This article appeared in the December 2016 edition of Carbon Capture Journal
Finding ways to convert carbon dioxide from an energy and industrial sector waste product to a useful commodity could spur the development of new technologies, products, and industries while limiting emissions to the atmosphere of climate-altering pollutants. In 2016, U.S. policymakers demonstrated leadership in this area by introducing several bills that would provide commercial deployment incentives for carbon capture use and storage (CCUS) technology.[i]
While CO2 has been safely used for carbon dioxide enhanced oil recovery (CO2-EOR) for over 40 years in the United States, there is an increased focus on identifying options for re-use of CO2 for other purposes. Indeed, in July, Senators Heidi Heitkamp (D-ND) and Sheldon Whitehouse (D-RI) introduced a bill to extend 45Q (the major tax credit for CO2-EOR) that expressly expanded the use of the tax credit to allow it to apply to other forms of CO2 utilization.[ii] Recent scientific developments in CO2 re-use are promising but challenges will have to be overcome to achieve additional progress.
Looking forward, the new administration and new Congress will need to consider how best to incentivize continued research, development, and demonstration (RD&D) and commercial-scale deployment of CO2 utilization technology, especially as the U.S. begins to lay the foundation for a strategy of deep decarbonization by mid-century.
CO2-EOR: The Best Re-Use Option . . . Today
Since the 1970s, the U.S. independent oil and gas industry has led the world in CO2-EOR, mostly using natural CO2. Captured CO2 is used commercially in the U.S. to recover more oil from already developed oil fields. That CO2 can be then safely and permanently stored underground in those same oil and gas reservoirs. The U.S. produces 300,000 barrels per day, or nearly 3.5 percent of our annual domestic oil production, through this method.[iii] Recent estimates suggest that in the coming years the oil and gas industry could technically produce between 56 – 106 billions of barrels of additional American oil from existing fields using CO2-EOR technology. [iv] This would involve the use of 22,270 – 33,050 million metric tons of CO2.[v]
The climate benefits of CO2-EOR are clear. Last fall, the International Energy Agency concluded that for every barrel of oil produced using manmade CO2, there is a net CO2 storage of 0.19 metric tons.[vi] This analysis includes the CO2 emissions from use of the oil and the impact of increased demand for oil due to lowered oil prices from the additional supply of oil.[vii] In light of the economic and environmental benefits of CO2-EOR, the National Coal Council (a federal advisory committee to the Secretary of Energy) recently released a draft report concluding that CO2-EOR is the “most immediate, highest value opportunity to utilize the greatest volumes of anthropogenic CO2.”[viii]
In addition to CO2-EOR, additional geologic re-use options for CO2 include CO2 shale, enhanced coal bed methane, enhanced water recovery, and enhanced geothermal. The National Coal Council concluded that these geologic options “have the greatest potential to advance CCUS by creating market demand for anthropogenic CO2.”[ix] Certainly, a major benefit of reusing manmade CO2 is creating a revenue stream to offset the costs of capturing carbon dioxide.
Next Generation Uses of CO2: NRG COSIA Carbon X-Prize
Last fall, the $20 million Carbon X-Prize was launched after many years of collaboration between investors, utilities, and non-profit organizations who agreed that CO2 could be transformed from a liability to an asset.[x]
On October 17, 2016, the NRG COSIA Carbon X Prize announced 27 semifinalist teams from the U.S., Canada, China, India, Switzerland, and Scotland.[xi] Track A focuses on creating products from CO2 from coal power plants and Track B focuses on CO2 from natural gas plants. The semifinalists are developing a wide range of products, from minerals for concrete and other building materials, to biofuels, paint, fertilizers, health supplements, and even toothpaste.[xii] There is a team re-using CO2 to develop carbon nanotubes, which can be used to make environmentally sustainable lithium-ion and sodium-ion batteries and teams creating CO2-based methanol, which is a potential drop-in fuel, meaning that it is interchangeable with existing petroleum-based fuels.[xiii]
During Round 3, the teams will demonstrate their technologies at a larger scale under real world conditions using test centers adjacent to existing power plants. The winner of each track will be awarded a $7.5 million grand prize in March 2020.
Challenges: Technical, Market, and Policy
In general, the three main types of carbon capture are pre- and post-combustion and oxyfuel combustion.[xiv] Each of these includes a number of technologies, including but not limited to the use of solvents, sorbents, membranes, and carbonate fuel cells. Some carbon capture technologies have a much higher energy penalty than others. Putting aside the technological challenges related to capturing CO2, there are a number of technical challenges related to the re-use of captured CO2, including the following:[xv]
- Processes need to be efficient in light of thermodynamic constraints. There is an energy penalty associated with the conversion of CO2 to other substances. The CO2 molecule is stable and breaking the bonds through a chemical or catalytic method often requires a large amount of energy, which affects the lifecycle analysis of emissions reduction. Innovators have explored using renewable energy for this task. If renewable energy prices continue to drop, that would enable greater use of such energy for conversion of CO2 through chemical or catalytic methods.
- Due to the cost of transport, the re-use of CO2 will need to take place near sources of captured CO2, which is a geographic constraint.
- Due to the volume of manmade CO2, re-use options need to be possible in many seasons and in various climates and on a commercial-scale.
Finally, one overarching technical challenge is the urgency of climate change – CO2 utilization options need to be able to be deployed on a commercial-scale quickly.
There are also a number of market challenges that have slowed down the creation of a market for CO2. Government investment has focused more on the capture side of CCUS than on the re-use aspect and it may be time for more emphasis on re-use. Between Fiscal Years 2005 and 2014, the U.S. Department of Energy invested $7.6 billion in carbon capture and storage and $100 million in beneficial re-use of CO2.[xvi] Many of the opportunities for re-use of CO2 will be competing with mature, high-volume manufacturing technologies that have been optimized for efficiency and have the confidence of customers.[xvii]
Additional market challenges include the following:
- Options for re-use of CO2 are highly diverse and it is not easy to compare their performance and benefits.[xviii]
- The potential economic benefits of CO2 conversion for re-use are largely unquantified because the technologies are in early stages of development.[xix] The climate benefits of re-use of CO2 are also not fully quantified.[xx]
- Utilities are not able to take on the technological or financial risk of investing in CO2 re-use options.[xxi] Legal and regulatory obstacles prevent testing of promising technologies on operating power plants.[xxii] As a result, utilities are also not regularly communicating with CO2 re-use innovators to inform the R&D process.
- Regulations on CO2 emissions are not stringent enough to independently drive the creation of a commodity market for CO2.[xxiii]
Certainly, products made from captured and re-used CO2 could be green-labeled and if the CO2-derived versions provided additional benefits not provided by existing options (such as for fuels, concrete, etc.) that would also help the CO2-derived products compete in the market.
With respect to business models, there may be some challenges that can be overcome by creative innovation. For example, power companies may be looking to enter into contracts to sell CO2 that are as long as the remaining useful life of the power plant (maybe 40 years), while re-users of CO2 may be looking to realize profits for investors within 10 years.[xxiv] If re-users of CO2 are start-ups, utilities may be concerned about whether the companies will remain in business for the duration of power plant operations.[xxv] There is also a question regarding whether the potential market for products derived from CO2 is large enough to absorb the amount of CO2 that will need to be captured to meet our mid-century climate goals. Innovative business models will be needed to resolve these challenges.
There may also be a number of policy challenges. The international ASTM standards for materials like concrete may need to be revised to reflect new approaches. On the regulatory side, CO2-EOR and other geologic storage technologies are recognized under U.S. law for their emissions reduction benefits, including under the Clean Air Act Prevention of Significant Deterioration (PSD) permit program, the Standards of Performance for Greenhouse Gas Emissions from New, Modified, and Reconstructed Electric Utility Generating Units, and the Clean Power Plan.[xxvi] The U.S. Environmental Protection Agency will need to review options for CO2 utilization to determine whether they are as effective as geologic storage for reducing CO2 emissions. With respect to the Clean Power Plan specifically, EPA must review evidence concerning “the ultimate fate of the captured CO2 and the degree to which the method permanently isolates the captured CO2 or displaces other CO2 emissions from the atmosphere.”[xxvii]
The Global CO2 Initiative Roadmap Project: Looking for Solutions
Researchers and industry experts are working on solutions to these technical, market, and policy challenges. The Global CO2 Initiative was launched in January 2016 with the goal of capturing 10 percent of annual global CO2 emissions and transforming them into valuable products. In October 2016, it determined that significant progress was made in CO2 utilization research over the past five years and concluded that “[m]omentum is favorable for four major markets – building materials, chemical intermediates, polymers, and fuels.”[xxviii]
In its roadmap, the Global CO2 Initiative identified five strategic actions to accelerate commercial deployment of CO2 utilization options.[xxix] First, policymakers should implement a price on carbon, increase mandates for renewable products and fuels, and incentivize continued emissions reductions. Second, research should be funded to decrease the cost of CO2 utilization. Third, production can be scaled-up through collaborations among researchers, entrepreneurs, governments and businesses for process integration of carbon capture, CO2 conversion, and hydrogen generation. Fourth, infrastructure is needed to link generators of CO2 with users of CO2 to ensure a reliable source of CO2. Finally, funders should explore applied research into long-shot technologies and applications with high CO2 abatement potential.
International agreements to reduce greenhouse gas emissions in 2016 demonstrate a global recognition of the need to reduce CO2 emissions. In order to meet mid-century climate goals, nations and other actors need to ramp up CO2 utilization quickly. The good news is that the pace of technological discovery is often surprising. Examples include the semiconductor industry and research in robotics. Estimates for the global size of the CO2 utilization market by 2030 in carbonate aggregates, fuels (methane and liquid fuels), concrete, methanol, and polymers are as large as $700 billion, utilizing 7 billion metric tons of CO2 per year, which is equivalent to approximately 15 percent of current global CO2 emissions.[xxx] With appropriate policy incentives, the U.S. can take a leadership role in in CO2 utilization. The rewards will be great.
[i] See, e.g., H.R. 4622, 114th Cong. (2016) available at https://www.congress.gov/bill/114th-congress/house-bill/4622 ; H.R. 636, 114th Cong. (2016), available at https://www.congress.gov/amendment/114th-congress/senate-amendment/3645 ; S. 2012, 114th Cong. (2016), available at https://www.congress.gov/114/bills/s2012/BILLS-114s2012es.pdf ; H.R. 2883, 114th Cong. (2016), available at https://www.congress.gov/bill/114th-congress/house-bill/2883 ; S. 2305, 114th Cong. (2016), available at https://www.congress.gov/bill/114th-congress/senate-bill/2305
[ii] S. 3179, 114th Cong. (2016), available at https://www.congress.gov/bill/114th-congress/senate-bill/3179
[iii] Oil and Gas Journal Survey (2014).
[iv] National Coal Council, CO2 Building Blocks: Assessing CO2 Utilization Options 96 (Aug. 2016).
[vi] IEA, Storing CO2 Through Enhanced Oil Recovery (2015), available at https://www.iea.org/publications/insights/insightpublications/CO2EOR_3Nov2015.pdf
[viii] National Coal Council, supra at 1.
[ix] Id at 20.
[x] Xprize Foundation. Carbon Conversion Landscape Analysis 5 (Dec. 2014); Prize Capital LLC. Commercializing the CO2-Asset Industry 17 (2013).
[xi] NRG COSIA Carbon X Prize, 27 Teams Advancing in $20M NRG COSIA Carbon Xprize (Oct. 17, 2016), available at http://carbon.xprize.org/press-release/27-teams-advancing-20m-nrg-cosia-carbon-xprize
[xii] Paul Bunje and Marcius Extavour, Carbon Xprize Team Semi-Finalists to Transform CO2 Waste Into Building Materials, Biofuels, and Toothpaste (Oct. 17, 2016), available at http://carbon.xprize.org/news/blog/carbon-xprize-team-semi-finalists-transform-co2-waste-building-materials-biofuels
[xiv] Global CCS Institute, Capture, available at https://www.globalccsinstitute.com/content/capture
[xv] Prize Capital LLC, supra at 66.
[xvi] Xprize Foundation, supra at 16.
[xviii] Id at 17.
[xix] Id at 18.
[xx] Xprize Foundation, supra at 18.
[xxi] Id at 19.
[xxii] Prize Capital LLC. Commercializing the CO2-Asset Industry 111-12 (2013).
[xxiii] Xprize Foundation, supra at 19.
[xxiv] National Coal Council, supra at 2.
[xxvi] Id at 2, 13-14.
[xxvii] 80 Fed. Reg. 64,662, 64,884 (Oct. 23, 2015).
[xxviii] Global CO2 Initiative, Draft Roadmap for Implementation of Carbon Dioxide Utilization Technologies 1 (Oct. 2016).
[xxix] Id at 2.
[xxx] Id at 3.