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Carbon Management – Major Opportunity for Transatlantic Climate Cooperation
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Carbon Management
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As the European Union moves to address the ongoing energy crisis, a strategic partnership with the United States is forming to address the issue of energy security. While a strengthened partnership between both regions is crucial for addressing security needs in the immediate term, this moment presents a key opportunity for a strong alliance on climate as well - and in particular for joint action to advance climate technologies like carbon management. This blog provides an overview of the ways carbon management is progressing in the United States and European Union, the issues that must be addressed, and how strategic transatlantic cooperation on carbon management may safeguard energy security and climate objectives alike.

In March 2022, the United States (US) and the European Union (EU) issued a joint statement on European Energy Security, laying out their ambitions to reduce Europe's dependency on Russian energy by increasing transatlantic energy trade. The agreement hails the beginning of a new era of transatlantic energy cooperation. But while the objective of the joint statement is energy security, both parties seek to ensure that climate action is not left by the wayside. 

The joint statement outlines the scope for increased transatlantic cooperation in the immediate term, but leaves some areas, such as the trade of clean and renewable energy and reducing methane emissions, in need of further clarification. For example, the US and EU commit to constructing clean and renewable hydrogen ready infrastructure but provide no definition for ‘hydrogen ready’ or details on what this might entail.

Though cooperation in developing carbon management was a noticeable absence from the joint statement, the most recent G7 Climate, Energy and Environment Ministers’ Communiqué concludes with the intention for members to work together to explore carbon management. With long-term cooperation on decarbonized transatlantic energy trade, carbon management will provide a major source of economic growth and a key role in reducing the CO2 emissions of various forms of energy, as US Special Presidential Envoy for Climate, John Kerry, outlined recently. Hence, while fossil gas might represent the first step in establishing stronger transatlantic climate cooperation, it should certainly not be the last. The G7 Communiqué is a positive step in this direction.

 

Carbon management – a growing industry on both sides of the Atlantic

Developing transatlantic cooperation on carbon capture and storage presents the perfect opportunity for the EU and US to work together to reach their climate goals. Carbon capture takes CO2 from heavy-emitting sources, such as industrial facilities, and stores it permanently in geological formations. Additionally, new carbon capture technologies like direct air capture take CO2 from the atmosphere and permanently store it underground.

Carbon management, which includes carbon capture and storage as well as carbon removal technologies like direct air capture, can also play a significant role in the production of zero-carbon fuels like hydrogen and ammonia, and to decarbonize existing hydrogen production. Developing and rapidly commercializing these technologies will be essential over the coming decades. In its most recent assessment, the Intergovernmental Panel on Climate Change (IPCC) outlined that carbon management technologies remain central to reducing global CO2 emissions and reaching climate goals.

 

Carbon capture and storage in the US

In November 2021, the US enacted the Infrastructure Investment and Jobs Act (IIJA), which includes the largest investment in carbon management since the Department of Energy began funding carbon capture research in 1997. Currently, lawmakers are also proposing a package of 45Q enhancements – tax credits that can be used to fund carbon management projects – that if enacted could, in tandem with the IIJA, expand US carbon capture capacity 13-fold by 2035. These enhancements include direct payment of the tax credit  to ensure that projects receive the full value, extending commence construction deadlines to 2032, decreasing capture thresholds, and increasing the value of the credit to $85 per ton for saline storage.

Since the reform of 45Q in 2018, carbon capture projects have been announced for a variety of industrial and power applications. At the end of 2021, there were 84 projects in some phase of development, with 51 announced in 2021. 71% of announced projects plan to store the CO2 in saline aquafers. Interest comes primarily from the industrial sector, and coming in second is the electricity sector, with 23% of projects connected to powerplants.

https://www.catf.us/ccsmapus/

 

Carbon Capture in the EU

Similarly, the EU has been progressing steadily in building out the policy framework to deploy carbon capture and storage. The recently released External Energy Engagement communication from the European Commission references the importance of developing carbon management through developing international co-operation on issues related to CO2 transport and storage infrastructure, while also developing policies to bring the technologies to market maturity back home. In October 2021, the European Commission held its first annual Carbon Capture Utilisation and Storage (CCUS) forum, which provided signs of political support to develop the technology across the Union. Until now, this effort has primarily been led by Member States, several of whom provided funding through the Recovery and Resilience Facility for carbon management development.

At the EU-level, the Innovation Fund, aimed at developing the next generation of climate technologies, also provided over €1 billion for carbon management projects. However, significant work is still needed to develop carbon management in Europe. Analysis from Clean Air Task Force shows a gap of 50% between projects to capture CO2 and those which will store CO2 by 2030 as well as a clear cumulative funding gap of approximately €10 billion between Europe’s ambitions and available funding for carbon capture and storage. A clear strategy to develop carbon management would prove effective to address these issues and provide an overarching vision to reach full scale development in Europe.

 

Creating climate opportunity through carbon management

In developing advanced climate technologies like carbon capture and storage, significant work is needed from both the US and EU if they are to follow through on their climate pledges. Having established a strategic partnership on energy security, now is the perfect opportunity to take greater steps to develop a climate partnership on carbon management. The US and EU could take these three key steps to develop such a partnership:

  1. Establish only zero carbon transatlantic energy trade

As outlined earlier, the growing cooperation between the EU and US has predominantly focused on meeting Europe’s needs for fossil fuels, thanks to the US’s status as a net energy exporter. However, this has not solved the problem of ensuring energy security. Studies project that Europe is expected to increase its hydrogen consumption from 8.3 Mt/year to more than 60 Mt/year by 2050 to decarbonize its hard-to-electrify sectors, as shown in the graph below.

 

Sources: Guidehouse, European Hydrogen Backbone 2021, DNV Pathway to Net-Zero 2021 and CATF Europe Decarbonisation Pathway Analysis 2022

 

Recently, EU climate chief Frans Timmermans acknowledged that Europe will not be able to produce hydrogen in sufficient quantities to satisfy the projected demand. Rather than focusing on developing an energy security strategy focused on oil and gas, the EU and US should move to simultaneously focus on ensuring the trade of zero-carbon fuels like hydrogen and ammonia while also ensuring that any new infrastructure designed to import liquefied natural gas (LNG) also be designed to include facilities capable of transporting these zero-carbon fuels as well as CO2. This has already been proposed by Germany, where a CO2 export terminal has been proposed at Wilhelmshaven, in addition to the LNG facility. Now, the US and EU must move to make this the standard, not the exception.

 

  1. Enable a strategic carbon management alliance

The US and EU should enable an alliance committed to developing carbon management technologies. This could take the form of using existing initiatives such as the EU-US Energy Council, the Trade and Tech Council, the Partnership for Transatlantic Energy and Climate Cooperation or the Transatlantic Green Technology Alliance. By establishing carbon management as a key priority in these initiatives, the EU and US can enable best practice and policy sharing to advance the deployment and commercialization of carbon management across both regions. In particular, both the US and EU could outline the successes of policies and initiatives to support carbon management such, as their respective 45Q and Innovation Fund initiatives. This will be particularly important if the transition to a decarbonized industrial sector can be realized in both regions, but also will be critical to ensure new carbon removal technologies like direct air capture can be scaled up.

 

  1. Ensure sufficient investment for carbon management development on a global scale

The US and EU could also send strong political signals on the need to provide investment in order to commercialize carbon management technologies around the world. Globally, carbon management investment and development is significantly behind the growth trajectory required to reach a 1.5°C world, while public investment is significantly below what is needed to realize full scale development of carbon management. Given the considerable economic and political power of the EU and US, both can contribute significant public and private investment to commercialize the technology domestically. This would enable cost reductions to come from increased deployment and ultimately ensure a greater availability of the technology as an option to decarbonize key sectors of the global economy. Furthermore, both the EU and US could play a key role in securing investment for carbon management elsewhere through initiatives such as growing and replenishing the World Bank CCUS Trust Fund. This would signal opportunity for additional private investment in carbon management in major hubs and regions across the world.

Transatlantic Cooperation: The next step for carbon management

The current energy crisis has enabled the US and EU to merge closer than ever on energy policy, which opens a unique window to work in tandem on transatlantic climate cooperation. This opportunity should not be missed. Carbon management is an area where key cross-cutting issues in the energy transition can be navigated, such as by enabling the trade of zero-carbon fuels as well as working to ensure the industrial sectors in both regions can become net-zero.

This contribution has sought to outline not only the path carbon management development has taken until now, but also where it can go in the future. With greater transatlantic cooperation, the US and EU can ensure advanced climate technologies like carbon management can reach full scale deployment, which will be crucial in our planet’s fight against global climate change.

 

 

 

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Eadbhard Pernot Photo

Eadbhard Pernot

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Policy Associate, Carbon Capture Clean Air Task Force
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Marc Jaruzel Photo

Marc Jaruzel

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Policy Analyst, Carbon Capture, Clean Air Task Force