
A total of 21 carbon capture, utilization and storage (CCUS) facilities were operating globally in 2020, capturing 41 million tons of carbon dioxide (CO2) annually, according to an International Energy Agency special report. Of these facilities, 10 are located in the U.S., and half of these plants capture CO2 from natural gas processing plants. The CO2 for the remaining five facilities comes from a coal fired power plant and industrial facilities producing synthetic natural gas (syngas), hydrogen, fertilizer and ethanol.
The number of carbon capture and storage (CCS) projects continues to grow worldwide, with 135 facilities now in the pipeline — over 70 of which were added in 2021 alone, according to a report from the Global CCS Institute.
The CO2 captured from these facilities is primarily used for enhanced oil recovery (EOR), a process that uses the gas to recover additional oil out of a well that could not otherwise be retrieved. Traditionally, most CO2 used in EOR came from naturally occurring reservoirs. In places where CO2 is not readily available from a natural source, industrial sources of captured CO2 may be considered.
Interest in CCUS is driven by a global focus on reducing carbon emissions and government incentives or penalties that fuel it.
On the incentive side, Section 45Q of the U.S. tax code offers tax credits for projects that capture CO2 from industrial sources and either store it permanently and securely in a geologic formation, or sell it for use in EOR or other industrial processes such as methanol or fertilizer production or food and beverage applications.
When enacted a decade ago, 45Q primarily targeted coal-fired and combined-cycle gas turbine power plants, and it capped the amount of CO2 that would qualify for the credits, valued at $10 per metric ton for EOR and $20 per metric ton for geologic storage. As of late 2021, a CCUS facility is installed at only one U.S. power plant, and it is currently not in operation.
To attract additional investment, Congress lowered the threshold for 45Q eligibility in 2018 while also increasing the credit’s value. Today, at the end of 2021, chemicals, oil and gas companies are among those eligible for escalating tax credits that in 2026 will reach $35 per metric ton for EOR and $50 per metric ton for geologic storage, with no cap on volume. The credits are currently available on CO2 captured and stored for 12 years after the project is placed in service. In addition, the U.S. Energy Act of 2020 authorized more than $6 billion for CCUS research, development and demonstration projects.
To meet emission reduction targets in the Paris Climate Agreement, Canada is taking a different approach. The government enacted the Greenhouse Gas Pollution Pricing Act in 2018, which establishes minimum national standards for carbon pricing. All companies that have significant point sources of CO2 are required to pay or submit offset credits based on the portion of their CO2 emissions that exceed an annual output-based limit. The escalating price of carbon will reach 50 Canadian dollars per metric ton in 2022 and will escalate to 170 Canadian dollars by 2030. Proceeds are returned to the jurisdiction where they are collected and can be used to support industrial projects, as well as offset costs to individuals and businesses impacted by the resulting higher energy prices.
In addition to these incentives and penalties, some corporations have set internal targets for decarbonization and will be measuring corporate performance against these goals. The capital and operating costs of adding CCUS is high, and the payout on the CO2 product usually does not provide a high return on investment. Incentives and other Environmental and Social Governance (ESG) benefits may drive these projects forward. Some facilities such as refineries may contain multiple CO2 streams each with unique characteristics. Selecting which streams to target for carbon capture depends on a variety of factors, from the volume and concentration of the CO2 in the stream to the potential contaminants that must be removed while balancing the capital cost of the retrofits needed to install the technology.