The primary reason for the flurry of carbon capture related headlines in the US over the last few weeks – and our analysis shows a significant step up – is because it looks like this will be the one technology/route to lower carbon emissions that will get a real boost from the infrastructure bill. There is bipartisan support for CCS because the fossil fuel industry sees it as a way to stay in the game and the unions believe that it will create jobs. This combination should garner enough votes to push it into the bill and get it passed, although the details around how CCS would be supported remain unclear. The infrastructure bill has very few real sources of income in it to offset the very high costs – something we will discuss on Sunday – and consequently giving a bigger tax break, through the 45Q program would create an even larger funding gap than we have today. The value/cost dynamic has to rise to get the activity that everyone is looking for and maybe that could be achieved by overlaying a carbon credit onto the program. Anyone exporting to Europe and concerned about the CBAM extending to natural gas, NGLs, chemicals, and polymers would likely consider CCS if they were eligible for 45Q and could also claim an offset on their exported products to neutralize the CBAM tax/fee.
