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What Carbon Utilization Companies Say They Need to Succeed

Takeaways from BPC’s Carbon Utilization Celebration

Carbon utilization, the act of repurposing captured carbon dioxide to create usable products, is an emerging frontier for clean energy and manufacturing that aims to help fight climate change, create domestic jobs, and contribute to significant economic growth. Because of the Bipartisan Infrastructure Law and the strengthened 45Q tax credit, carbon capture and direct air capture (DAC) are widely anticipated to be scaled over the coming decade. Once CO2 has been captured, it can either be permanently stored underground or repurposed in the production of traditional commodities such as fuels, concrete, baking soda, and even everyday items like shoes.

On September 26, the Bipartisan Policy Center hosted a “Carbon Utilization Celebration” on Capitol Hill, which brought together policymakers and carbon utilization industry leaders and experts to discuss and celebrate the recent strides made by the carbon utilization industry. The event included a panel discussion featuring senior representatives from carbon utilization companies followed by an industry technology showcase. Below are several key takeaways from the event.

BPC Carbon Celebration

Takeaway 1: Growth of the carbon utilization industry presents a major economic opportunity for American companies

There is a growing appetite for climate-friendly commercial products that are produced with minimal emissions. Carbon utilization techniques provide an opportunity for American companies to create economic value from CO2 captured from smokestacks or directly from the atmosphere. According to the International Energy Agency, $484 million in venture capital (VC) investments went to utilization companies in 2022, which is expected to significantly help grow the market for CO2 use by 10 million tons by the end of the decade. This market is also heavily concentrated in the United States, with 80% of total global VC investments in carbon capture utilization and storage (CCUS) between 2015 and 2022 flowing towards American companies. Panelists pointed out that in addition to lowering overall emissions, using CO2 in productive ways can generate essential revenue for carbon capture and removal (CDR) technologies, helping to spur innovation and scale infrastructure.

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Utilization can energize new manufacturing processes with important job creation and investment opportunities in the U.S.
Martin Keighley, CEO, CarbonFree

Takeaway 2: To scale up utilization, equal policy support must be given for equal climate solutions

Given the sheer scale of the climate challenge, the private sector must deploy effective innovative climate solutions as quickly as possible. The 45Q tax credit for carbon capture currently awards a lower credit value for captured CO2 that is utilized than captured CO2 that is sequestered underground in Class VI wells. Claiming the 45Q tax credit for utilization requires quantifying the climate impact through a life cycle analysis (LCA) that compares emissions from a process with utilized carbon to a baseline level of emissions carried out without the utilization practice. Because of this LCA, the net emissions of utilization pathways can be compared directly to permanent sequestration through geologic storage. Panelists pointed out that despite this apples-to-apples comparison, the 45Q tax credit unfairly penalizes utilization pathways with a lower credit value, relative to permanent geologic storage, sending the wrong signal to industry that government prioritizes one effective carbon solution over another. Some panelists pointed to the bipartisan, bicameral Carbon Capture Utilization Parity Act, which eliminates the gap in tax credit values so that underground storage and utilization would each receive the same tax benefit for an equal amount of emissions removal. They additionally pointed out that by providing equal support, in the long run, the market will determine which utilization solutions will thrive in the longer-term carbon-managed economy.

We need to unleash the private sector to go as fast as possible. Having parity for utilization can help that happen.
Rahul Shendure, CEO, CarbonBuilt
Carbon management infrastructure, which includes both geologic sequestration and utilization of CO2, needs to be scaled quickly to meet our climate goals. Both pathways result in less CO2 in the atmosphere, and both represent big market opportunities. Utilization has been given less policy attention than sequestration, but with sound carbon accounting and parity in 45Q, carbon management will grow faster in the U.S.
Adrian Corless, CEO, CarbonCapture Inc.

Takeaway 3: Unlocking 45Q is a requisite to success

As mentioned above, to receive the 45Q tax credit, utilization companies must submit an LCA that shows net emissions, and the government must approve their LCA before the tax credit is given. The Department of Treasury and Internal Revenue Service (IRS) must quickly begin approving industry-submitted LCA’s so carbon management companies can begin taking advantage of the increased credit value. When discussing the importance of the bolstered 45Q tax credit, panelists spoke to the need for swift approvals to scale up utilization practices.

Broad and effective implementation of the IRA tax credits is essential to our industry’s success.
Derek Phelps, Head of Policy and Governmental Affairs, Twelve

To read more on BPC’s Energy Program and our carbon management workstream, visit our website here.

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