How Congress just put us on track to solve climate change

If you asked me in 2017 what was likely to be the biggest accomplishment of the Republican-controlled 115th congress and the Trump administration, I definitely would not have said “finally putting us on track to solve climate change”. But that’s exactly what just happened this week. After years of behind-the-scenes work by Senators like Heidi Heitkamp (D-ND), Shelley Moore Capito (R-WV), Sheldon Whitehouse (D-RI), and John Barrasso (R-WY), the Senate included their bipartisan FUTURE act in the budget bill that ended the most recent few-hours-long government shutdown. Among other things, this bill expands/extends two existing tax credits: the 45Q tax credit for carbon capture utilization and sequestration (CCUS), the 45J tax credit for new nuclear plants.

With these changes, US federal government (the same one that is threatening to pull out of the Paris climate accord at the end of Trump’s term) has just put in place a $30–50/ton carbon price across nearly all of the technologies where near-term price signals are important for the long-term technology development needed to fully decarbonize our economy and solve climate change. Yes, that is a bold claim, and you’re probably skeptical that is sufficient, so let me explain.

First, some history, context, and predictions.

History, context and predictions

Over the last few decades, accelerated by Germany’s Energiewende kick-starting demand, China’s massive supply-side subsidies of solar photovoltaic (PV) manufacturing, and subsidies the world over (including the US PTC), the wind turbine, solar PV, and now Li-ion battery manufacturers (most famously Tesla) have been able to put the costs of renewable energy onto an exponential cost improvement curve. These learning curve trends have now continued to the point where even without subsidies, wind and solar power are now the cheapest source of new power in many locations. These trends are likely to continue, driving solar PV, wind, and battery costs to decline, and installations continue to increase, until over the next few decades variable renewable energy (VRE)+storage, (integrated into a well-connected grid with carbon-free flexible base hydropower and nuclear energy) displaces nearly all fossil fuel generation during the spring, summer, and autumn.

Even as VRE+storage becomes the dominant source of electricity and sufficient capacity and transmission are built out to meet demand for most of the year, natural gas will continue to be needed to handle winter heating demand in regions with insufficient nuclear or hydropower resources to do so.

The 45Q CCUS tax credits

This is where the long-term impact of the newly adopted 45Q CCUS tax credits comes in. Now that a carbon price (subsidy) is in place for CCUS, use of carbon capture will ramp up, both via integrated technologies such as as the Allam cycle and carbonate fuel cells and via bolt-on capture-only systems. Much of the captured CO2 will likely be used for enhanced oil and gas recovery, allowing for carbon-neutral gas production and use (once the CCS costs are lower than the 45Q subsidies).

Industry and personal transportation

In addition to decarbonizing the electrical grid, avoiding catastrophic climate change also requires decarbonizing the industrial and transportation sectors. Most industrial CO2 emissions are amenable to mitigation with CCS, so the new 45Q subsidies will drive significant investment in doing so, wherever it can be done cheaply enough. The decarbonization of transportation has already begun: as battery costs come down, electric vehicles are becoming cheaper than internal combustion vehicles, and once they do so new vehicle production will switch almost entirely from internal-combustion engine (ICE) to battery-electric vehicles (BEVs) and/or eventually perhaps fuel-cell electric vehicles (FCEVs). The subsidies already in place for EVs will likely be sufficient, and that transition should be able to finish without further subsidies.

Future carbon pricing

Over the next decade that the 45Q credits are scheduled to be in place, I expect a large number of new CCUS projects will come online, capturing the carbon from natural gas power plants and industrial facilities, and piping it to use in nearby oil/gas fields or to permanent sequestration sites, depending on the local geology. As such technology improves, the costs of CCUS will decline, and the political coalition for continued policy support for carbon pricing and/or CCUS subsidies will likely strengthen.

Full decarbonization of power and industry

The combination of VRE+storage, gas+CCUS, existing hydropower and nuclear plants, and new small modular reactors (SMRs) (mostly in areas where gas and/or CO2 pipelines don’t reach) will allow nearly-complete decarbonization of the electrical grid (over a timescale determined by the effective carbon price over time). As capture costs fall and/or the effective carbon price continues to rise, nearly all remaining gas, coal, and oil plants will be outfitted with carbon capture equipment, and the few remaining plants without capture capability will remain on standby for use only during cold snaps (with capacity factors in the low single digits).

Carbon Dioxide Removal

At that point, atmospheric carbon dioxide removal (CDR) will also begin to make economic sense. This may include some bioenergy CCS (BECCS), but at the scale required, this will more likely end up being mostly non-biological direct air capture powered by surplus VRE. If the capital costs of direct air carbon capture and sequestration (DACCS) are high relative to the energy costs, then the need for high capacity factors may encourage operators to capture CO2 from the atmosphere year-round. When not powered by VRE + battery storage, this would effectively create a carbon-negative fossil fuel loop, where the CO2 injected into enhanced gas recovery (EGR) wells exceeds the carbon content of the gas recovered, and some of the energy produced from burning the natural gas is used to capture from the atmosphere the extra CO2 to inject alongside the CO2 captured from burning the gas itself. On the other hand, if the energy costs of concentrating the captured atmospheric CO2 are high relative to the capital costs of the direct air capture, it may make more sense to only operate DACCS equipment during seasons where VRE+storage provides cheaper power than carbon-neutral natural gas, or possibly only during hours when electricity prices are near zero due to excess VRE.

Balancing the carbon budget

As described above, nearly all power sector CO2 emissions, most industrial CO2 emissions, and the emissions generated by automotive (BEV) transportation can be directly mitigated, at a reasonable CO2 price, by a combination of VRE+storage and by capturing point-source CO2 emissions and using them in carbon-neutral or carbon-negative EGR and enhanced oil recovery (EOR). However, that leaves one large remaining source of CO2 emissions: long-distance transportation (air and shipping). While it may be possible to cost-effectively produce synthetic oil using captured CO2 plus surplus VRE, it may instead be cheaper to continue pumping oil (with EOR as needed), allow the release of the CO2 produced by burning it, and then rely on atmospheric CO2 capture to recapture the CO2 (either at the time, or later as technology improves) in order to balance the carbon budget.

Completing the transition to sustainability

The vision outlined above describes how current trends in prices, deployment, and new technology, and current and expected future policy, get us to negative emissions, but those trends alone do not quite complete the transition to long-term energy sustainability. Switching all short-distance personal transportation to BEVs and most power production to VRE+storage, will dramatically reduce oil and gas demand, to the point where carbon-neutral (and eventually carbon-negative) production wouldn’t be much more expensive than oil is today. That same reduction in demand will also dramatically extend the life of oil and gas reserves, and allow them to compete over the long term with synthetic oil, gas, and other energy carriers produced by captured CO2 and excess VRE. Eventually, non-fossil fuels will likely dominate, but in a world of carbon-neutral production and use of fossil fuels, that transition can be dictated by technology and economics, and will no longer need to be accelerated by climate policy to avoid climate catastrophe.

As you can see, I am conditionally optimistic that we have collectively begun to put in place the required conditions for solving the climate change problem before it becomes insurmountable or becomes an existential risk to civilization. That is no reason for complacency: there is still a ton of work to be done to bring down VRE, storage, and CCUS costs; to scale up those technologies to the scale required to transition the energy system to be carbon-negative; to decarbonize the transportation sector; to ramp up DACCS or other negative emissions technologies (NETs) to the scale required to get atmospheric CO2 levels back down below 400 ppm; to mitigate and adapt to the effects of climate change while doing all of those other things. That mitigation and adaptation may even require temporarily implementing solar radiation management (SRM) or other geoengineering approaches to mitigate warming while we continue removing CO2 from the atmosphere. But despite the fact that we procrastinated so long in starting to deal seriously with climate change, it does appear that we are finally on a course to eventually doing what is needed to stop the damage, mitigate it, and eventually bring our climate back to how we’d like it to be.

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