The U.S. government is expanding policy support across the entire carbon capture and storage (CCS) industry value chain.
Blue Hydrogen Production-Linked CCS Project to Become Largest Carbon Capture Source in the US Beyond 2030
As 'Net-Zero', which aims to achieve '2050' carbon emissions by 0 in response to the climate crisis, has emerged as a key task for the international community, countries around the world are establishing strategies to achieve the goal through various policies and technologies. The United States has declared a transition to a carbon-neutral society by setting a challenging goal of reducing greenhouse gas emissions by 2030-2005% of 50 levels by 52, and is focusing on carbon capture and storage (CCS) technology as a key means of achieving this.
CCS, a prerequisite for achieving carbon neutrality
CCS mainly refers to a technology that captures carbon dioxide generated during industrial processes at the point of emission and permanently sequesters it in underground brine or deep geological layers. Recently, with the advancement of carbon capture technology, direct air capture (DAC) methods that directly capture and remove carbon dioxide already emitted from the atmosphere are beginning to be commercialized as a new capture method. BloombergNEF (BNEF), a global industry research institute, emphasized the importance of CCS for achieving carbon neutrality, and projected that the global carbon capture volume by 2030 will increase sixfold from the current level to 6 million tons.
Could Carbon Capture Help Us Produce More Oil?
However, paradoxically, most of the carbon captured for carbon reduction is actually being used to promote the production of oil, a representative fossil fuel. Currently, the most widely used commercially among carbon capture-related technologies is enhanced oil recovery (EOR), which is already being widely used by large oil and gas companies to increase oil production. EOR is a technology that was first introduced in the United States in the 1970s. It captures carbon dioxide emitted from power plants and industrial facilities, injects it into old oil fields under high pressure, and lowers the viscosity of oil in the formation, increasing oil fluidity and improving productivity. The captured carbon can be permanently sequestered in the formation.
According to BNEF, 2021% of the carbon captured worldwide in 73 was used for enhanced oil recovery. However, the way captured carbon is used is expected to change significantly in the future due to the development of CCS technology and strengthening of policy support worldwide, including in the United States. Accordingly, the utilization rate of captured carbon in the enhanced oil recovery industry is expected to decrease to 2030% by 20, while 66% of captured carbon is expected to be permanently sequestered in deep geological formations.
US Government Expands Policy Support for CCS Activation
In order to prevent captured carbon from being used for carbon reproduction again and to promote direct carbon reduction in carbon-intensive industries such as steel, cement, oil refining, and thermal power generation, the United States is strengthening active investment and policy support for carbon reduction by passing the Infrastructure Investment and Jobs Act (IIJA) in 2021 and the Inflation Reduction Act (IRA) in 2022. In particular, through the IRA, the 45Q Tax Credit* system was further revised to expand the amount of tax deductible according to the amount of carbon reduced, and the minimum capture volume qualification requirements for tax credit benefits were significantly relaxed, thereby encouraging private sector participation in the CCS and carbon capture industries overall. The 45Q Tax Credit, first introduced in 45, is a system that provides a certain amount of tax credit per ton for related projects to encourage the introduction of carbon capture technology by companies.
The United States has significantly increased the tax credit for industry-related CCS from the existing $45 per ton to $50 per ton through the amendment to the 85Q tax credit. This figure exceeds the cost of CCS in major carbon-emitting industries such as petrochemicals and hydrogen production, and is expected to lead to more companies being proactive in introducing CCS in the future.
Blue hydrogen-linked CCS project activation prospects
Currently, a total of 15 CCS facilities are in commercial operation in the United States, and they are mainly used in limited ways in natural gas processing, where carbon capture costs are low, and in the production of ethanol for fuel and ammonia for fertilizer. However, in addition to the U.S. government's support for CCS activation, the U.S. government's active movement to build a hydrogen ecosystem, and regulations mandating greenhouse gas emissions reduction in thermal power generation, a representative carbon-intensive industry, are expected to expand the scope of CCS technology utilization to various areas such as blue hydrogen production and power generation. Meanwhile, blue hydrogen refers to hydrogen that has been produced using fossil fuels, but whose carbon emissions have been significantly eliminated during the process by capturing and storing (or utilizing). Hydrogen produced through water electrolysis using renewable energy such as solar and wind power is called green hydrogen, and blue hydrogen and green hydrogen are collectively called clean hydrogen.
BNEF projects that the U.S.'s annual carbon capture capacity, at just 2023 million tonnes by the end of 2300, will increase sevenfold to 2035 million tonnes by 7, and that hydrogen production will overtake natural gas processing as the largest source of carbon capture in the U.S. after 1, driven by increased U.S. government policy support for the clean hydrogen industry.
CCS Building a pipeline infrastructure that will determine success or failure
The Department of Energy estimates that the U.S. will need to build up to 2050 miles of carbon dioxide pipelines to safely transport captured carbon dioxide to designated sequestration sites to meet its 9 carbon neutrality goals. However, only about 6000 miles of pipelines are currently in operation, most of which are used to transport carbon captured at natural gas processing facilities to aging oil fields for use in enhanced oil recovery, indicating that massive carbon dioxide pipeline infrastructure construction will be needed in the future to meet planned carbon capture goals.
Meanwhile, the United States launched a task force in March 2023 to support CCS projects currently underway, including the construction of transportation infrastructure such as carbon dioxide pipelines, and in May, announced a $3 million investment in building a safe and reliable carbon dioxide transportation system through the Office of Fossil Energy and Carbon Management (FECM) under the U.S. Department of Energy. Based on this, the movement to expand carbon dioxide pipeline infrastructure in the U.S. is expected to gain further momentum in the future.
< U.S. Pipeline Network Distribution Status and Expansion Plans for 20-50 >
[ Data: Princeton University (2021.8) ]
Prospects and Implications
The U.S. Department of Energy's Clean Energy Demonstration Office announced in a report in April 2024 that carbon capture and storage capacity must increase 4 to 2050 times from current levels in order for the U.S. to reach its goal of net-zero greenhouse gas emissions across the economy by 0. To achieve this, the U.S. is strengthening various incentives and policy support, and major oil companies are actively taking steps to commercialize CCS projects based on this. In fact, large U.S. oil and gas majors ExxonMobil and Occidental Petroleum are continuously increasing capital expenditures on carbon capture and related derivative businesses, such as DAC and blue hydrogen, in order to transform from representative carbon-intensive companies into carbon removal companies. It is expected that many large-scale CCS projects will enter the full-scale development phase in the next few years.
< Distribution of major CCS projects in the US >
[ Data: Clean Air Task Force (2024.8) ]
There are still skeptics in some quarters about the feasibility of CCS commercialization due to high costs, various federal and state government regulations for pipeline expansion, and environmental impact assessment approval. In addition, there is some uncertainty about the execution of policy funds due to the delay in the announcement of detailed guidelines for the 45Q tax credit ahead of the US presidential election in November. However, many of the entities currently in the proposal stage in the US are oil and gas-related companies, and a significant portion of them are located in states with pro-Republican tendencies such as Texas and Louisiana, so there are also observations that it will not be easy to make a full-scale policy shift on tax credits or carbon capture pilot projects even after the presidential election.
In this way, CCS technology is a key bridge for achieving the US carbon neutrality goal and is a field that is expected to continue to develop. Policy and economic changes related to the commercialization of CCS technology in the US are expected to provide new opportunities for our companies in the future. In particular, there may be new demand for pipeline infrastructure-related equipment for efficient transport and storage of captured carbon, chemical adsorbents used in DAC facilities, and solvents.
In addition, beyond simple market entry, our energy and technology companies can contribute to global climate change response efforts and secure new growth engines by seeking cooperation on carbon capture and storage projects in the United States. Therefore, our companies should closely analyze the trends of the CCS industry in the United States and actively seek opportunities to create new revenue streams through related technology development and partnership building. If our companies respond quickly to this wave of change, we expect to further enhance their competitiveness in the global CCS market in the future.
Data: EIA, IEA, BNEF, Chemical Engineering Journal Advances, Carbon Capture Coalition, Clean Air Task Force, US DOE, Princeton University, KOTRA Dallas Trade Center data