US companies that cut carbon emissions could qualify for subsidies on even the smallest projects under new climate legislation, unleashing a potentially unprecedented wave of investment in green technologies.
The Inflation Reduction Act passed by Congress this month will boost a host of clean technologies. Among them will be startups developing more efficient ways to capture and store carbon, which is going to be crucial to meeting global climate goals.
The technology either involves collecting carbon dioxide emitted by a factory, a method that’s been around for decades, or taking it directly from the air and then storing it underground. One of its biggest drawbacks has been the cost. And while the US already had a tax credit to support carbon capture, it was too paltry to attract much interest from industry and only available to larger operators.
Under the new regime, the US government will offer a tax credit of $85 for every metric ton of carbon emissions captured from a smokestack and stored — up 70% from current levels. Industrial projects like factories that produce steel or cement, need to capture 12,500 tons or more of CO2 a year to qualify, down from 100,000 tons a year under the previous system. Direct air capture qualifies for tax credits worth as much as $180 per ton for projects that trap as little as 1,000 tons of CO2 per year. And the credits will be paid directly to the operator, providing a clear source of revenue even for relatively small installations.
With all that new support, American companies could be capturing around 100 million tons of carbon dioxide a year within a decade, more than 10 times the amount currently sequestered for tackling climate change each year, according to Boston-based environmental organization Clean Air Task Force.
With new projects launching this year, researcher BloombergNEF estimates the most ambitious climate law in US history could deliver more than $100 billion to scale up technology, decarbonize industry and provide clean power.
“It used to be you had to be a really large CCS plant to claim the tax credit. The numbers now are so low,” said Julia Attwood, analyst at BloombergNEF. “That’s a big boost. It means very small facilities just testing out their technology can access it.”
The tax credit is also crucially directed more toward industrial applications than power plants. That means it’s harder for coal or natural-gas burning plants — power sources that could be directly replaced by solar or wind farms — to qualify for support. Instead, industries such as cement production, which currently have no alternatives to cut emissions, can more easily access the assistance.
“These industries that really need to use carbon capture as their decarbonization strategy finally have the option,” said Matt Bright, carbon capture policy manager at Clean Air Task Force. “It’s opening a new market for hard-to-abate industrial sectors.”
As the climate bill spurs industrial interest in carbon capture, it could also give a big push to new technologies to make it all happen.
The hefty incentives and reduced thresholds are already making a difference to some startups. One example is Mantel, a company that was founded earlier this year and has just raised $2 million in a seed funding round led by The Engine, a venture capital firm spun out of the Massachusetts Institute of Technology.
Carbon capture involves the separation of carbon dioxide from a mixture of gasses. It’s typically achieved using a chemical that specifically bonds with the greenhouse gas. This step releases a lot of energy, which is usually lost. The next step involves the addition of more energy in a separate chamber to break the bond, releasing carbon dioxide as a pure gas and regenerating the capture chemical. That can then be compressed into a liquid and buried deep underground in places that otherwise hold oil and gas.
The whole process is quite energy intensive, which makes carbon capture expensive. Mantel’s idea is to reduce energy loss in the capture step. This is done by carrying out the entire capture and release process at a temperature higher than 600°C using molten salt made of boron and other elements. Mantel says that any heat released in the first step of the capture process can be used in the regeneration step, reducing overall energy consumption by 60%.
The startup has shown that its process can work at a lab scale. The money it has raised should allow it go from capturing just grams of CO2 per day to capturing kilograms.
“We’ve been trying to find cheaper ways to do carbon capture. And one of those ways is to do the carbon capture at a high temperature,” said Cameron Halliday, Mantel’s chief executive officer. “If we can do this cheaper, we could do carbon capture across the world and address huge problems with climate change.”
Mantel’s technology can’t simply be retrofit into existing power plants or factories; the boiler where fossil fuels are now burned would have to rebuilt. That’s not going to be cheap, but Halliday argues that, because it cuts energy costs so much, the economics could work out.
And under the new US climate bill, even some of Mantel’s pilot efforts could qualify for subsidies, potentially helping the company scale up faster. “If we could build that demonstration plant a little bit larger than we had anticipated, then we could tap into $85 a ton,” Halliday said. “That’s part of the reason why this is so timely.”