The U.S. carbon management industry is about to enter a new phase with Donald Trump set to become the 47th president. The general reaction in the industry has been in sync with the renewable energy industry and climate groups. But when it comes to the CO2-focused sector there are a number of nuances that don’t necessarily mean it will be upended.
Zooming out to see the broader impact, a Trump presidency is expected to slow down the pace of decarbonization in the U.S., with more oil drilling licences expected, as well as a relaxation of methane flaring requirements and lifting the ban on LNG exports.
When it comes to carbon management it is the Inflation Reduction Act (IRA) – the signature Biden law that provides support for solar, wind, EV’s and hydrogen along with carbon capture and removal – that seems destined for the chopping block.
Trump has repeatedly stated that he intends to dismantle the law, calling it a “green new scam” and saying that all unspent funds will be rescinded. But part of this could turn out to be pre-election rhetoric with a more measured approach taking shape with the help of senate and congress Republicans, as well as – surprisingly or not – the oil industry itself.
Relevant: Oil Industry Wants Inflation Reduction Act Kept Intact If Trump Wins
Other supporters of the IRA are also rallying with former Biden White House National Climate Adviser Gina McCarthy saying attempts to upend the IRA would be a “fool’s errand,” because it makes economic sense and has solid bipartisan support on both state and federal levels.
Does Trump election change carbon capture’s prospects
CO2 capture has been seeing increased investment in the last several years, buyoed by a $85/tonne storage incentive from the IRA. Companies like Exxon Mobil and Chevron are developing multiple projects aimed at sequestering carbon from large emitters across Texas and Lousiana by utilizing IRA credits and have earmarked billions for future investments.
Last week Exxon shared its Q3 earnings report where the focus on carbon capture is evident with announcements of the largest CO2 offshore storage agreement to date, as well as the first agreement with a natural gas company bringing the total storage commitments to 6.7 million tons per year.
Hydrogen and low-carbon ammonia were also front and center with progress of the company’s Baytown project one of the highlights. A particular passage even addresses the role of the IRA: “Contingent on the U.S. federal government implementing regulations that are consistent with the Inflation Reduction Act’s legislative intent, the Baytown facility is expected to be the world’s largest of its kind upon startup, capable of producing up to 1 billion cubic feet of hydrogen per day and more than 1 million tons of low-carbon ammonia per year.”
Speaking to the FT, CFO Kathy Mikelis added: “There’s a lot in the IRA that’s helping to support projects across the country, which also helps to support economic growth and job growth. That gives a lot of people a lot of incentive to stand behind the IRA.”
All of this is not to say that everyone in the energy sector is in favor of carbon capture.
Some smaller energy producers have actively opposed a new set of EPA emissions rules, that requires coal plants to capture 90% of their CO2 by 2030 and sets a deadline for new natural gas plants to capture the same amount by 2035. The Supreme Court denied an emergency appeal from 20 Republican states for revoking the rules in a 7-1 vote and is expected to review them for a final decision in the coming years.
Carbon removal under a Trump presidency
The IRA has been a driving force behind the growth of carbon removal in the U.S., particularly for projects using direct air capture (DAC) and bio-energy with carbon capture and storage (BECCS). Providing $180 per ton of storage in saline geologic formations from DAC.
Two DAC hubs have been established with DOE funding reaching over a billion dollars, prompting private capital to follow. Blackrock invested $550 million in Occidental’s Stratos plant in Ector County, Texas.
UK energy producer Drax plans to invest up to $12.5 billion in developing BECCS in the U.S. and other North American countries. In September the company launched its U.S. entity Elimini, with more than 20 potential North American locations being assessed for potential plants.
Similar to solar and wind, these are two examples of funds flowing primarily to red states, creating construction jobs with the promise of well paid engineering jobs to follow. A job creation estimate from Lawrence Livermore National Labs claims that carbon removal has the potential to generate 440,000 long-term jobs across the U.S.
And though the IRA distributes the largest amounts, carbon removal is also supported by at least four other active programs that could remain intact:
- The Bipartisan Infrastructure Law (BIL)
- The Energy Act of 2020
- The Utilizing Significant Emissions with Innovative Technologies (USE IT) Act
- The Furthering Carbon Capture, Utilization, Technology, Underground storage, and
Reduced Emissions (FUTURE) Act
Despite this list it would be a blow for carbon removal if IRA funding is no longer available. The industry’s nascent market is experiencing growing pains with Microsoft dominating purchases and few others making sizeable commitments so far.
According to McKinsey carbon removal can become a $1.3 trillion market and the U.S. could be reducing its share with a slowdown or pause in supporting carbon removal.
Relevant: McKinsey Believes Carbon Removals To Be A Trillion Dollar Market Opportunity
International and state leadership
We are already seeing the impact of the election results both in the U.S. and abroad. While the Biden administration is moving to future-proof climate policies (saying they have learned their lesson from the first Trump administration) the EU and UK are looking to pick up the mantle on carbon management.
One of the effects of the IRA’s enactment in 2022 was that it firmly placed the U.S. at the forefront of carbon management by leapfrogging the European countries and attracting a variety of companies to its shores.
This prompted a response. Earlier this year the UK government announced a $28 billion package for carbon capture, while the EU has been moving ahead with developing the support framework for carbon capture and removal.
At his confirmation hearing earlier this week European Commissioner for Climate Action Wopke Hoekstra said that the Commission has to take a leadership role in driving the development of carbon capture, utilization and removal in the union, signaling his commitment to achieving the target of capturing 280 million tons of CO2 annually by 2040.
Carbon capture is also seeing strong support in SE Asia, with Japan leading the way and looking for storage in the entire Pacific neighborhood from Alaska to Malaysia and Indonesia.
Canada is also in the mix with different efforts for capturing carbon and could see companies moving there, as it also provides a comparable level of government support to the one in the U.S. today.
Companies like Deep Sky are also making rapid progress in the carbon removal space in Canada, with the industry set for substantial EU support with the CRCF. A DAC hub is also emerging in Kenya, showcasing the Global South’s potential.
So while the election outcome can be seen as a setback for renewables, that won’t necessarily be the case for carbon management. Under Trump the U.S. might be more inward-oriented in the next four years but other drivers of growth for carbon management are clear to see.
Read more: Oil Industry Wants Inflation Reduction Act Kept Intact If Trump Wins
