CO2 and Direct Air Capture: A Primer

Image Credit: Climeworks

By Alida Soileau

When we hear “climate change” or “global warming,” what we are really hearing about is an overabundance of carbon dioxide, or CO2, and other greenhouse gases in the atmosphere. Climate change, including periods of global warming, has always been part of Earth’s history, but the warming period we are in now is problematic because it is man-made.

CO2: AN OVERVIEW

Greenhouse gases trap heat in Earth’s atmosphere, causing temperatures to rise. The increase in greenhouse gases comes largely from CO2. In fact, “CO2 emissions from fossil fuel combustion and industrial processes contributed about 78% of the total GHG [greenhouse gas] emission increase from 1970 to 2010.”

Natural processes like respiration and decomposition also release CO2. However, the issue at hand is that modern human activities have caused a massive increase in CO2. Specifically, a 47% increase in atmospheric CO2 since the Industrial Revolution started is directly attributable to humans. And despite an increased awareness around climate change in recent decades, CO2 emissions increased from 1.3% per year from 1970 to 2000, to 2.2% per year from 2000 to 2010.

CURRENT EFFORTS TO REDUCE CO2

Recognizing the need to slow climate change, governments and international bodies have taken action. On December 12, 2015 196 parties adopted the Paris Agreement, a “legally binding international treaty on climate change.” It entered into effect on November 4, 2016. This Agreement, the first of its kind, represents a consensus among member states to address climate change. The Agreement’s goal is to ensure global temperature rise does not exceed 2° Celsius above pre-industrial averages. Ideally though, temperature rise should not exceed 1.5° Celsius. Notably, the U.S. withdrew from the United Nations’ Paris Agreement during the Trump Administration but is slated to rejoin under the Biden Administration.

To stabilize—and eventually lower—global temperatures, countries must get CO2 levels in check. CO2 mitigation efforts take two forms: reducing emissions and eliminating existing CO2. National governments have imposed caps on CO2 emissions and incentivized companies to innovate in ways that reduce emissions (think electric cars). But methods to eliminate existing atmospheric CO2 are also on the rise. Planting more trees is the quintessential example of CO2 elimination. Trees reduce atmospheric CO2 by sequestering CO2 when they absorb it as part of photosynthesis. In addition to natural processes, sequestration technologies have the potential to drastically decrease the amount of atmospheric CO2. One such technology is direct air capture.

DIRECT AIR CAPTURE

Direct air capture removes CO2 from the atmosphere so that it can be sequestered—compressed and stored—underground. This process moves air over substances that bind specifically to CO2, sucking it out of the atmosphere. The potential advantages of direct air capture are substantial. Estimates of the amount of CO2 direct air capture could remove annually by 2100 range from 10 to 40 gigatons. To put this in perspective, global energy-related CO2 emissions for 2019 were around 33 gigatons.

The cost of the technology is the primary reason direct air capture’s potential has not been explored more fully. As of late 2018 it cost $100-200 per ton of carbon. Compared to the cost of soil sequestration, which costs $0-$100 per ton of carbon, direct air capture is expensive. However, its current cost of $100-$200 represents a significant decrease from its original price point of $600 per ton of carbon. Perhaps the best way to combat significant expense is through government subsidies or tax credits. On the federal level, the U.S. has opted to provide tax credits. Through the Bipartisan Budget Act of 2018, Congress expanded tax credits for carbon capture and sequestration efforts, but the IRS has yet to codify rules relevant to the statute.

In June 2020 the IRS proposed a rule regarding carbon sequestration tax credits. The proposed rule provides credits for private actors who put carbon capture technology into place before 2024. The tax credits are awarded on a “per metric ton of qualified carbon oxide” basis, and the amount of the credit depends upon what the private actor does with the sequestered carbon. For example, carbon oxide that is simply put in storage is worth up to $50 per metric ton, whereas carbon oxide used to help recover oil underground and then put in storage is worth up to $35 per metric ton. When this rule, or some version of it, goes into effect, it will give investors and developers a safety net, enabling them to offset the cost of new projects with tax credits. Without clear financial incentives in place though, development of direct air capture technologies may be further delayed.

Some companies currently commercializing direct air capture include Carbon Engineering, Global Theromostat, and Climeworks. Carbon Engineering is now “working to build industrial-scale Direct Air Capture facilities that will each capture one million tons of CO2 per year – which is equivalent to the work of 40 million trees.” The company plans to begin construction on its first large commercial plants in 2022 and license its technology to facilitate the development of additional plants by 2030. Global Thermostat is working with ExxonMobil to scale up their operations. Additionally, Global Thermostat bills their technology as “remarkably low cost . . . It is profitable and does not require subsidies or carbon credits.” Finally, Climeworks boasts 14 existing direct air capture facilities, including the world’s first commercial facility.

Looking forward, direct air capture still has a long way to go, but the limited projections suggest direct air capture’s potential is promising. To better understand this technology’s potential, the U.S., specifically the IRS, should expedite its rulemaking to ensure investors and developers move forward with direct air capture projects.

I conclude by saying the IRS should expedite its rule-making, and between writing the article and its publication, the IRS did issue a final rule: https://home.treasury.gov/news/press-releases/sm1227.