Facing brutal climate math, US bets billions on direct air capture

Pulling carbon dioxide from the air is gaining popularity as the world fails to curb carbon emissions fast enough to avoid catastrophic climate catastrophe.

The U.S. government has granted $3.5 billion to build factories that capture and store the gas, the largest such effort globally to combat climate change through Direct Air Capture (DAC), and increased a tax credit to $180/tonne to support the technology.

Britain’s 100 million pounds ($124 million) for DAC research and development pales in comparison. Boston Consulting Group anticipated $12 billion in federal funding to boost consumer and commercial electric vehicle demand.

The U.S. DAC hub financing bids were due on March 13, but the government and some corporations have not fully disclosed the applications, many of which Reuters is seeing for the first time. The Energy Department expects winning bids this summer.

To cap global warming at 1.5 degrees Celsius, U.N. scientists estimate that billions of tonnes of carbon must be removed from the atmosphere each year.

Permanent carbon removal like DAC will be needed to supplement natural solutions like planting more trees or enhancing soil carbon sequestration.

The obstacles are many.

The biggest plant captures just 4,000 tonnes a year, costs are high, talent is scarce, and corporate credit buyers are mostly on the sidelines. Developers must win over communities that have been harmed by huge energy projects and question oil firms’ position in the space.

CO2 must be permanently kept.

The U.S. government wants to support four centers, and more than 20 state, federal, company, and investor sources say at least nine proposals have been filed in a first round, including two significant Occidental Petroleum (OXY.N) projects.
Swiss startup Climeworks, backed by Singaporean sovereign investor GIC, has raised over $800 million.

In his first significant interview since applying for three hubs in Louisiana, California, and North Dakota, Chief Executive Christoph Gebald said all could be scaled to the U.S. government’s megatonne target.

He said the three hubs could produce 3,500 direct jobs and tens of thousands of indirect jobs by 2030 if given the go-ahead. Over the next 18 months, the company planned to increase headcount from the low double-digits to over 100.

Gebald felt talent was the true issue. Where will you get those folks in 30 years?No DAC university program.”

Gebald said a megatonne facility would cost “easily in the billions” and the firm may raise financing if its three bids succeed, but it would likely wait until 2024 to return to the market.

“Most of the capital is for assets, so it depends on the build out program.”

Jonas Lee, chief commercial officer of Carbon Capture, told Reuters that the startup will use captured carbon to generate sustainable aviation fuel in Wyoming.

This industry is vulnerable, yet all the arrows are pointing up. “We have to put iron in the ground and start taking meaningful amounts of CO2 from the atmosphere,” Lee added.

“Hopefully that will help in a virtuous cycle that galvanizes even more support from corporations buying carbon credits, and maybe state and local governments.”

OIL INVOLVEMENT
The bid sites are spread around the country, but they all feature inexpensive, renewable electricity and plenty of gas storage space.

As demand for fossil fuels declines, several of the big energy companies want to position themselves for what might be a multi-trillion-dollar sector.

Occidental Petroleum believes it can get federal subsidies for the world’s largest Direct Air Capture plants. It declined to reveal whether it has applied for support for two DAC projects it is constructing in Texas.

Oil corporations are also ahead in permitting CO2 sequestration wells.

“We have the pore space to begin with, from the reservoirs that are depleted or depleting, that we’ve operated that now can be repurposed into sequestration by the engineers who know how that reservoir reacts,” said Chris Gould, chief sustainability officer at California Resources Corp (CRC.N), a net zero emissions oil company working with Climeworks on a California project.

Some carbon removalists still distrust oil companies.

“It’s really essential for the success of direct air capture that this be about removing legacy emissions and not about continued fossil fuel use,” said Erin Burns, executive director of Carbon 180, a DAC consultant. “We want fossil-free hubs.”

COSTS
Most DAC techniques use a liquid or solid formulated to naturally absorb carbon dioxide, then heated or processed to extract and bury the carbon.

The process, factories, pipelines, and storage require expensive energy. Its ability to alter the climate at a cost the world can afford is still in doubt.

The U.S. government has set a $100 per ton price for carbon dioxide capture and storage, but it can cost more than $1,000.

Heirloom Carbon, a California business that applied for a Louisiana center with Climeworks, views that as a realistic aim, while Carbon Capture told Reuters it expected $250 a ton by 2030 and $150 a ton within a decade.

Dan Friedmann, CEO of DAC business Carbon Engineering, which supplies technology to Occidental, said that to reach a cost and scale that can effect the earth, a plant must be easily replicated like a fast-food chain.