Opportunity Costs - Carbon Capture & Sequestration

By Sheri Deal-Tyne, Health & Energy Policy Researcher, PSR Iowa

This is the fifth article in a series that has examined concerns, especially health, related to carbon capture. Carbon capture involves a variety of initiatives undertaken purportedly to address looming climate changes.  Our previous report addressed the relationship between hydrogen production and carbon capture. This report focuses on the major opportunity costs of diverting taxpayer dollars to the dubious benefits of carbon capture.

Billion-dollar Events Driving Urgency

The U.S., like the rest of the globe, experiences increasingly frequent and extreme weather events. In 2021, the U.S. endured twenty billion-dollar climate disasters. 

In April this year, the Intergovernmental Panel on Climate Change (IPCC) released a report announcing it’s “now or never” to limit global warming to 1.5°C. Scientific modeling demonstrated that curbing the earth’s warming to 1.5°C produces less devastating outcomes than warming 2°C or higher.

In May of 2022, the World Meteorological Organization (WMO) released a climate update indicating that there is now a 50:50 chance that the annual average global temperature will temporarily reach 1.5°C above the pre-industrial level in at least one of the next five years–with the prospect increasing over time. 

Source: NOAA National Centers for Environmental Information (NCEI) (2022)

On September 13, 2022, the UN released a new report warning of tipping points and announcing that the reduced CO2 emissions experienced during Covid quarantines have returned to pre-pandemic levels. As disasters and warnings arrive at a faster and faster pace, does anything change?  How are the warnings heeded?

Carbon capture is aggressively promoted as a climate solution by the fossil fuel industry, but we must ask at what cost for whom and over what time frame?  Examining the economic costs of carbon capture without addressing the manifold externalities or alternative opportunities foregone, we run the risk of legitimizing carbon capture as a climate solution.  Given its history and failures to date, it cannot be overemphasized that carbon capture is a false promise.

Needing Zero Carbon

The IPCC report emphasized that global GHG emissions must be reduced by 43 percent by 2030 in order to limit global warming to 1.5°C and asserted that Global temperatures will stabilize when CO₂ emissions reach “Net Zero.”

The fossil fuel industry and some members of academia promote carbon capture as essential to achieve “Net Zero” by eliminating CO2 emissions.  Net Zero has been promoted as if it meant an overall balance between emissions produced and emissions taken out of the atmosphere, which it does not. Real Zero is the ultimate goal.

Financing Carbon Capture

On September 23, 2022, the US Department of Energy (DOE) issued a press release

whose headline read: “Biden-Harris Administration Announces $4.9 Billion to Deploy Infrastructure Necessary to Manage and Store Carbon Pollution.” This support for carbon capture followed the August Inflation Reduction Bill (IRA) added substantially to public funds for carbon capture projects already found in other earlier sources. 

Chart 1. Carbon Capture Project Funding Sources

The 45Q tax credit is one of the main drivers of industry interest in carbon capture; as a tax credit, it is intended to incentivize investment in carbon capture and sequestration. The recently passed Inflation Reduction Act (IRA) increased the credit amounts for the 45Q, further incentivizing CCS/CCUS.

In August 2022, researchers at Princeton University analyzed the potential for CCS to grow as a result of the 45Q increases.  They concluded it led theoretically to a mere 20 percent reduction of emissions by 2030.  A separate, preliminary cost estimate done in July 2022, of the IRA conducted by a congressional research agency estimated that the new CCS tax credits will cost taxpayers $3.2 billion over the next ten years to at most, sequester 53 million tons of CO₂ if it was all used for Enhanced Oil Recovery (EOR) at $60 per ton.  Both sources confirm this is a minuscule amount compared to overall CO₂ emissions.  Globally emissions in 2021 were 36.3 billion metric tons, while yearly U.S. emissions amount to 4.46 billion metric tons.

Scope 3 Emissions

Within the energy and corporate sectors, there is a term known as Scope 3 emissions which are indirect emissions that occur in a company’s value chain. An example would be a company that makes gas-powered equipment. The emissions resulting from the use of the equipment by customers are Scope 3 emissions. Under the GHG Corporate Protocol, reporting Scope 3 emissions is not required. Scope 3 emissions are an example of an externality.

“Externalities” are a concept in economic theory that represent “the impacts of a market decision whose cost is not accounted for within the price used in the market transaction.” Chart 2 lists many of the externalities associated with carbon capture. When considering the externalities of CO2 pipelines, it is important to bear in mind that the carbon capture projects conceptualized by proponents entail a massive network of pipelines in order to accomplish their purported goals.

Chart 2. Externalities Related to Carbon Capture

Carbon Capture’s Exaggerated Potential: Red Flags

In a previous report, we discussed the Petra Nova plant in TX. When built in 2017, the Petra Nova plant was hailed as the world’s largest coal-fired carbon capture facility and cost $1 billion to construct. The plant received $195 million in funding from the DOE. In September 2022, NRG Energy sold its 50% share of the plant for a mere $3.6 million to the other owner.

Another example involves the Gorgon plant, a massive LNG carbon capture project based in Australia owned by Chevron. Gorgon has missed its CO2 sequestration targets for the past 5 years and was forced to purchase carbon credits to compensate for the shortfalls.

Gorgon and Petra Nova are only two problematic carbon capture projects. A recent analysis by Food and Water Watch reveals an abysmal track record for many carbon capture projects in the U.S. Their analysis concludes that carbon capture is nothing more than a “handout to fossil fuel corporations.” That carbon capture is so aggressively promoted by the fossil fuel industry should be a red flag to everyone. Many assert the fossil fuel industry embraces carbon capture because it will prolong our society’s addiction to fossil fuels.

Overlooked Milestones

Despite increased accessibility and affordability of renewable energy, the narrative has perplexingly become that carbon capture is something we absolutely must do to save ourselves from global warming. In April of 2022, for the first time, two renewable wind and solar sources generated more electricity than coal or nuclear power. Wind and solar produced 57.73 million MWh during the month, while coal and nuclear both generated less than 56 million MWh.

“Natural” gas was still the top source of electricity during the month, producing 95.61 million MWh. Guggenheim Securities analysts announced in October 2022, that utility-scale solar and onshore wind are now less expensive than gas-fired power, and that the lower cost “supports the case for economic deployment of renewables across the US.”

Rather Than Carbon Capture

Mark Jacobson, a Stanford University professor, and his team have created a blueprint for the world to fulfill its energy needs using 100% wind, water, and solar (WWS) by 2035. Their plan was recently published in a peer-reviewed study in Energy and Environmental Science. The plan does not rely on fossil fuels, carbon capture, nuclear power, or blue hydrogen. The cost of making the transition to 100% renewable energy would be $62 trillion. However, the modeling also shows that switching to 100% renewable energy would save $11 trillion a year, which means the initial cost would be recouped in 6 years! The study demonstrates that by switching to a 100% WWS energy system, worldwide energy usage would decrease by 56 percent immediately.



For a real-time example, consider the 100% solar-powered village of 2,000 homes that never lost power during Hurricane Ian. As a result of resilience planning and wetlands protection, the community did not flood despite being only 15 miles from Ft. Myers, FL. The community not only survived Hurricane Ian, but they were also able to open their school as a shelter for other victims. Watch an on-the-scene video here.

Conclusion

Efforts to implement CCS will effectively prolong society’s reliance on climate, environment, and health-damaging fuels, including coal, “natural” gas, oil, and ethanol. CCS is itself an overly complex, expensive, false solution with a long list of unacceptable toxic and harmful environmental consequences and costs. CCS diverts attention and resources needed now to transition to clean energy sources away from fossil fuels. We have the technology, the know-how, the examples, and the blueprints for how to make this transition, but lack the political will. Whether the needed political will can be mustered in time remains to be seen.

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