Earlier this week Carbon Engineering announced that is has begun work on a second site for direct air capture facilities that will collectively be able to remove up to 30 million tonnes of CO2 annually.
We sat down with Lori Guetre, VP and head of Business Development at Carbon Engineering, to talk about the projects in Texas, the impact of the Inflation Reduction Act and the company’s plans to scale its work globally.
This interview has been edited for clarity and length.
Let’s start with the inflation Reduction Act – how has it impacted Carbon Engineering?
It’s super exciting and it feels like a long time coming. There are so many people, organizations, NGOs and companies that have wanted to take action on climate for so long. The United States, policymakers and government and everyone else have been working to find ways to enable additional accelerated action on climate. And it all really culminated in the Infrastructure and Jobs Act in January and then in the Inflation Reduction Act (IRA) in August.
For our licensee in the US, 1PointFive, this is a significant increase in the 45Q tax credit, which helps to motivate projects, both through the utilization of air captured co2, as well as just pure sequestration of atmosphere.
What is the level of financial support generated by the IRA?
The IRA differentiates between point source captured co2 and director to separate things of course. In the case of atmospheric CO2 that will be utilized, [the credit] went up from $35 to $130 a tonne. If you take the atmospheric CO2 and you permanently sequester it, rather than utilizing it, then the tax credit went from $50 a tonne to $180 a tonne, so a $130 boost in the tax credit itself, which has a significant impact.
Has this extended Carbon Engineering’s runway in terms of finance and ability to scale?
When we see people from across the globe that are interested in direct air capture (DAC) they generally fall in one of two categories. One can be a government that has passed net zero into law. You’re obligated to make a real net zero plan and you find out that getting to net zero is really hard.
Another group that is really excited about DAC are those that are already dealing with trying to decarbonize a hard to abate sector. Aviation is a good example where, the airlines are trying to lean in and be responsive to their customers, but they have access to scarce amounts of sustainable aviation fuel, which is a viable way to decarbonize but is in short supply.
So do you see compliance markets as the main driver of decarbonization?
At Carbon Engineering we’ve always been focused on compliance markets and working with policymakers. In fact, the voluntary market coming online in the last few years is new and different, and can definitely help accelerate the pace of a build out. We see the voluntary market as the provider of a [near term] push to get things going faster. But really, in the longer term, as the world decarbonizes, most of that work is going to be done by compliance markets.
The very first compliance policy to recognize DAC with geologic sequestration was actually the California Low Carbon Fuel Standard (LCFS). We worked with them to help describe what direct air capture is and where we were at in our development. And in 2019 there was a small, quiet, landmark change to compliance markets. That opened up a 30 megatonne market for DAC and sequestration projects.
The California LCFS is already governed by all of the regulations needed to do the accounting for the net environmental benefit of a [carbon removal] fuel pathway project. Since then the Washington State LCFS passed DAC with sequestration into their legislation in 2021. Up here where we are based in British Columbia, Canada, we’re working to add DAC with sequestration into our LCFS as well.
What is the thinking behind the California LCFS, as they seem to be the first movers showing the rest an effective way about utilizing these types of standards?
When we look at what the California low carbon fuel standard did, they actually said that the atmosphere is a shared resource. A project that does DAC with geologic sequestration anywhere in the world can generate California LCFS credits. That was pretty revolutionary. We work with the California Air Resources Board, who was setting up this regulation. We gave an example with a project somewhere far away from California and they said the atmosphere is a shared resource and as long as a project complies with their regulations, and is counted only once, then that project can earn credits [from the California LCFS].
Do you see the rollout of similar legislation in other states and countries picking up speed in the next five to ten years?
Yes, there are many other states in the US that are working on a LCFS. Canada also has a federal standard for decarbonizing transportation fuels. We see many of those considering two of our solutions. One example is just for carbon dioxide removal as California does.
But we can also turn captured atmospheric CO2 into a low carbon fuel. We can make jet fuel, diesel fuel out of that captured atmospheric CO2. Those tend to be viable fuel pathways for them as well.
We also see this new shift for governments now. For instance, in the United States, there’s a bill that’s been tabled in the House and in the Senate, that would have the US Federal Government procure carbon dioxide removal directly.
Would you expect something similar from the EU, or from individual countries in Europe like the UK, Germany?
The EU and the UK governments have both announced an aspiration to have five megatons of carbon dioxide removal by 2030. We will likely see it fulfilled by multiple kinds of carbon dioxide removal. So technologies like Bioenergy with carbon capture and sequestration (BECCS) and direct air capture are being considered. Certainly in Europe there are regulations on country levels for decarbonizing aviation and some of the pathways include fuel that you could make from air so that’s another place that it shows up. Germany also has a greenhouse gas reduction obligation.
Are there are any specific regulations for decarbonization of the aviation sector?
When we think about aviation, there’s the ICAO CORSIA initiative that will govern decarbonizing international flights. Many airlines and governments are working on CORSIA together today under ICAO. That comes online in 2027 and will have an immediate impact.
When you are an airline or somebody else trying to decarbonize transportation today, and you only have access to expensive and relatively small-scale solutions, then direct air capture with sequestration is a really exciting new tool in toolbox.
How is the work on your first facility in Texas going?
Yes, the one in Texas is our first full scale commercial plant, which is exciting for us. We announced earlier this year that we’ve completed the front-end engineering and design and then 1PointFive announced that they’re beginning construction on that site. They anticipate beginning to capture CO2, the commissioning the plants at the end of 2024 and then beginning to serve customers in 2025.
Do you have other partnerships like the one with 1PointFive outside of the US? Is there potential for more?
We license our technology to partners around the world. 1PointFive is our partner in the United States, Storegga is our partner in in the UK, Carbon Removal as a partner in Norway, and we actually have a partner in Canada that’s working on a fuel plant design called Huron Clean Energy.
Those are the partners that we’ve announced and we have a number of additional discussions underway with potential partners in other locations. Some of them are definitely headline customers that are working really hard on decarbonizing. Typically these companies have that might have been using “Point Source Capture” which involves everything from the transport and storage to the geologic sequestration. They look at direct air capture as a new capture tool in the toolbox.
You mentioned that 1PointFive is your exclusive partner for the US. Are you looking to do the same in other countries?
We approach each of the different potential partnerships and locations based on the strategic value that that partner brings. In some cases, we’ve had discussions for that jurisdiction or for a particular market. In other cases, our discussions are that the partners want to license our technology for that [single] project. But that’s not necessarily an exclusive relationship. Over time, we look at what’s the best way to get to our goal of providing carbon dioxide removal, as fast as we can, as affordably as we can.
Taking your partnership with Occidental as an example, are there any other large energy or industrial companies that could focus on what Oxy CEO Vicky Holub calls “carbon management”?
We’re super excited for the carbon management leadership that Vicki Holub brings in and talks a lot about how through the energy transition it’s going to be important for all energy companies to figure out how to how to be responsive to lowering carbon and ultimately deliver net zero solutions that customers are demanding.
Our partnership with 1PpointFive, which is a wholly owned subsidiary of Occidental, is an example of where we chose to license to a tech energy company. The energy industry has the skills, knowledge and understanding of geologic reservoirs that are a very good overlap with the work that we’re going to need to do. They also have experience building these large industrial projects.
What do you the priorities are when it comes to lowering global emissions?
We need to reduce our emissions first, everywhere we can. We need to reduce first and not remove. Remove is the additional thing that we need to do. If we reduce first and there are still hard to abate emissions that are still adding CO2 to the atmosphere, then it’s actually an affordable tool in the toolbox to complement everything else that we’re doing to get there. And it’s actually within reach. With carbon removal we can actually save the world trillions of dollars in getting to net zero versus known alternatives today.