States have an array of policy options to reduce carbon emissions from power plants. In the first of a three-part clean power series, C2ES brings together state leaders and industry experts to explore market-based approaches to efficiently and effectively implementing EPA's proposed Clean Power Plan.
April 15, 2015
9:00 a.m. – 12:00 p.m.
(Doors open at 8:30 a.m.)
Capitol View Conference Center
101 Constitution Ave. NW
Washington, DC 20001
RSVP Here by April 10
Director, Rhode Island Department of Environmental Management
Director, Virginia Department of Environmental Quality
Director of Environmental Programs, Colorado Department of Public Health & Environment
Vice President, Environmental Management and Resources, DTE Energy
Government Affairs and Corporate Social Responsibility, Holcim (US) Inc.
Director of Energy and Environmental Policy, Duke Energy
Senior Environmental & Fuels Policy Manager, Exelon
Senior Fellow, Brookings Institution
Professor, Stanford Law School
President, Center for Climate and Energy Solutions
Photo by Ellie Ramm
Elizabeth Craig of the EPA (left) speaks with three representatives of 2015 Climate Laedership Award winners, Andy Battjes of Brown Forman, Bridgeport, Conn., Mayor Bill Finch, and Alexis Limberakis of Clorox
When it comes to climate leadership, the way a message is delivered can be the key to success.
Winners of the 2015 Climate Leadership Awards found that being creative in communicating ideas on sustainability and reducing greenhouse gas emissions helped the message resonate with constituents, customers, and employees.
Sixteen organizations, including C2ES Business Environmental Leadership Council members Bank of America and General Motors, won Climate Leadership Awards this year. The awards are co-sponsored by the Environmental Protection Agency (EPA) with the Center for Climate and Energy Solutions, Association of Climate Change Officers, and The Climate Registry.
Three winners -- Bridgeport, Conn., Mayor Bill Finch, household consumer product maker Clorox, and wine and distilled spirits manufacturer Brown Forman – spoke at the Climate Leadership Conference about three ways to connect climate goals to your audience.
1. Link your goals to everyday issues.
Finch, who received EPA’s only individual leadership award, wanted his city to take on the goal of reducing emissions 10 percent below 2007 levels by 2020. He found what he talked about mattered.
“Not polar ice caps,” he said. “But jobs for Uncle Harold.”
In Bridgeport, those jobs were deploying fuel cells, which produce electricity using natural gas and electrochemical reactions with only trace emissions. The Dominion Bridgeport Fuel Cell, spearheaded by Fuel Cell Energy, is the largest in North America, powering 15,000 homes. Construction is set to begin this year on Bridgeport’s Green Energy Park, which includes a smaller fuel cell plus 9,000 solar panels on the site of a former landfill.
Finch also got jobs for Uncle Harold’s nieces and nephews through the Mayor’s Conservation Corps. With the help of block grants, the city hires 40 youths every summer to go door to door, urging people to recycle, use rain barrels, and plant trees.
“Kids are our greatest ambassadors,” said Finch. “They’re helping to change the way we can sell these concepts to the public and change behaviors.”
2. Engage your employees.
At Clorox, Director of Environmental Sustainability Alexis Limberakis said the company got employees on board by tying messages about sustainability to personal motivation.
“Most employees get recycling, but a carbon footprint is over their heads,” she said. “When you connect it to cost savings, that’s when the light goes on.”
When selecting members of its sustainability team, the company didn’t search for experts in sustainability. Instead, it chose people who understood the company’s values and operations. That enabled Clorox to develop innovative ways to reduce waste that aren’t necessarily apparent to consumers but make a big difference.
The EPA honored Clorox for goal-setting and reporting and verifying organization-wide greenhouse gas inventories and achieving aggressive greenhouse gas emissions reduction goals. Clorox reduced emissions 16 percent and increased the efficiency of its product distribution by transitioning from truck to rail.
3. Engage your supply chain.
The climate impacts on Brown Forman’s operations in drought-stricken California were obvious: The company’s water supply, the growing season, and the availability of corn, rye and malt barley used to make spirits were all affected.
When communicating about climate goals to employees and suppliers, “you need a clear linkage to the company’s overall purpose,” said Environmental Health and Safety Director Andy Battjes. “Addressing climate change and other environmental impacts now has an impact on our ability to grow and thrive.”
With that in mind, Battjes said it was easier to convince employees that climate goals are important, especially when cost savings are tied in. After that, they were able to communicate the same message through the supply chain.
“Our employees have good, innovative ideas that have never been tried before. Give them a chance, and they will put it into practice,“ he said. “When you get into suppliers and fellow industries, you get to multiply those effects.”
Brown Forman was recognized for reporting and verifying organization-wide greenhouse gas inventories and setting aggressive greenhouse gas emissions reduction goals. The company plans to reduce greenhouse gas emissions 15 percent between 2012 and 2022 by switching the boilers at its distilleries from fossil fuels to biomass. It also plans to switch the fuel for its steam boiler at a production operation to a less greenhouse gas-intensive fossil fuel.
Climate Leadership Award winners demonstrate the many paths forward to a low-carbon future and serve as an example for others in how to talk about – and take – climate action. The next step is to find even more creative and engaging ways to spread that message to a broader audience.
For electric vehicles (EVs) to hit the mainstream and make a meaningful contribution to reducing greenhouse gas emissions, they’ll need a robust public charging infrastructure that lets drivers go where they take gasoline-powered cars now. Our recent work for Washington state identified some promising ways to get the private sector to fund more of that infrastructure in the near term, and fund all of it eventually.
The C2ES study was commissioned by the Washington State Legislature’s Joint Transportation Committee and guided by an advisory panel of state legislators, EV experts, and other stakeholders. The findings, which could be implemented in the state through a bipartisan House bill, demonstrate that, with continued public support and accelerated EV market growth in the near term, the private sector could predominantly fund commercial charging stations in about five years.
A frequent question about funding infrastructure for EVs is, “Why not just follow the gas station model?” Under that model, an investor would pay to install and operate equipment and make a profit by selling the electricity to charge an EV.
Putting aside the fact that gas stations make most of their money at the convenience store or repair shop and not at the pump, this business model doesn’t work for EV charging for three reasons. First, the cost of owning and installing EV charging equipment is high. Second, the market for EVs is small in most places and the demand for charging is uncertain. And third, EV drivers are not willing to pay a high price for public charging when charging at home is cheap and easy.
These barriers are the same whether you’re in Washington state or Washington, D.C.
To overcome them, we first identified three sources of revenue to businesses – the sale of electricity, the sale of EVs, and the sale of other retail products while an EV driver is charging. We quantified the additional revenue that could flow to the electric utility, the automaker, and the retailer from increased EV deployment. We then quantified how an investment to capture this revenue would benefit the financial performance of a charging infrastructure project. Financial performance improved significantly, but not quite enough to earn a payback for the station owner-operator in the time an investor typically seeks (about five years or less).
We then looked at the role of government in supporting the market in the near term to see if that helped. We considered a combination of policy incentives, such as extending Washington state’s sales tax exemption for all-electric cars for five years and subsidizing some of the cost of the charging equipment. We found that if this public sector assistance is offered, and if the EV market continues to develop, after about five years some EV charging business models will be profitable and sustainable with no further public sector intervention.
The near-term success of EVs is critical if we’re going to significantly reduce emissions from the transportation sector, which is responsible for 28 percent of greenhouse gas emissions. We know that private sector investment is crucial, but that the private sector must see a profit if it is to invest billions in EV technology and infrastructure.
Our study reflects what we’re already seeing on the ground, as utilities, automakers and retailers invest in charging infrastructure. Three major electric utilities want to help deploy charging stations in California. In January, automakers including BMW and Volkswagen announced they will work with ChargePoint to install more than 100 charging stations in key markets. And some retailers, including Walgreens, were early adopters of EV charging, partnering with NRG’s eVgo back in 2010.
Our work for the Washington State Legislature shows how policymakers can build a small bridge to a time in the near future when more private businesses will invest in EV infrastructure on their own.
Learn more about our project and download the business model tool we developed to complete this analysis.
EV Charging Financial Analysis Tool
The EV Charging Financial Analysis Tool was developed for this project by C2ES and the Cadmus Group to evaluate the financial viability of EV charging infrastructure investments involving multiple private and public sector partners.
It uses the discounted cash flow (DCF) analysis method to determine the expected financial returns for EV charging infrastructure investments over the expected lifetime of the charging equipment based on inputs provided by the user.
The tool also provides financial viability metrics from the perspective of both private and public sectors as well as sensitivity analyses for key inputs and assumptions.
February 24, 2015
Climate Leadership Award Winners Announced
WASHINGTON – Sixteen organizations and one individual are being honored today with Climate Leadership Awards for their accomplishments in reducing greenhouse gas emissions and driving climate action.
The awards are given by the U.S. Environmental Protection Agency’s Center for Corporate Climate Leadership, in collaboration with the Center for Climate and Energy Solutions, the Association of Climate Change Officers and The Climate Registry. Awardees will be honored this evening at the Climate Leadership Conference in Arlington, VA.
The awardees come from a wide array of sectors, from finance and manufacturing to retail and local government. Recipients have demonstrated leadership in managing and reducing emissions, investing in energy efficiency and renewable energy, and preparing for the impacts of climate change.
Information on the award winners is at: www.epa.gov/climateleadership/awards/2015winners.html
Following is EPA's press release:
FOR IMMEDIATE RELEASE
February 24, 2015
UPS, Bank of America, SC Johnson among 16 Organizations across the U.S. Recognized for Climate Action
EPA also recognizes Chevrolet Clean Energy Campus Campaign, San Diego Regional Climate Collaborative in new Innovative Partnerships Category
WASHINGTON – From an innovative partnership enabling colleges to sell carbon credits to fund clean energy projects on campuses to some of the country’s leading corporations setting and exceeding aggressive emission reduction goals, the U.S. Environmental Protection Agency’s Climate Leadership Award winners announced today are demonstrating that innovative actions to combat climate change are smart business decisions. Sixteen organizations and one individual representing a wide array of industries from finance and manufacturing to retail and technology show exemplary corporate, organizational, and individual leadership in response to climate change.
“I am proud to recognize our Climate Leadership Award winners for their actions to reduce the harmful carbon pollution that’s fueling climate change,” said EPA Administrator Gina McCarthy. “Our winners are demonstrating that a healthy environment and a strong economy go hand in hand. These organizations are providing the leadership, commitment, and solutions needed to cut greenhouse gas emissions and meet head on the challenge of a changing climate.”
EPA’s Center for Corporate Climate Leadership, in partnership with the Association of Climate Change Officers (ACCO), the Center for Climate and Energy Solutions (C2ES), and The Climate Registry (TCR), announced the fourth annual Climate Leadership Award winners.
The 2015 Climate Leadership Award recipients are:
- Innovative Partnerships Certificate (new category): This award recognizes organizations working collaboratively on leading edge climate initiatives with established objectives to measurably address greenhouse gas reduction goals and/or adaptation and resilience activities. This year’s recipients include:
o ChevroletClean Energy Campus Campaign (Detroit, Mich.): The Chevrolet Campus Clean Energy Campaign marks the first time college campuses have been able to use carbon performance methodologies to earn revenue via GHG reductions that result from on-campus efficiency and clean energy. The Campaign set a 100 percent absolute GHG reduction goal through 2014 (2012 base year).
o San Diego Regional Climate Collaborative (San Diego, Calif.): The Climate Collaborative supports members in setting and meeting GHG reduction targets via trainings and information on GHG inventory and monitoring tools; sharing climate action plan templates; supporting local governments in developing climate action plans; developing capacity for local governments to implement measures in their climate action plans; and more.
- Organizational Leadership Award: Bank of America (Charlotte, N.C.) is being honored with this award for not only completing its own comprehensive greenhouse gas inventory and setting an aggressive emissions reduction goal, but also exemplifying extraordinary leadership in its internal response to climate change through engagement of its peers, competitors, partners, and supply chain, and addressing climate risk in its enterprise strategies. Bank of America issued the first corporate green bond to fund energy efficiency projects in 2013. Bank of America is setting an absolute global greenhouse gas (GHG) reduction goal of 15 percent from 2010 levels through 2015. This goal builds on a previous total reduction of 18 percent of its U.S. GHG emissions from 2004-2009.
- Excellence in Greenhouse Gas Management (Goal Achievement Award): The following organizations are being honored for publicly reporting and verifying organization-wide greenhouse gas inventories and achieving publicly-set aggressive greenhouse gas emissions reduction goals:
- The City and County of San Francisco;
- The Clorox Company (Oakland, Calif.);
- DPR Construction (Redwood City, Calif.);
- SC Johnson (Racine, Wis.);
- Sprint (Overland Park, Kan.); and
- UPS (Atlanta).
- Individual Leadership Award: Mayor Bill Finch, City of Bridgeport, Conn., is being recognized for demonstrating extraordinary leadership in driving meaningful climate action within the Greater Bridgeport community and throughout the City’s operations. The Mayor is implementing an emission reduction goal for the city of 10 percent below 2007 levels by 2020.
- Excellence in Greenhouse Gas Management (Goal Setting Certificate): The following organizations are being honored for publicly reporting and verifying organization-wide greenhouse gas inventories and publicly setting aggressive greenhouse gas emissions reduction goals:
- Brown-Forman Corporation (Louisville, Ky.);
- California Department of Water Resources;
- Capital One Financial Corporation (McLean, Va.);
- CH2M HILL (Englewood, Colo.);
- The Clorox Company (Oakland, Calif.);
- EMC Corporation (Hopkinton, Mass.);
- The Hartford (Hartford, Conn.); and
- Tiffany & Co. (New York).
“After the hottest year globally on record, action on climate change is more urgent than ever,” said Elliot Diringer, executive vice president of C2ES. “We applaud the CLA winners for demonstrating the many paths forward to a low-carbon future, and hope others follow their example.”
“The Climate Registry is honored to recognize an impressive group of climate champions for their dedication to and leadership in addressing climate change in their operations,” said David Rosenheim, executive director of TCR. “This year’s deserving award winners are leading the way in reducing carbon pollution through greater transparency and consistent data, demonstrating the path to a more sustainable future.”
“Climate change presents immense challenges across an incredible array of sectors, geographic regions and job functions," said Daniel Kreeger, executive director of the Association of Climate Change Officers. "The 2015 Climate Leadership Award winners have shown that incorporating climate into decision making is critical to their organizational success and are raising the bar on climate action."
The awards were presented at the 2015 Climate Leadership Conference in Arlington, Va.
EPA's Center for Corporate Climate Leadership establishes norms of climate leadership by encouraging organizations with emerging climate objectives to identify and achieve cost-effective GHG emission reductions, while helping more advanced organizations drive innovations in reducing their greenhouse gas impacts in their supply chains and beyond. The Center provides technical tools, guidance, educational resources, and opportunities for information sharing and peer exchange among organizations interested in reducing the environmental impacts associated with climate change.
More information about the 2015 Climate Leadership Award winners: www.epa.gov/climateleadership/awards/2015winners.html
More information about EPA’s Center for Corporate Climate Leadership: www.epa.gov/climateleadership
One city, company, state or nation can’t solve our climate and energy challenges overnight. Meaningful progress requires a variety of approaches by multiple actors, and that’s why partnerships are critical.
The benefits, indeed, the necessity of partnering and collaborating on climate action is increasingly being recognized.
The MIT 2014 Sustainability Report notes that “a growing number of companies are turning to collaborations — with suppliers, NGOs, industry alliances, governments, even competitors — to become more sustainable.” Collaborating with non-traditional partners was the focus of this month’s National Association of Clean Water Agencies’ (NACWA) Winter Conference, where C2ES President Bob Perciasepe touted the benefits of water and energy utility partnerships. The Environmental Protection Agency (EPA) will recognize the importance of innovative partnerships for the first time in the upcoming 2015 Climate Leadership Awards to be announced Feb. 24 in Washington D.C.
Successful partnerships on climate and energy challenges, like successful relationships, take work. So in honor of Valentine’s Day, we offer the following six rules for strong partnerships:
A new C2ES report highlights lessons useful for companies and policymakers as more states and countries consider carbon pricing to spur innovative technologies and cut emissions at the lowest possible cost.
The report, written for the World Bank’s Partnership for Market Readiness (PMR), examines how three companies — Pacific Gas and Electric (PG&E), Rio Tinto, and Royal Dutch Shell -- prepared for carbon pricing programs.
The PMR shares this type of information with developing countries to help them create their own market-based policies. We were pleased to partner with the PMR to explore how a few of the companies in our Business Environmental Leadership Council prepared for carbon pricing and we thank the companies for sharing their expertise.
The lessons they shared fall into two categories – what business can learn from other companies operating in carbon markets and what governments considering market-based climate policy can learn from business.
Hear from Leaders in Climate and Energy Innovation
Leaders from business, government, academia and nonprofits will share best practices to address climate change through policy and business solutions at the 2015 Climate Leadership Conference Feb. 23-25 in Washington, DC.
The Climate Leadership Conference is hosted by The Climate Registry, the Association of Climate Change Officers, and the Center for Climate and Energy Solutions (C2ES). The Environmental Protection Agency is the headline sponsor.
C2ES is hosting two workshops at the conference.
Conference registration is required to attend the workshops. Register Here
Emerging Best Practices for Identifying Climate Risk and Increasing Resilience
Monday, February 23, 8:30 a.m. – 10:15 a.m.
This workshop will be a knowledge exchange seminar built around discussions on climate-related risks and opportunities for private sector businesses. Discussions will explore strategies companies are using to prioritize and plan; data and tools they use to understand their vulnerabilities and opportunities; key barriers that impede resilience planning; and the partnerships that allow companies to interact with public sector decision-makers that are also building resilience.
Conference Registration Required. Register Here
Chris Benjamin, Director, Corporate Sustainability, PG&E
Robert Kopp, Associate Professor, Rutgers University
Emilie Mazzacurati, Founder and CEO, Four Twenty Seven, Inc.
Janet Peace,Vice President, Markets and Business Strategy, C2ES
Joe Casola, Program Director, Science and Impacts, C2ES
Climate Solutions: The Role of Innovative Partnerships
Monday, February 23, 10:45 a.m. – 12:30 p.m.
This workshop examines ways organizations are working collaboratively on leading-edge climate initiatives, such as greenhouse gas reduction goals and adaptation strategies that go above and beyond the business-as-usual approaches. We know that cross-sector collaboration makes more of an impact than what might be achieved alone. The session will showcase transformational partnerships that produce robust results, innovative solutions and scalability. Participants will be invited to share their own perspectives and explore where new partnerships may be needed.
Conference Registration Required. Register Here
Keith Canfield, Director, Corporate Sustainability Programs, Clinton Climate Initiative
David Tulauskas, Director, Sustainability, General Motors Company
Katie Mandes, Vice President, Community Engagement, C2ES
Understanding the National Enhanced Oil Recovery Initiative
By Patrick Falwell
Solutions Fellow, Center for Climate and Energy Solutions
Vice President, Fossil Energy, Great Plains Institute
Since 2011, the Center for Climate and Energy Solutions (C2ES) and the Great Plains Institute (GPI) have convened the National Enhanced Oil Recovery Initiative (NEORI). Bringing together leaders from industry, the environmental community, labor, and state governments, NEORI has worked to advance carbon dioxide enhanced oil recovery (CO2-EOR) as a key component of U.S. energy security, economic, and environmental strategy. Currently, most CO2-EOR is done with natural underground reservoirs of CO2, yet the industry’s future growth depends on taking advantage of the large amounts of CO2 that result from electricity generation and industrial processes. NEORI therefore is working to turn a waste product into a commodity and to encourage policies that will help bring an affordable supply of man-made CO2 to the market.
As such, NEORI has offered consensus recommendations for federal- and state-level policy action. In May, Senator Jay Rockefeller (D-WV) introduced legislation in the U.S. Congress adopting NEORI’s centerpiece recommendation to reform and expand an existing federal tax incentive for the capture of man-made CO2 and its geologic storage through CO2-EOR.
Going forward, NEORI will work to educate policymakers across the political spectrum and the broader public about the opportunity for CO2-EOR to serve as a national solution to energy and environmental challenges.
BACKGROUND ON CO2-EOR
Although commonly considered a “niche” extractive technology, CO2-EOR is a decades-old practice. Since the 1970s, CO2-EOR projects have utilized CO2 to produce additional oil from otherwise tapped-out fields. CO2 readily mixes with oil not recovered by earlier production techniques, swelling the stranded oil and bringing it to the surface. The CO2 is then separated from the oil and re-injected in a closed-loop process. Each time CO2 is cycled through an oil reservoir, the majority of it remains trapped in the underground formation, where, over time, all utilized CO2 will be stored permanently.
Today, CO2-EOR in the U.S. accounts for over 300,000 barrels of oil production per day, or nearly 5% of total annual domestic production.[i] More than 4000 miles of CO2 pipelines are in place and, as of 2014, approximately 68 million tonnes of CO2 are being injected underground annually for CO2-EOR. Nearly 75% of this CO2 is from naturally occurring deposits, but over time the supply of CO2 from man-made sources is expected to grow significantly. Currently, 11 U.S. states have CO2-EOR projects. Most are in the Permian Basin of Texas, with new activity emerging on the Gulf Coast and in the Mountain West. Untapped opportunities exist in California, Alaska, and a number of states in the industrial Midwest. Estimates suggest that CO2-EOR could ultimately access 21.4–63.3 billion barrels of economically recoverable reserves.[ii] Recovering this oil would require 8.9–16.2 billion tonnes of CO2 that would predominantly come from man-made sources. Technically recoverable reserves offer potential to produce additional oil and utilize more man-made CO2 that is currently otherwise emitted into the atmosphere.
The main barrier to taking advantage of CO2-EOR’s potential has been an insufficient supply of affordable CO2. For an oilfield operator looking to implement CO2-EOR on a depleted oilfield, there is a cost gap between what they could afford to pay for CO2 under normal market conditions and the cost to capture and transport CO2 from power plants and industrial sources. For some industrial sources, such as natural gas processing or fertilizer and ethanol production, the cost gap is small (potentially $10–20/tonne CO2). For other man-made sources of CO2, including power generation and a variety of industrial processes, capture costs are greater, and the cost gap becomes much larger (potentially $30–50/tonne CO2). Recognizing the cost gap as a significant barrier, NEORI has worked to determine the role that public policy can play in narrowing it.
NEORI’S CONSENSUS RECOMMENDATIONS AND ANALYSIS
For the last three years, NEORI has brought together a broad and diverse group of constituencies that share a common interest in promoting CO2-EOR. Some NEORI participants support CO2-EOR as a way to provide a low-carbon future for coal by managing and avoiding its carbon emissions. Others are interested in the jobs and economic growth that deploying new CO2 capture projects, pipelines, and EOR operations will bring. Still other participants want to advance innovative technologies that can capture and permanently store CO2 underground. Despite differences of opinions among participants on other issues, all agree that CO2-EOR is a positive endeavor and that public policy can play an important role in realizing CO2-EOR’s many benefits. As such, NEORI’s participants have crafted a set of consensus recommendations for federal and state policy incentives to enable the widespread deployment of carbon capture technologies to provide CO2 for use in CO2-EOR, while addressing concerns about how incentives have been allocated in the past.
To support its consensus recommendations, NEORI also prepared a quantitative analysis to estimate the extent to which a federal initiative could spur new CO2-EOR projects and improve the federal budget at the same time. An incentive awarded for capturing CO2 from man-made sources for use in CO2-EOR has the potential to be self-financing, given that it could lead to new oil production that is taxed at the federal level. CO2-EOR in the U.S. generates federal revenue from three sources:
1. Corporate income taxes collected on the additional oil production
2. Income taxes on private royalties collected from CO2-EOR producers
3. Royalties from CO2-EOR production on federal land
Together these sources equate to nearly 20% of the sales value of an additional barrel of oil and generate the source of public revenues that will in turn cover the cost of newly allocated incentives.
NEORI’s most recent analysis of the budget implications of a tax incentive reflects the legislation introduced by Senator Rockefeller. This analysis shows that an improved federal incentive could lead to the production of over eight billion barrels of oil and the underground storage of more than four billion tonnes of CO2 over 40 years and generate federal revenues that exceed the value of tax incentives awarded within the U.S. Congress’ standard 10-year budget window.
NEORI PROPOSES AN ENHANCED FEDERAL INCENTIVE
NEORI recommends a reform and an expansion of an existing federal tax incentive, the Section 45Q Tax Credit for Carbon Sequestration. First authorized in 2009, the 45Q tax credit provides a $10 tax credit for each tonne of CO2 captured from a man-made source and permanently stored underground through enhanced oil recovery (a $20 tax credit is available for CO2 stored in saline formations). While enacted with the best of intentions, the existing 45Q program has been unable to encourage widespread adoption of carbon capture technologies for two main reasons. First, 45Q is only authorized to provide tax credits for 75 million tonnes of CO2, a relatively small amount considering how much CO2 could possibly be utilized through CO2-EOR. As of June 2014, tax credits for approximately 27 million tonnes of CO2 had already been claimed, and it is foreseeable that the remaining pool of credits will be exhausted in the near future. Second, 45Q has been unable to provide needed certainty to carbon capture project developers that they will be able to claim the incentive, due to rigid definitions in the tax code and the lack of a credit reservation process. Carbon capture project developers have not been able to present the guarantee of credit availability when seeking private-sector finance.
Under NEORI’s proposal, a larger pool of 45Q credits would be established, while suggested reforms would increase certainty and private-sector investment, improve transparency, and help the program pay for itself fiscally within 10 years.
Allocating New 45Q Credits via Competitive Bidding and Tranches
To minimize the cost of new 45Q tax credits to the federal government, NEORI recommends that carbon capture projects of similar cost bid against one another for allocations of tax credits. Under annual competitive bidding processes, carbon capture projects would bid for a certain tax credit amount that would cover the difference between their cost to capture and transport CO2 and the revenue they would receive from selling CO2 for use in CO2-EOR. The project submitting the lowest bid would receive an allocation of tax credits, and allocations would be made to capture projects up to specified annual limits.
Given the wide difference in capture costs for potential man-made sources of CO2, three separate pools of credits, or tranches, would be established. The creation of separate lower-cost industrialA and higher-cost industrialB tranches for power plants would ensure that an incentive is available for the diversity of potential man-made sources of CO2.
Tax Credit Certification
A certification process would provide essential up-front certainty to carbon capture project developers and enable them to reserve their allocation of 45Q tax credits to be claimed in the future. Upon receiving an allocation of 45Q tax credits through competitive bidding, a project would have to apply for and meet the criteria of certification within 90 days. For example, a carbon capture project would need a contract in place to sell its CO2 for use in CO2-EOR to be certified. To maintain certification, a carbon capture project would have to complete construction in three years, if it is a retrofit, and five years, if it is a new facility.
Revenue Positive Determination and Program Review
Following the seventh annual round of competitive bidding, the U.S. Secretary of the Treasury would assess whether newly allocated 45Q tax credits have been revenue-positive to the federal government. If the new 45Q tax credits are not proving to be revenue-positive, the Secretary will make recommendations to Congress to improve the program. Otherwise, competitive bidding will continue until the next review.
The Secretary of the Treasury also would be advised by a panel of independent experts.
Annual Tax Credit Adjustment Based on Changes in the Price of Oil
Each year, the value of claimed 45Q tax credits would be adjusted up or down to reflect changes in the price of oil. In most instances, the price that CO2-EOR operators would pay CO2 providers for their CO2 is linked explicitly to the prevailing price of oil. When the price of oil rises and CO2-EOR operators are willing to pay more for CO2, the value of 45Q tax credits would be adjusted downward to ensure the federal government does not pay more than needed. Conversely, when oil prices fall, the value of 45Q tax credits would be adjusted upward, ensuring that carbon capture projects receive sufficient revenue.
Tax Credit Assignability
Potential carbon capture project developers include electric power cooperatives, municipalities, and startup companies. Not all of these entities have sufficient tax liability to allow them to realize the economic benefit of a tax credit. As such, NEORI recommends that carbon capture projects have the ability to assign 45Q tax credits to other parties within the CO2-EOR supply chain. This provision could facilitate tax equity partnerships, but only among entities directly associated with the project and managing the CO2.
In a time of considerable disagreement on U.S. energy and climate policy at the federal level, NEORI members believe that CO2-EOR offers broad benefits and the rare opportunity to unite policymakers and stakeholders in common purpose. The NEORI coalition therefore remains committed to educating members of both political parties and the broader public as to how CO2-EOR can generate net federal revenue from domestic oil production, meet domestic energy needs, safely store man-made CO2 underground, and help advance and lower the costs of carbon capture technology.
A. Lower-cost industrial sources of CO2 include natural gas processing, ethanol production, ammonia production, and existing projects involving the gasification of coal, petroleum residuals, biomass, or waste streams.
B. Higher-cost industrial sources of CO2 include cement production, iron and steel production, hydrogen production, and new-build projects involving the gasification of coal, petroleum residuals, biomass, or waste streams.
[i] Kuuskraa, V., & Wallace, M. (2014, 7 April). CO2-EOR set for growth as new CO2 supplies emerge. Oil & Gas Journal, www.ogj.com/articles/print/volume-112/issue-4/special-report-eor-heavy-o...
[ii] Wallace, M., Kuuskraa, V., & DiPietro, P. (2013). An in-depth look at “next generation” CO2-EOR technology. National Energy Technology Laboratory, www.netl.doe.gov/File%20Library/Research/Energy%20Analysis/Publications/...