shell Systems International | Core Energy LLC SMART Transportation Division The ZEROS Project DTE Energy (of the Sheet Metal, Air, Rail Tellus Operating Group EBR Development LLC and Transportation Workers) Waste Management Elysian Ventures Summit Agricultural Group World Resources Institute EnergyBlue Project Summit Power Group Energy Innovation Reform Project Svante GE Gas Power The Nature Conservancy Glenrock Energy Third Way Great River Energy Thunderbolt Clean Energy LLC Greene Street Capital United Mine Workers of America Impact Natural Resources LLC United Steel Workers ION Engineering LLC Utility Workers Union of America White Energy FEDERAL POLICY BLUEPRINT Table of Contents

Preface 2

Introduction 2

The Federal Role in Commercializing Carbon Capture 3

The Administration and 117th Congress – A Critical Window for Carbon Capture 4

Carbon Capture’s Role in Addressing Climate Change 5

Carbon Capture as a Jobs Creator 6

Carbon Capture Benefits to Affected Communities 7

Looking Ahead: Reaching Economywide Deployment of Carbon Capture 7

Investment Certainty, Project Finance & Feasibility 8

Technology Deployment & Cost Reductions 12

Transport and Storage Infrastructure & Market Development 14

Jobs, Economic Development & Affected Communities 18

Conclusion 19 This Blueprint focuses on federal policy priorities. It Preface does not address state-level policies, which have an Members of the Carbon Capture Coalition (the important role to play in complementing federal policies Coalition) work together to achieve a common to support commercial carbon capture deployment. goal: economywide deployment of carbon capture, removal, transport, utilization, and storage. The mission of the Coalition is to reduce carbon emissions to meet midcentury climate goals, foster domestic Introduction energy and industrial production, and support a The United States leads the world in the high-wage jobs base through widespread adoption of commercialization of carbon capture, removal, carbon capture technologies. The Coalition supports transport, utilization and storage (or carbon the mission by advancing a comprehensive agenda capture), and there is broad bipartisan support for of federal policies and actions that will accelerate capturing and utilizing CO2 and CO. The U.S. has deployment of: 13 commercial-scale carbon capture facilities, with the capacity to capture about 25 million tons of CO • Capture of carbon dioxide (CO ) and carbon monoxide 2 2 annually, representing approximately half of the 26 (CO) from power plants and industrial facilities; commercial-scale carbon capture projects worldwide. • Carbon removal technologies, including direct air capture, bioenergy with carbon capture and storage To meet midcentury emissions reduction goals, preserve and create high-wage jobs and maintain and other advanced technologies that remove CO2 already in the atmosphere; U.S. technology leadership, a broad suite of enabling policies will be required to accelerate commercial • Transport infrastructure to carry CO from where it 2 deployment of carbon capture projects. is captured to where it can be geologically stored or put to beneficial use; Large-scale deployment of carbon capture is essential if we are to achieve the economywide decarbonization • Utilization of captured CO2 and CO to produce low- carbon fuels, chemicals, materials, and other useful necessary to meet midcentury climate goals. To limit products; warming to 2°C, the IEA estimates that the global carbon management industry will need to scale up • Storage of CO in secure geologic reservoirs, such 2 to well over 2,000 facilities capturing and storing as saline geologic formations and oil and gas fields. 2.8 gigatons (billion metric tons) of CO2 per year. The 2021 consensus Federal Policy Blueprint Deployment of carbon capture also provides a viable builds upon the Coalition’s original policy blueprint pathway for the decarbonization and continued released during the 116th Congress. It articulates a operation of key industrial, manufacturing and energy comprehensive and ambitious federal policy agenda facilities, thereby avoiding plant closures and the to help achieve the goal of economywide carbon offshoring of jobs and livelihoods. capture deployment and reflects the consensus In the three years since Congress revamped the federal policy priorities of the Coalition. It is not federal 45Q tax credit, project developers and intended to represent a complete compilation of all investors have announced over 30 carbon capture policies that are relevant and important to the broader projects. They span multiple industry sectors, electric carbon management agenda of carbon capture, power, transportation fuels, and direct air capture removal, transport, utilization, and storage. technologies. These approximately 30 publicly announced carbon capture projects represent an essential early down payment on long-term “Carbon capture” is used to deployment to meet midcentury climate goals. If reference the entire suite of carbon these projects all proceed to commercial operation, it will represent roughly a tripling of operating carbon management tools: capture, removal, capture projects in the U.S. Additionally, many more transport, utilization, and storage. projects under development have not yet been publicly announced.

2 FEBRUARY 2021 Federal Policy Blueprint 3 Boston rk o

. Y

w Ne F F 2020 Washington Raleigh Potential Geologic Storage July Miami Charleston Pittsburgh and Columbus Atlanta together with the 45Q Knoxville 1 June 2019 Detroit , Louisville # Wabash Valley Valley Wabash Resource / OGCI Mobile y in saline formations or in oil and gas fields. 2 ## # One Earth Energy* # Ox e

Nashville # t / + s ta y S c Jackson Chicago Madison ### lo rie i Linde e # V November 2018 November # Generating

Pra # + # Little Rock # # Lake Charles Methanol # Fuels # # Springfield # IL Clean IL Shreveport # # G2 Net Zero LNG/NETPower Des Moines # + Alto Ingredients # # # Summit Ag Note: Five additional projects under development are not pictured on this map due to confidential location. # Minneapolis # # # # end of 2025 in order 2025end in qualify of to the for credit. While these legislative accomplishments are significant, representthey toward initialstep onlyan carbon utilization, removal, capture, and storage; the legislation also included reforms the to Department Energyof (DOE) loan program office, enabling DOE draw onto $8 currently in funds billion to available provide loans and loan guarantees carbon to capture Service Revenue the Internal projects. Additionally, (IRS) finalizing the 45Q rulemakingin January 2021 after a three-year delay, extension, provides regulatory long overdue and certaintyinvestment dollars of unlock billions in to private capital carbon for capture projects, which can engineering, thenow complete planning, permitting and financing requiredto begin constructionby the # # # # # ## # # r # Tulsa # # / ## Linde e # # # # Systems # # # # # # # # y # ## # ### ### w # ra # # ## # ##### # # # Dallas # Houston # # # ## o # # # Lincoln Wichita # # #### ## nd # ### # # # ## # International Ox ## P # # ## ## ## ## # ## # # u # # ## # # # / Fargo Sioux Falls # ta # ## # # # # # ## # # o # # # # ct T # # # rgy k e # e # # j # # nn # Blue Flint Ethanol En Pro Mi # # # # NE Public Power / Ion* + ite # h # W # # # # , LH / # # te # # # # # # n # # # # # # # # # a # # # d Glenrock Energy Energy* #

# Sv Oxy /Total a Red Trail # # # pre ## # DAC One Carbon Engineering / Oxy Denver # ric Coop* n S ## t e # c ## # ## # Albuquerque Billings ld le # o # # Dry Fork ## E # # # # G # # # Basin Electric # Enchant / # Farmington 1 Salt Lake City F Tucson span industry, power and direct air capture and will store CO * ty Capture Capacity Ci e s i s Bo ga e V s La 2 gy r e Publicly announced carbon announced capture States projects currently the United are that in Publicly under development En n a CA Resources / CA OGCI

Seattle Los Angeles Systems Cle A E F announced projects announced Francisco n +

Sa Projects Under Development Department of the Treasury and the IRS to finalize 45Q guidance and a rulemaking as well as building consensus among its membership companies, unions and NGOs on the effective implementation of 45Q. This resulted in the Coalition submitting consensus-based, in IRS the and Treasury recommendations to and guidance model comprehensive Since the enactment of the reformed and expanded 45Q tax credit the in 2018, Coalition spent over two years both urging the U.S. 1 authorizations for federal research, development and and authorizations federal research, development for demonstration (RD&D) programs scaling up aimed at deployment carbon of capture technologies. The Omnibus featured2021 urgently-needed an two- extensionyear the of 45Q tax credit and robust Consolidated Appropriations (FY Act, 2021 2021 Omnibus), is foundational commercial-scale for the 45Q tax credit through passage the of FUTURE coupled with groundbreaking 2018, in Act provisions energy year-end in legislation passed as part the of Carbon Capture Carbon The landmark bipartisan reform and expansion of The Federal Role Role Federal The in Commercializing These Figure 1: Figure fully enabling economywide commercialization of carbon capture, removal and utilization technologies The Administration and the development and buildout of associated and 117th Congress – CO2 transport and storage infrastructure. If carbon capture is to fulfill its necessary role in achieving net- zero emissions by midcentury, we must scale federal A Critical Window investments and policy ambition accordingly. for Carbon Capture A full federal portfolio of supportive policies includes The administration and 117th Congress have a crucial enhancements to 45Q, other tax credits and near-term opportunity to build upon the significant incentives, greatly expanded funding for RD&D, and bipartisan legislative accomplishments and growing momentum of the previous two sessions of Congress financing and grants for CO2 transport and storage infrastructure. Already, there has been tremendous to advance a comprehensive and ambitious policy progress in the previous two Congresses, in both portfolio to realize the full climate, economic recovery the number of bills introduced and bipartisan, and jobs potential of carbon capture, removal, bicameral co-sponsors that have expanded the transport, utilization and storage technologies. Broader policy landscape for advancing carbon capture, legislative packages focused on economic recovery, removal, transport, utilization, and storage. Taken infrastructure and climate legislation being developed together, these legislative efforts have the potential for consideration provide a window for action that to establish a comprehensive federal policy portfolio carbon capture cannot afford to miss. to facilitate and leverage private investment in If large-scale carbon management is to fulfill its carbon capture projects. This expanded federal needed contribution to meet midcentury climate goals, carbon capture policy framework will, in turn, spur progress over the next decade is critical to scale continued innovation, increased scale, and improved carbon capture technologies within the timeframe performance, while driving down costs and attracting required to achieve net-zero emissions by 2050 and still more investment that further accelerates negative emissions thereafter. Meaningfully scaling deployment—just as federal policy has effectively the carbon management industry by 2050 requires helped foster the development, commercialization significant action in the near-term within industrial, and ultimate scale-up of other low- and zero-carbon energy, and manufacturing sectors. In parallel, the technologies, such as wind and solar. buildout of interconnected and responsibly-sited

CO2 transport and storage infrastructure must be

Figure 2: 45Q Tax Credit Structure and Eligibility Requirements

Annual Carbon Capture Thresholds

25,000 – 500,000 metric tons At least 100,000 metric tons At least 500,000 metric tons

of CO2/CO of CO2/CO of CO2/CO For carbon utilization projects to Industrial facilities (e.g., ethanol, steel, Electric generating units (i.e., coal and

convert CO or CO2 into useful products cement, and petrochemicals), direct natural gas-fired powered plants) (e.g., fuels, chemicals, products) air capture facilities and facilities using

CO2 for enhanced oil recovery (EOR)

45Q Tax Credit Amounts

$35 per ton $35 per ton $50 per ton

For secure geologic storage of CO2 For carbon utilization projects to For secure geologic storage of CO2 in

through enhanced oil recovery convert CO or CO2 into useful products saline geologic formations (e.g., fuels, chemicals, products)

Timing: Projects must begin construction before January 1, 2026 and may claim the credit for up to 12 years after being placed in service. Eligibility: Carbon capture and direct air capture projects that either capture and utilize or geologically store carbon oxides are 4 eligible to claim the tax credit. FEBRUARY 2021 Federal Policy Blueprint 5

International Energy Energy International Intergovernmental Panel on on Panel Intergovernmental (IPCC) and the (IEA) economywide that concluded have and per year to limit warming 2°C. per limit to the to year For more 2 per year to limit warming to 2°C.” warming to limit to per year 2 carbon management industry will The Global CCS estimates Institute that more than 2,500 large-scale carbon capture facilities will need goal; 2040 come by to online the 1.5°C achieve to half these of facilities are expected be power in to sectors. industrial in thegeneration, half other Post-2050, capture direct air and other negative emissions technologies role increasing an will play in offsetting anthropogenic remaining any emissions in 50 percent more carbon capture deployment. The IEA estimates that the global carbon management industry 2,000 will need over well scale to to up facilities, metric capturing (billion gigatons 2.8 tons) of CO conditions where under scenario, 1.5°C ambitious further emissions reduction measures the are taken, IPCC estimates between that on average, 15 8 to emissions annual of reductionsgigatons will come from carbon capture technologies, more than half of which come must from carbon removal. Carbon Capture’s Capture’s Carbon Addressing in Role Change Climate Both the United Nation’s Change Climate Agency deployment accelerated commercial dramatically carbon of capture critical is global achieving for temperature targets. modelingIn scenarios warming limit below to 2°C, the IEA percent emissions all of concludes that 15 come must fromreductions 2070 meet zero by net to carbon with capture, the largest relative emissions reduction contributions coming from carbon capture industrialat facilities. transition faster A zero net to increases the need carbon for Moving capture. the 2050 goalposts to fromnet-zero would require 2070 need to scale up to well over 2,000 over well need to up scale to facilities, capturing 2.8 of gigatons CO “The IEA“The estimates that the global transport transport 2 captured 2 transport and 2 transport and storage infrastructure, and 2 storage infrastructure must be well be infrastructure well must storage significant action significant in the near- manufacturing sectors. In parallel, industry 2050 requires by responsibly-sited CO storage projects. together, these policies would leverage private private these leverage would policies together, medium-term and of deployment near- in investment carbon transport, removal, capture, utilization, and financial incentives, low-cost incentives, and grants financial financing for CO significantlyexpanded RD&D Taken funding. Therefore, it is vitally important that legislation this in Coalition recommendations, Congress key include 45Q existing to other and enhancements including essential options needed the worst avoid to impacts of change. climate significant carbon by capture deployment2030, the and other U.S. countries risk being left without capture necessary investments net-zero achieving for emissions economywide 2050. by commit to fail we If a broaderto federal policy portfolio enable now to permitting processes. Meeting these benchmarks and CO will enable the industrial, power, theand storage sectors massive carbon make to reach a critical mass 2030. by Doing so will establish new benchmarks ease of technical maturity, in construction, affordability, and effective and timely Carbon carbon capture, direct capture, air utilization, and storage projects be must deployed quickly to well underwaywell 2030, by gathering CO appropriate to it delivering and facilities from multiple geologic storage sites serving as regional hubs. underway 2030.” by the buildout of interconnectedthe of and buildout term within industrial, energy, and term within industrial, energy, “Scaling the carbon“Scaling management particularly hard-to-abate sectors such as aviation, infrastructure in 21 states across the Midwest, Great

as well as in reducing the concentration of CO2 Plains, Gulf Coast and Rockies regions can support remaining in the atmosphere. an annual average of up to 68,000 project jobs and 35,800 ongoing operational jobs over a 15-year period, while capturing and managing 592 million metric tons of CO per year. Carbon Capture 2 A typical direct air capture plant capturing one million metric tons of CO per year can generate roughly as a Jobs Creator 2 Deployment of carbon capture, removal, transport, 3,500 jobs across the various sectors in the supply utilization, and storage technologies will retain and chain. The construction, engineering and equipment grow domestic high-wage industrial, energy, and manufacturing sectors combined could see at least manufacturing jobs. Carbon capture projects at 300,000 new jobs associated with full scale direct air industrial facilities and power plants provide some of capture deployment, according to another Rhodium the most desirable clean energy and industrial jobs Group analysis. since employment associated with heavy industry (refining, chemicals, cement, steel, etc.) and power plants pay higher than average local wages, while Figure 3: Job Estimates by Facility Retrofit preserving important facilities and infrastructure. Project Operation In addition, new and innovative high-skilled and high- Jobs Jobs wage industries will play a role in commercializing carbon capture and carbon removal, including jobs Carbon Capture Retrofit - Industry associated with new negative emissions and carbon Steel Mill 1,680 - 3,030 170 - 310 utilization technologies. Carbon capture retrofits will reduce emissions from existing facilities, preventing Refinery 440 - 760 40 - 70 their retirement and loss of associated high-wage jobs. Cement Plant 430 - 690 60 - 110 According to a recent Rhodium Group analysis Hydrogen Plant 175 - 300 20 - 30 commissioned by the Great Plains Institute, carbon capture deployment at industrial facilities and power Ethanol Plant 30 - 50 5 - 10

plants and buildout of associated CO2 transport Carbon Capture Retrofit - Power

“Carbon capture deployment at Coal Power Plant 1,800 - 3,350 160 - 300

industrial facilities and power plants Natural Gas Combined-Cycle 1,140 - 2,090 100 - 180 Power Plant and buildout of associated CO2 transport infrastructure in 21 states CO2 Transport Infrastructure across the Midwest, Great Plains, Trunk Line 1,250 - 2,190 8 - 20 Gulf Coast and Rockies regions can (20” diameter pipeline, 200 miles long)

support an annual average of up Feeder Line 250 - 370 2 - 5 (12” diameter pipeline, to 68,000 project jobs and 35,800 50 miles long)

ongoing operational jobs over a Building upon modeling of economically feasible capture projects from the Great Plains Institute, the Rhodium Group 15-year period, while capturing and has provided analysis of the jobs potential of typical carbon managing 592 million metric tons of capture retrofits at facilities across several industries. The range in jobs numbers reflects differences in project sizes in CO per year.” the Great Plains Institute project database. 6 2 FEBRUARY 2021 Federal Policy Blueprint 7

for less for ; 2 transport and 2 to ensure the to into broader national broader national into to further to complement, Federal Policy Blueprint transport and storage transport storage and 2 through coordinated federal actions. federal actions. through coordinated investment certaintyinvestment business model and flexibility Congress, by intended as ensure effective as well the tax of oversight credit; and implementation Incorporate CO infrastructurefinancing large- of deployment enable infrastructure to policy scale transport CO and storage of funding federal RD&D expand and Retool commercially mature and next generation carbon transport, removal, capture, utilization, and storage technologies and practices (including fully funding the robust RD&D provisions 2020); enacted in Provide additional federal tax credits and other incentivesdeployment uponexpand and build 45Q financing carbon in capture projects, capture direct air and including carbon utilization projects; Ensure benefits from the deployment of carbon capture projects flow to affected communities workers and Enhance the 45Q tax credit The remainder this of agenda policy the consensus more detail in outlines theof Carbon Capture Coalition and our will guide efforts seeking in federal policymakers engage to carbon of widespread deployment and adoption and utilization removal capture, technologies and CO of development associated storage infrastructure. • • • • Looking Ahead:Looking Reaching Economywide Carbon of Deployment Capture With the cornerstone the policy of 45Q tax credit in theplace, Coalition now advocates a comprehensive for carbon needed commercialize agenda federal policy to transport, removal, capture, utilization, and storage the outlines Blueprint broader This federaltechnologies. foundation policy this needed achieve agenda policy to and ensure carbon necessary capture’s contribution in emissions 2050. by net-zero achieving The Carbon strategic vision Capture for Coalition’s future policy action is to: •

unabated, potentially for decades. for potentially unabated, separation flue and capture, gas 2 2

and develop appropriate measures to ensure and and ensure measures appropriate to develop and benefits. optimize benefits, furtheranalysis is neededquantifyto air quality impacts from carbon capture retrofits at different types different in facilities industries of they will emit CO While carbon provide quality air capture will likely capture. Younger and relatively more efficient Younger capture. plants with significant economicremaining life pose the most change; without capture, climate to serious challenge Because carbon capture retrofits are capitalintensive, there is little risk inefficient, old, of and polluting facilities extending carbon their adding lives by technologies deployed at individual cement, refining, refining, cement, individual at deployed technologies and poweriron plants. and steel, capture retrofits on conventional pollutantsvary will depending on the emissions and carbon capture capture may resultcapture meet facilities more in may to having current stricter and usually emissions standards. the specificindividualof impact carbonHowever, Additionally, utilization of pre-combustion utilization of industrial Additionally, gases removes criteria pollutants as part the of carbon installationutilization of process. Finally, must undergo pretreatment to remove criteria air remove to pretreatment undergo must pollutants, sulfur oxides, particulate including matter, and nitrogen the protect to capture solvent. dioxide, emissions reasons. several for First, prior CO to has the potential to play a role a addressinghas play in the to potential these concerns. Carbon capture retrofitsinstances in many significantlymay reduce conventional pollutant change also typically suffer the greatestimpact from criteria and other air pollutants; carbon capture communities and workers. The communities that are most vulnerable climate to carbon capture technologies, there is a need to ensure that benefits of from of deployment suite the carbon management technologiesaffectedto flow Communities addition realizingIn the to essential reductions in carbon emissions from widespread adoption of Benefits to Affectedto Benefits Carbon Capture Capture Carbon Figure 4: Economywide Deployment of Carbon Capture Jobs, Economic Technology Development Deployment & & Affected Cost Reductions Communities

Investment Transport, Storage Certainty, Infrastructure Project Finance & Market & Feasibility Development

may need to be developed to address the pace Investment Certainty, of project deployment, whether to add certainty to construction schedules, reduce the risks of cost Project Finance overruns, or provide backstops for technology & Feasibility performance guarantees. Enhancement of the 45Q tax credit, in addition to an expanded portfolio of complementary policies, is crucial to providing investment certainty, additional Maximizing the Impact incentive value and the flexibility needed to leverage of 45Q on Project Deployment greater private investment in carbon capture projects, including direct air capture and utilization projects. Enact a Direct Pay Mechanism These steps will increase the financial feasibility for 45Q A direct pay mechanism for 45Q is the most important of projects, particularly those projects that involve next step Congress and the administration can take to capturing CO from more dilute sources, including 2 enable economywide deployment of carbon capture certain industrial processes such as the manufacture technologies to meet midcentury climate goals, as well of steel and cement, power generation and from as to provide a powerful spur for economic activity ambient air through direct air capture. and job creation at a time when both are urgently Financing projects involving these sources with higher needed for our nation’s recovery from the COVID-19 capture costs is critical to achieving the full climate, pandemic. Importantly, direct pay for 45Q can be economic and jobs benefits of carbon capture and implemented at a low budgetary score. removal. Key additional investment certainty and The complexity and inefficiency of tax equity project financing provisions include a direct pay transactions impose increased costs and burdens mechanism and multiyear extension of the commence on project developers. Tax equity is a suboptimal construction window for the 45Q tax credit, along with means of financing carbon capture technologies, even a range of complementary policies that will lower the under normal market circumstances, because tax cost of debt and equity, reduce commodity risk and equity investors demand elevated returns that erode expand markets for low-carbon electricity, fuels, and the value of the tax credit to the project, especially products produced through carbon capture, direct for carbon capture, direct air capture and other less air capture, and carbon utilization. Ultimately, the commercially mature technologies. scale of deployment required by 2030 will necessitate accelerating project development. Additional policies 8 FEBRUARY 2021 Federal Policy Blueprint 9

storage in saline geologic saline storage in formations 2 projects and technologies that can participate. the In CongressFUTURE lowered 2018, of Act the annual capture threshold industrial eligible for facilities from 500,000 metric 100,000 to tons metric and tons thresholdcreated a new annual carbon for utilization 25,000 of projects a minimum of and a maximum of 500,000 but the tons, original 500,000-ton threshold electricfor unchanged. remained units generating experience with commercial-scale carbon capture This means that some date. projects potential to starting already today risk missing the newly extended commence-construction the at 2025. deadline end of A significantextensionmultiyear of the 45Q commence construction window remains necessary provideto the long-term certainty the for private be will that deployment commercial in investment essential carbon scaling up to capture technologies as the just federal midcentury, by wind production tax credit tax and solar investment credits (ITCs) anchoredhave long-term those in private investment technologies and 2005, 1992 since respectively. Thresholds of Elimination thein 45Q Statute The current thresholds statute are in a legacy the of original 45Q program from a decade They over ago. serve purpose policy have public and obvious no undermined the broader objectives the of incentive by thelimiting number and range industrial of facilities, Multiyear ExtensionMultiyear the of 45Q Commence-Construction Window Further extension the of 45Q tax credit is needed the full emissions achieve reductionto of potential the credit. While the two-year 45Q extension the in recently passed FY provides welcome Omnibus 2021 stabilitynear-term and helps project developers forwardmove with the 30-plus announced publicly carbon capture projects already various in stages of alone action this financing, and development project certainty investment give will not a sufficient over time period the allow needed to carbon expansionof deployment. capture More and capital-intensive complex carbon capture projects lead times canyears five have of or more before beginning construction, especially those projects pursuing CO permitting longer to due those or deploying timelines, technology certain in industrial sectors with little or no on private and 2 transport infrastructure infrastructure transport 2 in saline geologic saline in formations, typical at tax 2 saline geologicsaline CO storage of federal lands Providing predictable markets products for from carbon capture & utilization Treasury is properly implemented and seek properly and is implemented Treasury clarification guidanceon where necessary Facilitating CO permitting and siting planning, Dramatically increase commercial-scale Providing further enhancements 45Q to fill to costremaining gaps other and expanding existing Enhancing financing enable to federal incentives Ensuring 45Q guidance developed by Maximizing 45Q the of impact on deployment project • • • • • • Finance & Feasibility Policies Policies Feasibility & Finance • Investment Certainty, Project Certainty, Project Investment economic benefits. economic value for the for value American taxpayer yielding more by deployment carbon of and utilization removal, capture, technologies—and jobs and thus climate, greater dollar expended by the federal government through the federal government expended by dollar the 45Q greater would deliver direct pay incentive, efficiently, and effectively. effectively. and would Directonlynot efficiently, pay unlock broader markets financial greater and leverage private capital projects; in investment for every for Bycontrast, 45Q for direct pay would provide morethemuch incentive value directly, intended only $40 from that of value the tax credit, with the the of federal the incentive lost to $10 remaining financial transaction. of $50of per metric the for ton capture and storage of CO equity rates, a project investment developer realizes tax credits the to federal government. example, For incentive an provide Congresswhile to intended credit. This means that the effective 45Q of value tax credits flowingto tax equity-financed projectsis roughly 20 percent less than the cost those of same According carbon to capture project developers, taxthe terms of typically equity investment consume around 20 percent the the of or of tax greater value Figure 5: Power and Industrial facilities that do not meet or narrowly exceed current 45Q thresholds by up to 25 percent.

Total CO2 Total CO2 Emissions of Emissions of Current Number of Facilities Under Number of Facilities Narrowly Threshold Facilities Threshold Facilities Above Threshold

(metric tons of CO2 Under (metric tons Narrowly Above (metric tons of CO2 per

Sector per year) Threshold of CO2 per year) Threshold year)

Coal Power At least 500,000 65 13,532,968 11 6,173,161 Plant Gas Power At least 500,000 658 81,362,442 34 19,039,608 Plant Industrial At least 100,000 3,964 106,090,987 180 20,067,726

Data source: Environmental Protection Agency, Facility Level Information on Greenhouse Gases Tool, 2018.

Since the reform and expansion of 45Q, it has become Further Enhancements to 45Q clear that these thresholds stifle innovation, severely to Fill Remaining Cost Gaps limit the number of facilities and industries able to The reform and expansion of 45Q remains a signature participate and reduce the overall emissions reduction bipartisan accomplishment, and the policy will drive potential of the 45Q program. a significant level of project deployment, especially in Thresholds are already deterring projects at industrial industrial sectors with lower costs of carbon capture, facilities and in some power generation applications. such as ethanol, gas processing, fertilizer and Additionally, these thresholds are impeding the hydrogen production. However, as companies and potential growth of the emerging carbon utilization investors have initiated project development in earnest marketplace, which includes new and innovative in response to 45Q, they have encountered barriers technologies and processes to produce low- and to utilizing the tax credit and increasingly realize that zero-carbon fuels, building materials, chemicals, enhancements to the program are needed beyond and other advanced materials and products direct pay, multiyear extension, and elimination of thresholds to fill remaining cost gaps that prevent sourced from captured CO2 and CO. Many of these carbon utilization technologies are not immediately projects from achieving commercial feasibility and able to scale to the 25,000 metric ton threshold, securing private financing. effectively precluding their early-stage commercial demonstration and locking them out of the 45Q Differentiated Credit Values program altogether. for Higher-Cost Technologies The largest sources of carbon emissions in industrial Furthermore, project developers are finding that even production and power generation also feature lower if a facility does narrowly exceed the threshold, as concentrations of CO , thus increasing the per-ton costs outlined in figure 5, they still may not be able to secure 2 of capture. This includes carbon-intensive industrial financing for the carbon capture projects. This is due sectors such as steel, cement, basic chemicals and to the risk posed by potential operational or market refining, as well as coal, natural gas and biomass disruptions such as the COVID-19 pandemic, which power generation. In addition, direct air capture that may cause the facility to fall below the threshold in separates CO from ambient air, the most dilute source a future year and not be able to claim the tax credit. 2 of CO , has the highest per-ton costs of capture. While For these reasons, Congress should remove these 2 widescale adoption of carbon capture technologies in barriers to innovation and project development by these sectors is essential to meet midcentury emissions eliminating all thresholds in the 45Q statute. 10 FEBRUARY 2021 Federal Policy Blueprint 11

, saline , saline 2 in saline geologic saline in formations. Since projects such 2 made it impossible companies for access to existing incentives retrofit to currently operating coal-fired power plants with carbon capture technology. proposedEnacting reforms 48A to modify to plant heat rate requirements for compatibility with operating carbon capture and equipment providing direct for $2 would unlock approximately pay currently in billion technical funding retrofits. for available Additionally, existingfixesto the would enable 48BcarbonITC Enhance and Expand Complementary Federal Incentives to Enable Financing Projects Carbon Capture of Other federal existing incentives financial beyond the 45Q tax carbon credit either exclude capture projects or require technical modifications allow to Expandingprojects qualify. to financing of the suite carbon to mechanisms available direct capture, air capture and utilization projects additional will make private capital on more favorable available terms, thus reduction emissions and future deployment increasing make Congresspotential. expand should eligibility, technical corrections and/or enhance federal existing incentives, including: ExistingReform Section 48A Credits Tax 48Band Investment Design flawsin currentthe program 48A ITC have current 12-year period credits claim under to 45Qcurrent 12-year means that carbon capture projects a lower have This is return, the the of facility. averaged lifetime over especially projects for challenging that captured store CO receive from no revenue the sale CO of geologic storage imposes ongoing an cost net after credit payment window ends. Therefore, the 12-year be storage is less developed,saline to and likely operation, in remain to withoutunlikely revenue certainty the the of capture lifetime over projects that extending the storage serves.such period Finally, credits claim would ideallyto be accompanied a by equityfor some financing provision. direct Tax pay ten-year a to timeframe, is limited investors thereby tax the of value diminishing credits received later in years projects, financing in unless project developers the optionhave direct pay. of

for up to a 12-year period. Lengthening a 12-year to up for 2 emissions coal of combustion, a natural 2 is one way to fill fill costexisting gapsin to is one the way 45Qcredit project more financing feasible. Theand make for storing CO the creditand aligning payment window more closely the theto expected of carbon lifetime capture facility industrial and power facilities, are designed operate to twenty over for years. 45Q currently credits projects Window from 12 to 20 Years 20 Years to 12 from Window with Combination in Direct Pay Carbon capture, capture direct air facilities, including Lengthen the 45Q Credit Payment Lengthen the 45Q Payment Credit requirements for the geologic demonstration secure for requirements of storage and emissions for reductions achieved through carbon utilization apply. would still developer’s option that would be allocated on the each megawattbasis of hour generated and claimed the of lieu 45Qin tax credit. Current 45Q regulatory generation, which will be crucial net- achieving to a production taxzero emissions the in power sector, credit alternative be should provided the at project presently structured sufficiently not will incentivize carbon capture deployment natural in gas power basis of an equivalent coal an basis of power plant,thus creating a fundamental carbon deploy to disincentive capture Since the 45Qon natural program gas power. as half the CO gas power equipped plant with carbon capture will generate only about half the 45Q credits onper a ton and Storage Since combustion natural of gas results roughly in Production Tax Credit Option Credit Production Tax Generation Gas Natural for Power with Carbon Utilization Capture, Establish an Alternative an Establish Electricity streams and through adequately capture direct air to these in sectors are that investment private incentivize criticaldecarbonization. to that recognize and accommodate the very accommodate and recognize that different costs capturing of carbon and managing emissions from different industrial and power flue plant gas Therefore, it is vitally important that policymakers differentiated 45Q for provide enhance values credit to natural gas and biomass power generation, and direct large-scale any have captureair do yet not commercial projects placed service in anywhere the in world. reductions, veryreductions, little occurred has deployment due costs greater to and commercial risk; fact, in cement, capture projects involving industrial gasification capture eligible for PABs would reduce financing to access existing credits. Necessary changes costs, encouraging the development of more carbon include reallocating unused credits awarded to capture and direct air capture projects. projects that failed to proceed, amending closing agreements for current projects to extend placed in service requirements to ten years, including a direct Prevent the Disallowance pay provision and clarifying that, similar to the 48A of 45Q under the BEAT Tax Important potential tax equity investors in carbon program, projects claiming 48B ITCs are also eligible capture projects may be subject to disallowance of to claim the 45Q tax credit. 45Q tax credits under the Base Erosion and Anti- Abuse Tax (BEAT), which was revised in the tax Provide for a Reformed and reform legislation of 2017 and lowers the threshold that Expanded Section 48 Investment triggers taxation of multinational companies. Business Tax Credit for Carbon Capture, tax credits such as 45Q can be applied to offset up to Utilization and Direct Air Capture 80 percent of a company’s BEAT obligation. However, In addition to reforming the 48A and 48B ITCs for this provision applies only through 2025, and the existing projects, Congress should reform and expand Coalition supports this additional permanent fix, which the Section 48 ITC program for new carbon capture, investors claiming the wind production tax credit and carbon utilization and direct air capture projects equal solar ITC already enjoy. to 30 percent of the value of installed carbon capture equipment, as defined under the 45Q program, and Make Carbon Capture placed in service within ten years. An expanded ITC Projects Eligible for Master would enable and accelerate deployment of carbon capture from more expensive and hard-to-abate Limited Partnerships Carbon capture projects, along with other low- and sectors, and it would be open to all projects eligible zero-carbon energy projects, are currently ineligible for 45Q, including current 48A- and 48B-eligible for Master Limited Partnerships (MLPs), which are a projects that choose to opt into the reformed program. business structure that allows for raising equity on Projects would comply with IRS requirements under public markets, while providing the tax benefits of 45Q for monitoring, reporting and verification of a partnership. Carbon capture projects should be secure geologic storage and for lifecycle analysis of allowed to qualify for MLP status to raise equity on emissions reductions from carbon utilization. Finally, more favorable terms. projects claiming the reformed Section 48 ITC would also be eligible for direct pay and for 45Q credits to help broaden the range of commercially feasible projects, thereby leveraging private-sector investment and expanding deployment. Technology Deployment & Cost Reductions Make Carbon Capture and Direct Air In the same way that other low- and zero-carbon Capture Projects Eligible for Tax- energy technologies were largely developed and Exempt Private Activity Bonds commercialized through public-private partnerships, Carbon capture projects are currently ineligible for such as wind and solar, the federal government has tax-exempt private activity bonds (PABs), a common, played a key role in the development of some of well-accepted mechanism for financing large-scale the first carbon capture and storage projects, when private infrastructure projects that have public the cost and commercial risk of deploying these benefits, including large-scale air pollution control technologies at commercial scale remained prohibitive investments in the 1970s and 1980s at privately- for private industry to shoulder alone. owned power plants. Compared to conventional There are long lead times in advancing capital- bank financing, tax-exempt PABs reduce annual intensive technologies from concept to demonstration debt payments, both by lowering interest rates and to commercialization, which makes federal extending the repayment period. Making carbon investments during the next decade critical to scaling 12 FEBRUARY 2021 Federal Policy Blueprint 13 these sectors, half the of emissions over are process emissions, chemical meaning or they are to inherent physical processes, for as the such creation clinker of cement or from steel iron that ore, cannot be abated without carbon capture. These decarbonization sectors faceunique with heterogeneous, are capital- They challenges. and long-lived heavyintensive facilities. Moreover, industry is highly trade-exposed, meaning that individual companies compete must high-volume, in low-margin global commodities markets. Thus, any costs borne from carbon deployment of abatement technologies will be difficultfor to thembear individually and profitable. remain While carbon capture the is not solution complete addressingto industrial emissions, they represent essentialan component the of broader portfolio scalableof emissions reduction options available industryto decarbonizing for the manufacture of products necessary modern building to including life, materials, fuels and basic chemicals. whether through theappropriations process oras part economic recovery a broaderof COVID-19 package. ensuring particular, thatIn funds are fully appropriated large-scalefor projects, pilot commercial-scale demonstrations front-end and design engineering and (FEED) studies carbon for capture projects can drive jobsnear-term creation and economic while activity, spurring additional the project next over development years.several Industrial Emissions Beyond the programs detailed figure in 6, the FY Omnibus contains 2021 important cross-cutting programs industrial for emissions reductions. terms In emissions,of the industrial sector is responsible for one-thirdapproximately both of global and domestic emissions; more than these half of three occur just in Within chemicals. basic and cement, sectors: steel,

authorization levels Scaling new RD&D programs carbonfor removal, capture, utilization, FY and storage to Omnibus 2021 & Cost Reduction Policies Reduction Policies Cost & • Technology Deployment Deployment Technology Congress fully fund these newly authorized programs, investment in carbon in investment management that will be needed emissions economywide reach net-zero to 2050. by Therefore, it is crucial that the administration and 117th While these are historic increases, these authorization marklevels a course correction towards building more ambitious even an program federal of RD&D levels for carbon for levels capture RD&D. appropriating Fully the authorized would result over an funding in levels 400 percent carbon increase to capture budgets. economywide deployment. commercial The FY Omnibus features 2021 robust authorization carbon utilization, removal, capture, and storage technologies and processes will be a critical component driving of down costs accelerate to retooling and prioritizing of federal investments prioritizing and federal investments retooling of lessin commercially mature and transformational commercial saline geologic storage sites to serve to sites geologic storage saline commercial as regional hubs anchoring a the of development Continued expansion, carbon industry. management see meaningful commercial deployment in the the in deployment see commercial meaningful federal RD&Dmarketplace. Similarly, programs large-scale prioritizeneed of to the development generation carbon capture technologies across sectors. increased The will need U.S. make to RD&D these for investments technologies to The federal has government a significant still to role funding less in play commercially mature and next billion for clean for energybillion technologies, only 4 percent whichof $3.5 (approximately was billion) allocated to carbon capture technology. technologies. As the American one example, Recovery 2009 of Act and Reinvestment included $90 in the U.S., carbon thein U.S., has capture suffered overall a federalsignificantof lack investment compared support of historicto levels other for clean energy up carbonup capture technologies. While DOE funding a crucialhas played role the in success recent of large-scale carbon capture and storage projects Figure 6: Energy Act of 2020 (FY 2021 Omnibus) Carbon Capture Programs

Program Areas Total Authorized Funding (over 5 years)

Carbon Capture Technology Program for the development $4.71 billion in total funding: of transformational technologies that will significantly improve • $910 million for R&D the efficiency, effectiveness, cost, emission reductions and environmental performance of coal and natural gas use, • $1 billion for large-scale pilot projects including in manufacturing and industrial facilities. This program • $2.6 billion for commercial-scale demonstration projects includes significant authorizations for RD&D, large-scale pilot projects, commercial demonstration projects and FEED studies. • $200 million for FEED studies

Carbon Capture Test Centers to advance RD&D of carbon $125 million capture technologies.

Carbon Storage Validation and Testing program that will $800 million coordinate federal agencies’ work on assessing suitable

CO2 storage locations and developing demonstration and commercial storage sites.

Carbon Utilization program to scale up markets and identify ~$283 million technologies to convert captured carbon to valuable products and commodities.

Direct Air Capture Test Centers grant program for the ~$447 million operation of direct air capture test centers to advance RD&D of direct air capture and storage technologies.

Reforms to the DOE Loan Program to better allow carbon $160 million (for administrative expenses) capture projects to access approximately $8 billion in remaining funding. Additionally, authorizations are provided for $25 million in FY 2021 (for fees for existing projects) administrative expenses.

The Energy Act of 2020 (contained within the FY 2021 Omnibus) establishes and significantly expands several important areas of focus for the DOE, from early-stage research to commercial-scale deployment of carbon capture, removal, utilization, and geologic storage programs.

Interconnected, responsibly sited transport systems Transport and Storage that collect CO from multiple capture sources 2 and deliver it to shared large-scale commercial Infrastructure & Market saline geologic storage sites, or regional “carbon hubs,” are the infrastructure backbone needed for Development economywide deployment of carbon capture at the To deploy carbon capture at levels sufficient to meet necessary scale. The development of commercial midcentury climate goals, we must responsibly saline geologic storage sites will be critical to scale up an interconnected, nationwide network for meeting net-zero emissions goals. While industry has transporting CO captured from multiple industrial 2 decades of commercial experience safely storing facilities, power plants and direct air capture plants CO geologically at large scale, only one dedicated to locations around the country where it can be put 2 saline geologic storage project exists in the U.S. to beneficial use or safely and permanently stored today. Nevertheless, over half of the current 30-plus in appropriate geologic formations. This buildout is announced carbon capture projects in development multifaceted and requires policy mechanisms for CO 2 have declared their intent to store CO in dedicated transport, geologic storage and carbon utilization, 2 saline geologic storage sites. Therefore, timely as well as actions related to permitting of saline federal permitting of saline geologic storage will be geologic storage. key to bringing both carbon capture projects in the development pipeline and future projects to fruition. 14 FEBRUARY 2021 Federal Policy Blueprint 15 transport transport 2 . These networks captured from industry, 2

then be safely and permanently stored. for the for sole purpose long-term of saline 2 transport to infrastructure development 2 transport federal timely systems, storage and 2 Given the increase project response in in development theto 45Q tax credit, it is crucial that federal funding meet increase the thesefor to programs EPA at influxof Classanticipated applications well VI and the growing states number seeking of primacy to theseadminister programs. the development of saline geologic storage sites, with sites, geologic storage saline of the development particular priority on larger-scale commercial projects serveto as regional storage also hubs. The bill increases funding the for Environmental Protection support to Agency (EPA) the permitting saline of geologic as provide as well storage, resources to states and that establish seek their primacy from EPA rigorousown equally permitting programs. Permitting Saline Timely for Geologic Storage financing and the ensuring development to addition In of CO permitting geologic saline to of storage will be key bringing carbon capture projects the in development fruition. to pipeline Carbon capture projects that seek CO inject to Class VI geologic the storage to are EPA’s subject rule,well which is part the Underground of agency’s Injection Control Program. to fostering economywide fostering to carbon of deployment transport, removal, capture, utilization, andstorage. other the of infrastructure to development Similar electricity transmission, as water, such systems and thetelecommunications, SCALE position would Act the federal partner government to with private capital both in regional invest and nationalto CO and storage infrastructure networks bemust sufficiently economies to achieve sized of scale and efficiently CO move power generation suitable capture and direct air to large-scale commercial geologic saline storage hubs, where it can The SCALE would provide Act low-interest loans a portionand grants cover to the of cost common of carrier CO partner with private-sector enable and investment. the SCALE would expand Act theAdditionally, DOE CarbonSAFE program, which provides cost share for

2 pipeline pipeline 2 Act (INVEST Act CO 2 on private and federal 2 and Lowering Emissions Act 2 transport transport 2 transport and storage infrastructure transport and storage infrastructure 2 2 transport will be and storage system ), first introduced in the 116th Congress116th ), firstintroduced in the 2 Transport and Storage Storage and Transport 2 infrastructure networks with federal additional policies Providing predictable markets products for from carbon capture & utilization Dramatically commercial increasing scale CO storage of saline lands theFostering CO buildout of Facilitating CO infrastructure siting and permitting planning, • • • • Infrastructure & Market Market & Infrastructure Policies Development Transport and Storage Storage and Transport SCALE Act step change in the federal government’s approach approach the federal government’s in change step on Representative Bustos’ Investing in Energy in on Representative Investing Bustos’ Systems the for CO Transport of Act), passage the of SCALE would Act represent a ( Representatives (D-TX),by Veasey McKinley (R- WV), Bustos (D-IL) and Stauber (R-MN). Building The Carbon Capture Coalition has endorsed the bipartisan Storing CO does currently equivalent policy not and is at any have behind thisrisk in area. falling of projects and committed investments or completed Canada,in Norway, the European United Union, Kingdom, and Australia the in two past years. The U.S. support for CO is being increasingly recognized upon and acted governmentsby around the world, with significant national COnational meeting to midcenturykey emissions reduction goals. The need government enabling for policy to supportto low- deployment of and zero-carbon technologies the next over 30 years, scaling a infrastructure legislation, its given essential role in emissions economywide. net-zero achieve to helping the to other buildout of formsSimilar infrastructure of The administration and Congress prioritize should inclusion of CO as a necessary component broader any of The Federal Role in the Buildout the in Buildout Role Federal The of CO Figure 7: Optimized CO2 Transport and Storage Network

# # ## # # # # # # # ## # #

#### # # # # # # # ## # # # ## ### # ## # ### # # # ## # # # # # # # # # # # ## # # # # # # # # ## # # # # # ## # # # # # # # # ## # # # # # # # ## # # ## # # # # # # # # # # # ## # # # # # # # # # # # # ## # # # # # ##### # ## # # ## # ## # # # # ##### # # #### # # # # # # ## # # ## # # # ### ## # # # ## # # # # # # # # # # # # # # # # # # ## #### # # ## # # ### # # # # ## # # # # # ## # # ### # # # # ## ### # ## # # ## # # # # # ### # # # ### # ## ## # # REGIONAL CO2 INFRASTRUCTURE EMITTING FACILITIES # # ## # # # # ## ## # # # # # # # ## # # # # # ## # # # # # # ## # ## # (MODELED) # ###### # # # # # # # # ## # # # # ## # ## # #### # # # ## #### # # #### # # AMMONIA # # # #### ## # # ## # # ### # # # # # ## # # # # ## # ### # # # # # # # # # ## ## # ## # # # # # # # # ## # # # # ## #### # #### # # POTENTIAL SALINE # # ### # # # # # # ### # # # ## # # # # # # # GAS POWER ## # ## # # ## ## # # # ## ## # # # # CEMENT # # # # INJECTION AREA # ### # # # # # PLANT# # # # # # # # # # # # # # # # ## # # # # # # # ## # # # # # # # ## # # # # #### # # ## # ## # # # # ## # # # # # #### # GAS # ## # # ## ## ## ## ## # #### EOR FIELD WITH POTENTIAL ## # # # # #### # # # CHEMICALS PETROCHEMICALS # # ###### # # # # # # ## ##### # # PROCESSING # ### # # # # ## # ## # CO DEMAND # # # # # # # # 2 # # # # ## # # # ## # # # # # # #### ## #### ## ## # # # # ## # ## # # # # # COAL POWER PULP# # &# ##### ## # # #### ### # ### HYDROGEN # # # ## ## # # # # # # # # PLANT # PAPER### # # # # ### # ## # # ## # # ### # # # # # # # # # SALINE FORMATION # # # # ### # EMITTING FACILITIES # ## # # # # REGIONAL CO2 INFRASTRUCTURE METALS, # # ## ## # # ## # ## # # # # ## ETHANOL ## REFINERIES# # # # # # ## # (MODELED) # # # # # ##### MINERALS & # ### # # # # # # ##### # # AMMONIA # ### # ## ### # # # # ### # # #### # # # # # # # # ### ## # # #### ### # ## EMITTING FACILITIES OTHER # # ## # # REGIONAL CO2 INFRASTRUCTURE# # ## ### # ## # # POTENTIAL SALINE # # ## # # # # # # ### # # # GAS POWER# # ### ## ## ### # # ## # #### (MODELED)# # CEMENT # # ###### INJECTION AREA # # PLANT# # # #### # # # AMMONIA ###### # # # # # ### # # # # # # ## # # # ### # # # # # # # #### # # # # ## #### # # POTENTIAL# # ## SALINE # ## GAS# # # # # # # # # ## ## ## # EOR FIELD WITH POTENTIAL # # PETROCHEMICALS# ## # # # ## GAS POWER CHEMICALS ## # ## ## ## #### # # ## # # #### INJECTION AREA# CEMENT PROCESSING # ## CO DEMAND PLANT # # # # # 2 # # # # ### ## # # # # # COAL POWER # #PULP# & ## #### ## ### GAS HYDROGEN # ## ## ## # ## EOR FIELD WITH POTENTIAL CHEMICALS PETROCHEMICALSPLANT # ## # PAPER## # # # ##### # # ## # PROCESSING # ## # # SALINE FORMATION # # ## CO2 DEMAND METALS,# # ## # # ## # COAL POWER PULP & ETHANOL ## REFINERIES HYDROGEN MINERALS## & PLANT PAPER # # OTHER# ### # SALINE FORMATION METALS, # ETHANOL MINERALS & REFINERIES OTHER

Optimized CO2 transport and storage network deployment modeling from the Great Plains Institute finds that, under 45Q, a shared,

interconnected CO2 transport and storage system could capture, transport and store 300 million metric tons of CO2 per year by 2035 from industrial facilities and power plants.

Currently, securing an EPA Class VI permit for Congress and the administration can boost EPA saline geologic storage can take several years. and state resources to manage both the increased Even with the two-year extension of 45Q bringing number of Class VI well permits and state primacy the commence construction window to the end of applications. They can also ensure better 2025, the timeframes required for saline geologic coordination and engagement at the federal level on storage permitting may put carbon capture projects the extensive planning that is involved in granting a at greater risk of missing the deadline to qualify for Class VI permit to projects. 45Q, especially when considering the additional time required to undertake planning, complete FEED Coalition priorities for federal actions to ensure studies, secure financing and accomplish other the timely permitting of saline geologic storage necessary components of project development. resources include: Therefore, increased funding is critical to ensuring • Increase EPA funding for permitting Class VI wells that EPA and states have adequate staffing and for saline geologic storage, and grants for states to resources to conduct the necessary reviews in a administer their own Class VI permitting programs; timely fashion. 16 FEBRUARY 2021 Federal Policy Blueprint 17 or CO offsets 2 transport infrastructure, infrastructure, transport 2 emissions on established an 2 per year. The growing carbon-to-value per year. 2 and breakthroughs carbon in utilization technologies processesand federal RD&D. enabled by incentivize to steps can take The federal government commercial production products of sourced from carbon standards developing and including capture, disclosures regarding the embodied carbon content carbonof recycled products. As corporations and other entities look begin to towards procurement of products fuels and sourced from liquid electricity, carbon capture processes, the federal government a centralcan play standards role developing in for what is needed track, to account and for verify carbon reductions from the products. manufacture such of standards addition developing In to and disclosures embodiedfor carbon, the administration and Congress can harness the power purchasing of production and captured use of CO anthropogenic CO lifecycle basis. carbon utilizationIncreasingly, is seen as important an complement large-scale to carbon as it storage, provides value-added markets carbon for capture important an component constitutes and operations the together, carbon Taken a circular of economy. National Academies Science of has estimated that utilization 1 pathways to could up take globally, CO of gigaton couldmarket be worth estimated an $800 billion annually 2030. by High-volume products sourcedfrom carbon utilization, aggregates and fuels concrete, couldincluding drive both significant carbon utilization value. and market realizing this will require market range a However, policies development as market federalof such CO of buildout procurement, to large-scaleto carbon as storage, value-addedit provides markets carbonfor capture operations and constitutes an important component carbon a circular of economy.” seen asseen an important complement “Increasingly, carbon utilization“Increasingly, is

2 storage 2

transport and storage infrastructure 2 suitable geological storage locations on federal the permitting facilitate lands and to CO of sites on federal lands. siting of CO and carbon capture projects; identify to Direct federal agencies characterize and federal, state, tribal and stakeholder coordination tribal stakeholder and state, federal, and collaboration on permitting and responsible (USE and the Act) IT Energy 2020 of Act that were enacted as part the Omnibus of bill. 2021 theseencourage measures will Implementing Proactively implement key provisions the of Proactively Utilizing key implement Technologies SignificantEmissions withInnovative utilization be not should constrained, so long as the should be eligible to receive credit under 45Q. receive under credit to The be eligible should Coalition that maintains the marketplace eligible for commodities and products produced from carbon even feedstocks for animal feed feedstocks animal for and food. theeven Using IRS definitionof commercial markets, a varietywide productsof sourced from qualified carbonoxides fuels, chemicals, plastics, advanced materials, products and building fluids, gasesindustrial and may involve the production involve a widemay of variety of commodities or products sourced from gases waste low- and zero-carbon including or capture, direct air manufacture of a valuable productmanufacture a valuable of that results a net in reduction greenhouse of gas emissions as compared process incumbent an to or product. Carbon utilization Carbon utilization entails the beneficialof use CO or CO captured from gaseous streams waste the in commercial technology deployment. The Coalition will deployment. technology commercial be specific developing recommendationspolicy in the Congress. 117th low- and zero-carbon technologies, complementing the role tax of credits andincentives other financial on the drive help supply side to in private investment important has policy federal role that procurement demand-side providing support in played other for carbon-negative products fuels and liquid electricity, produced through carbon utilization, removal, capture, Membersand storage. the of Coalition recognize the The Coalition has identified as a priority the federal to federal related policies of development zero- low-, of even procurement and private and Carbon Utilization Development & Market • • the federal government to establish markets for electricity, liquid fuels and products sourced from Jobs, Economic carbon capture, as it has done with other low- and zero-emissions energy and products. Congress and Development & the administration can develop federal procurement policies for valuable products captured from carbon Affected Communities The jobs associated with installing carbon capture across agencies. Language that allows for the retrofits or constructing direct air capture facilities, procurement of captured carbon products under U.S. as well as associated CO transport, utilization and Department of Agriculture procurement policies can 2 storage projects, lend themselves to labor forces and serve as an initial model for further exploration. skillsets in oil and gas, mining, and key industrial and manufacturing sectors. Deployment of carbon capture also provides a viable pathway for the decarbonization Reducing Project and continued operation of industrial, manufacturing Development Risk through and energy facilities, thereby avoiding plant closures Contract for Differences and the offshoring of jobs and livelihoods. A contract for differences (CfD) is a mechanism to These jobs can bring significant equity benefits to reduce the risk of commodity market volatility for communities and regions, through high-wage jobs that developers and investors willing to undertake early- have been a traditional pathway to the middle class for stage commercial demonstration projects involving many American families. However, the skilled, high-

carbon capture, direct air capture and carbon paying jobs that carbon capture and CO2 transport utilization. CfDs can be used in a variety of industries infrastructure projects help retain and create may not to create investment certainty to deploy projects be readily available to disadvantaged communities that would otherwise be uneconomic under current living in close proximity to industrial, power or direct market conditions. air capture plants, and whose residents may not have access to the education, training and skills required Under a CfD, a developer would enter into a contract for such employment. with the federal government that provides a fixed “strike price” for a commodity produced in association with Carbon capture retrofits require facilities to be outfitted the carbon capture project (e.g., electricity, emissions with capture technologies such as amine scrubbers

reductions from direct air capture, fuels, steel, cement, to remove CO2 from exhaust gas and compressors to

chemicals, etc.). If the price of the commodity in make the CO2 transport-ready; specific technologies question falls below the strike price stipulated in the deployed are dependent upon the type of plant and contract, the government would pay the difference, vary across industries and facilities. In addition to the protecting the project developer from a loss. jobs associated with carbon capture projects, there

Conversely, if the market price rises above the strike price, a project developer would pay the difference, which would then be returned to the U.S. Treasury, thus preventing a windfall gain to the developer. Structured Jobs, Economic Development in this way, a CfD cost-effectively provides for long-term & Affected Communities investment certainty and reduces the cost of capital, Policies while optimizing the market risks and opportunities for both project developers and the federal government • Leveraging existing federal that are associated with scaling carbon capture, direct apprenticeship and workforce training air capture and carbon utilization technologies. programs in affected communities • Quantifying potential benefits and impacts of carbon capture retrofits at industrial and power facilities on local criteria air and other pollutants

18 FEBRUARY 2021 Federal Policy Blueprint 19 underscores transport and 2 Federal Policy Blueprint The administration can federal existing leverage workforce and apprenticeship programs training expand supportto jobs for training undertaken in partnership with community colleges, trade unions and other local institutions affected in communities. and DOE The to administration can direct EPA assess studycoordinate interagency an to and quantify benefitspotential and to local risks criteria and otherair pollutants from carbon capture retrofitsindustrialat and power facilities across different industry and technologies sectors. portfolio supportive of enhancements includes policies theto 45Q tax credit and other tax credits and RD&D, for funding expanded incentives, financing and and grants the for CO buildout of storage infrastructure. This expanded policy framework will spur continued technology innovation, increased performance,and scale, improved thus driving down The Coalition’s The Coalition’s the federal actions and needed investments for economywide deployment carbon of removal, capture, transport, utilization, and geologic Large- storage. scale carbon deployment of capture is essential, if we midcentury achieve are goals to as modeled climate theby IEA and IPCC. addition meeting In to emissions reduction targets, the jobs associated with large-scale carbon management can bring significant equity benefitsto communities and regionsby providing the traditionally afforded have that employment kinds of the American to classa pathway middle many for policy environmental training, job Additional families. be implemented measures must other and adoption ensure that reductionsto carbon in emissions are accompanied economic, by health public and other benefitsat the community level. federal robust and comprehensive a out Building carbon capture policy agenda can the help sustain U.S. its position as a global leader the in commercialization these of industrial energy and deployment and technologies and associated infrastructure. A federal 1. 2. the Coalition will be puttingAdditionally, forward further policy recommendations this in area during the Congress. 117th Conclusion unabated, unabated, 2

transport infrastructure in in infrastructure transport 2 analysis, carbon capture per year. Along with the per year. 2 transport infrastructure, this would would this infrastructure, transport 2 separation flue and capture, gas 2 Rhodium Group leverage existing federal resources prioritize existing to leverage to actions betternear-term to assist and understand issues faced affected by communities: benefits from carbon capture retrofits. The administration can two take steps immediate change; without they will capture, emit CO more detailed decades. for potentially However, analysis is needed quantify to quality air potential facilities extending carbon their adding lives by relatively more efficient, long-lived Younger, capture. plants pose theclimate mostto significant challenge Because carbon capture retrofits are capitalintensive, there is little risk inefficient, old, of and polluting the carbon installation utilization of process. Finally, resultcapture meet facilities more in may to having current stricter and usually emissions standards. Additionally, beneficial utilization of pre-combustionof utilization beneficial Additionally, industrial gases removes criteria pollutants as part of must undergo pretreatment to remove criteria air remove to pretreatment undergo must pollutants, sulfur oxides, particulate including matter, and nitrogen the protect to capture solvent. dioxide, for several reasons. several for First, prior CO to on wide a range industrial of facilities and power instances many plants, and in carbon capture retrofits significantly reduce conventional pollutant emissions and power facilities; carbon capture has the potential a role addressing play in to these concerns. Carbon capture is a flexible controltechnology worksthat The communities that are most vulnerable climate to change also typically suffer the greatest impacts from criteria and other air pollutants from nearby industrial development of CO of development private in investment. billion $212.9 generate to up operational period a 15-year jobs over and capture metric592 million CO of tons 21 states across21 the Midwest, Great Gulf Plains, Coast and Rockies regions can support average annual an 68,000 to up of project jobs and 35,800 ongoing According to and plants power and facilities industrial at deployment CO associated of deployment install the capture technology, as well as ongoing as well jobs theinstall capture technology, operate theto and maintain retrofits. are jobs associated with the equipment,materials (e.g., cement and steel), engineering, and labor required to costs and enabling commercial deployment—all while “Building out a comprehensive and ensuring that American workers and communities benefit from carbon capture deployment and are not robust federal carbon capture left behind on the path to a net-zero economy by 2050. policy agenda can help the U.S. Momentum is building in the U.S., as evidenced by sustain its position as a global recent groundbreaking bipartisan policy developments and the over 30 carbon capture, direct air capture and leader in the commercialization geologic storage projects publicly announced since the and deployment of these energy enactment of the 45Q tax credit. Moving forward, we must continue to scale federal investments and policy and industrial technologies and ambition for carbon capture to deliver on its full climate, energy and jobs potential. associated infrastructure.”

The Carbon Capture Coalition is a nonpartisan collaboration of over 80 industry, energy, and technology companies; energy and industrial labor unions; and conservation, environmental, and energy policy organizations building federal policy support for economywide deployment of carbon capture, removal, transport, utilization and storage. To view the Coalition’s federal policy blueprint, please visit www.carboncapturecoalition.org. The Great Plains Institute convenes the Carbon Capture Coalition. 20

carboncapturecoalition.org