Inflation and political uncertainty have dealt a blow to large-scale carbon capture utilisation and storage (CCUS) projects in the U.S., casting a shadow over the decarbonisation efforts of industries like cement, steel, and chemicals. The technology, which captures CO2 from fossil fuel burning and either stores or utilises it, is seen as pivotal for these hard-to-abate sectors. However, the path to commercialising CCUS has become increasingly steep.
The Biden administration’s 45Q tax credits, offering $85 per ton of CO2 sequestered, initially sparked enthusiasm and triggered announcements of over 270 projects. Yet, soaring inflation has diluted the value of these credits and hiked project costs by about 30%, according to Howard Herzog, Senior Research Engineer at the MIT Energy Initiative. The optimism fuelled by the Bipartisan Infrastructure Bill and the Inflation Reduction Act has waned significantly.
The cement industry, a major emitter, exemplifies this challenge. With around 90 operational plants in the U.S., the sector desperately needs CCUS to meet net-zero targets. However, current incentives fall short of stimulating widespread adoption. Peter Findlay, Director of CCUS Economics at Wood Mackenzie, predicts U.S. CCUS capacity will only double to 104 million tonnes annually by 2034 without enhanced incentives.
The political climate adds another layer of uncertainty. The Trump administration’s spending review has thrown the future of federal support into doubt. While the 45Q credits might survive due to their alignment with Republican state interests, DOE grant programs face potential cuts, Findlay warns. This political tug-of-war could stall CCUS deployment, just as it was gaining traction.
Yet, there are glimmers of hope. State initiatives like California’s low carbon fuel standard, shareholder pressure, and novel pathways such as integrating CCUS with data centers, could spur investment. Baker Hughes and Frontier Infrastructure’s partnership to develop integrated CCUS, gas-fired power, and data center projects is a testament to this potential.
Moreover, global cement leaders like Heidelberg Materials are pushing ahead with CCUS. The company’s projects in Indiana and Norway underscore the technology’s viability with strong government backing and social acceptance. The global cement industry estimates CCUS could account for 36% of carbon reduction needed for net-zero concrete by 2050.
To resuscitate CCUS momentum in the U.S., the public sector must play a more assertive role. Adapting procurement procedures, ramping up green markets, and expanding federal policies for carbon management are crucial steps. The journey to CCUS commercialisation is fraught with challenges, but the destination—a greener industrial landscape—is well worth the struggle.
As the saga unfolds, markets must brace for potential ripples. The cement industry, for instance, may face higher costs or supply disruptions as it grapples with decarbonisation. Companies investing in CCUS could see their share prices sway in tandem with political shifts. Meanwhile, the data center boom might spur innovative partnerships, reshaping the energy landscape.
For investors, the message is clear: CCUS is a high-stakes game with immense potential but fraught with political and economic uncertainty. The coming years will separate the bold from the cautious, the visionaries from the wait-and-see crowd. One thing, however, is certain: in the fight against climate change, CCUS is a weapon the world can’t afford to ignore.
