Efforts to incentivize Carbon Capture and Storage (CCS) technology have been seen across the globe. Along with the 2022 Inflation Reduction Act in the United States, other countries are making similar moves to incentivize companies to step into carbon capture development.
The Inflation Reduction Act Impact
In the United States, the Inflation Reduction Act (IRA) gave $500 billion in spending and tax credits to incentivize clean energy, boost tax revenue, and reduce healthcare costs. The most significant piece of the legislation for climate technology was the expansion of tax credits for CCS technology. The act went into effect in August 2022 and upgraded the existing 45Q tax credit for CCS and its subsets like Bioenergy with Carbon Capture and Storage (BECCS).
Prior to the IRA, a BECCS facility could receive $50/tonne for each tonne of carbon sequestered. Today, that tax credit has been raised to $85/tonne as long as participating companies can provide the data that their emissions have been reduced and removed.
The legislation also includes an extension for eligibility for the 45Q tax credit by pushing the deadline to January 2033 for projects to begin development. The signing of the IRA created a new wave of urgency for other countries to follow suit and it is expected that support for CCS will continue to increase in the coming years.
CCS Efforts in the United Kingdom
In the UK, the government published its CCUS Net Zero Investment Roadmap in April of this year. The document provides a blueprint for a joint commitment between the government and the industry for CCUS development in the United Kingdom. The goal aims to deliver four CCUS “low carbon industrial clusters” that will capture and store 20-30 MtCO2 per year by 2030.
In doing so, the plan will hopefully assist in hitting the UK’s goal of net zero emissions by 2050. The country’s plan for BECCS in particular includes developing a new business model “to incentivize private finance enabled projects” that will produce negative emissions and firm low carbon electricity.
Advancing CCS Funding in Europe
Over the last year, Europe has also made pivotal steps toward CCS development. In November 2022, the Swedish government announced an investment of $3.3B (36B SEK) for BECCS technology in the form of a reverse auctions incentive mechanism. In this system, the state purchases carbon credits or rights from BECCS facilities. Each interested plant can place a bid in a government procurement and the facility with the cheapest bid wins the procurement.
Systems like the reverse auction incentive will be fundamental in the development of CCS technology. Sweden has a national goal of zero net greenhouse gas emissions by 2045 and recognizes that the scalability of BECCS can assist in reaching this target. The state support will be allocated over a 20-year period and is likely to include additional funding in the future.
Shortly after Sweden’s announcement for BECCS funding, Norway and France signed a letter of intent to cooperate in the support and development of CCS. The agreement was the first step in creating cross-border transportation and storage of CO2 in the future. Similar increased support for CCS development can also be found in Denmark where the country began the first cross-border CO2 storage site this year. The CO2 was transported from Belgium and sequestered underground in the Danish North Sea.
“The science is clear. Industrial carbon removal is a necessary part of our climate toolbox,” said European Commission President Ursula von der Leyen at the inauguration.
Notable Programs for CCS Technology
The European Commission has continued its dedication to emission reduction, most notably with the Net-Zero Industry Act, which aims to establish an annual 50Mt injection capacity in CO2 storage sites in the EU by 2030.
Additionally, there are a handful of programs focused on CSS funding and research across the EU. Horizon Europe and the EU Innovation Fund are both funding programs that offer assistance to projects working to address the climate crisis.
Horizon Europe has is a total budget of €95.5 billion and aims to further develop and support research to address an array of global challenges. Likewise, the EU Innovation Fund is another large funding program for innovative low-carbon technologies with the objective of reducing greenhouse gases. Standing on a budget of €38 billion, it has a particular focus on carbon capture projects between the years 2020 and 2030. Project proponents may apply for funding via regular open tenders. Given the urgency behind the climate crisis, Carbon Capture and Storage technologies will continue to receive attention from Europe as it presses forward with its goal of net zero emissions by 2050.
