Carbon emissions and their impact on the climate has become a contentious topic. More specifically, debates focus on the proper allocation of funds and different perspectives on the timeline on which policy should address emissions. While many tools can be used for carbon avoidance, such as nuclear, renewables, or innovative hydrogen techniques, a core strategy in our hydrocarbon-based economy is to capture and remove carbon from the atmospheric balance sheet.
On the table for policymakers focusing on captured carbon management are at least two different kinds of tactics for limiting the impact of carbon emissions on the environment: underground storage and repurposing carbon for commercial use. The pressing question remains: which strategy is more economically viable for investments?
The main sources of carbon emissions are from generating electricity and heat, producing goods and food, cutting down forests, transportation, and overall consumption. Carbon dioxide is a common emission coming from all of these processes as well as simple human breathing and organic decomposition of plant and animal life. On industrial and economy-wide scales, however, they serve as greenhouse gases, which hover in the Earth’s atmosphere, and reflect the sun’s radiation back down on the planet. For many policy and industry leaders, on one timescale or another, this is a planetary issue we should (and can with the right innovation) do something about.
One proposed resolution is capturing carbon and storing it underground. While this may appear to be a perfect solution on paper, it is lengthy and costly. The Direct Air Capture (DAC) process starts by capturing carbon dioxide (CO2) from the air, compressing it, injecting it into water, and storing it underground in the pore space of bedrock. No project involving carbon capture has cost less than $100 per ton of carbon dioxide, and the average cost adds up to nearly $600 per ton.
Carbfix initiated the first industrial-scale carbon capture plant in Iceland, aiming to remove up to 1 billion tons of carbon annually over 25 years. Iceland had been chosen due to its advantageous geologic storage capacity and various inhospitable regions. The plant is also powered by geothermal energy from a neighboring plant. Despite the project’s ambitious goals, it faces the same challenges of finite time and funding.
The U.S. federal government provides subsidies as a part of the 2022 Inflation Reduction Act (IRA) under the Biden administration to facilities focusing on air capture to reduce CO2 levels through carbon pumping or enhanced oil recovery (EOR). However, these subsidies, in the case of oil recovery, may inadvertently negate the effect of neutralizing the carbon balance as it does remove carbon but uses it to bring more hydrocarbons into the economy.
The IRA continues initiatives started by the U.S. Internal Revenue Code in 2008 under the Obama administration, specifically section 45Q, which incentivizes carbon capture through tax credits. These credits vary depending on the method of carbon use: $85 per ton pumped underground and $60 per ton used for EOR when captured directly from the smokestack, compared to $180 per ton stored underground and $130 for EOR when captured from the air. This highlights the longer-standing practices of carbon management, such as on-site point-source emissions capture. The innovative focus of DAC is still in the proving grounds, but carbon dioxide is often captured with great efficacy right where it is produced. This still requires a solution for what to do with the carbon – transport it somewhere, inject it underground, utilize it for another process, or something yet to be thought of?
The other general approach is repurposing captured carbon for commercial use. Industries like the carbonated beverage or agricultural industry are viable trade partners for repurposing carbon. However, the relatively low demand and relatively high delivery costs, which can triple the price of commercial-grade CO2, somewhat limits this option’s viability. Moreover, reselling CO2 to soda companies, for example, is not ideal for those focused exclusively on carbon removal, as the gas will eventually return to the atmosphere – although it is delayed and generates economic value in the process.
Nonetheless, repurposed carbon offers benefits when used in other industries. For instance, carbon is useful in the petrochemical industry to produce polymers and plastic products or in the metal industry as an alloy for steel, the most common metal in the world. With the global demand for steel on the rise, repurposing carbon in this way may pose a stronger solution for faster results by using a common emission to create more eco-friendly infrastructure materials. Innovative solutions are also seeing carbon incorporated into our built environment by sequestering carbon into asphalt and concrete in roads or for graphite in industrial contexts.
When asking how we can avoid the most carbon dioxide per dollar invested, selling carbon, and focusing on innovative ways to sequester it into our economy rather than our geology appear to be the most viable options. Investing in carbon storage is still an option for certain regions and contexts, but does not show the same economic promise. Moreover ongoing debate questions whether it’s worthwhile to allocate considerable time and funding to projects that do not create new incentives and feedback loops like a circular economy. Policymakers should prioritize strategies that offer the most effective and economically feasible outcomes in hopes for significant carbon reduction.
Written by Tabetha Bowes, Public Policy Intern
The Alliance for Innovation and Infrastructure (Aii) is an independent, national research and educational organization. An innovative think tank, Aii explores the intersection of economics, law, and public policy in the areas of climate, damage prevention, energy, infrastructure, innovation, technology, and transportation.