Fossil Fuel Companies Are Quietly Scoring Big Money for Their Preferred Climate Solution: Carbon Capture and Storage

Over the last year, energy companies, electrical utilities and other industrial sectors have been quietly pushing through a suite of policies to support a technology that stands to yield tens of billions of dollars for corporate polluters, but may do little to reduce greenhouse gas emissions.

These policies have fast-tracked environmental reviews and allocated billions in federal funding for research and development of carbon capture and storage, or CCS, technologies that pull carbon dioxide out of smokestacks or directly from the air before storing it underground. Just a single bill—the bipartisan infrastructure legislation that passed the Senate last week and is now headed to the House of Representatives—includes more than $12 billion in direct support for carbon capture, and could unlock billions more through other programs, according to the recent drafts.

Many environmental advocates argue that the massive government support would be better spent on proven climate solutions like wind and solar energy, which receive far less in direct funding under the infrastructure bill.

“We know today that renewable energy is ready to be deployed, it works, it helps decarbonize the energy sector,” said Josh Axelrod, a senior advocate in the nature program at the Natural Resources Defense Council, an environmental group. “On the flip side, carbon capture has a mixed record, is not widely deployed anywhere, and if it holds promise, it holds promise in the next decade or the next 20 or 30 or 40 years.”

With the infrastructure bill passed, Senate Democrats have turned their attention to a budget reconciliation package that could provide even more support for carbon capture and storage. As part of the reconciliation bill, industry lobbyists are pushing to expand an existing tax credit for the technology that has already given hundreds of millions of dollars to oil companies. The Biden administration and some lawmakers have indicated they approve of the idea. The budget legislation is also expected to include a program that would force utilities to lower emissions and could provide additional funding to fossil fuel power plants that are fitted with carbon capture technology.

Carbon capture and storage does have supporters outside of industry. Axelrod said it could help reduce emissions from some industrial processes, like manufacturing cement. Many scientists and policy experts also say the world might need to remove carbon dioxide from the air decades from now, and a nascent form of carbon capture technology known as “direct air capture” could help.

Simon Nicholson, co-director of the Institute for Carbon Removal Law and Policy at American University, said that if government support for carbon capture and storage is used to help test direct air capture, “then it’s a near-term investment that might have long-term positive implications. That nuance is hard to convey.” But, he added, “it is going to be a bit of a political and commercial scramble for funds here, because the oil and gas companies, the electricity companies, are going to want the money to go towards traditional CCS,” which is attached to smokestacks.

Some environmentalists say that is exactly what is happening. They argue that the money being appropriated by Congress is likely to allow polluting power plants and petrochemical facilities to continue operating longer into the future, while doing little to reduce the nation’s emissions. They also say that, even if the technology is able to cut carbon pollution from petrochemical plants or refineries, it won’t address other toxic chemicals those operations send into communities that are home to many people of color. Electrifying industry and reducing the use of plastics and petrochemicals, these advocates argue, would be far cheaper and safer.

The most powerful forces pushing for carbon capture have been fossil fuel companies, which have promoted CCS for decades but have increased their lobbying and marketing for the technology in recent years as they have fallen under increased pressure to address climate change. 

Soon after launching a new business line that it said will deploy carbon capture technology, ExxonMobil in April proposed a $100 billion mega-project in Houston that would capture emissions from the region’s heavy industry and store it underground.

But there’s a catch: The company said it would need substantial government funding to move forward. With the two major pieces of legislation working their way through Congress, Exxon may get what it wants.

A Politically Appealing Opportunity

Nearly three years ago, a major United Nations’ climate report fundamentally altered the public discourse on climate change by highlighting the far-reaching effects expected if the world warmed just 1.5 degrees Celsius (2.7 degrees Fahrenheit). Advocates and scientists spoke with new urgency about the need to rapidly reduce emissions. Governments and corporations began announcing plans to reach “net-zero” emissions. And carbon capture and storage started to receive renewed attention, with the growing realization that every emissions-cutting tool might be needed to get there.

In the United States, CCS has also offered a politically appealing opportunity to reach consensus on climate change: The energy industry and many Republicans who oppose other solutions support carbon capture and storage, as do unions that represent people who work in the fossil fuel sector.

Lee Beck, international director for carbon capture at the Clean Air Task Force, an environmental nonprofit, said carbon capture and storage could help reduce emissions faster and more cheaply in some parts of the world, particularly in Asia, home to many newly-built fossil fuel power plants that could continue spewing greenhouse gases for decades.

“We need to deploy as many solutions as fast as possible,” she said.

But just as carbon capture and storage has drawn increased attention, the plummeting costs of wind and solar energy have eroded the case for using the technology in the power sector. In most parts of the United States and much of the rest of the world, renewable power sources are already competitive with or cheaper than burning fossil fuels to generate electricity. Adding expensive carbon capture equipment to a fossil power plant would only tilt the balance further in favor of renewable sources.

The federal government has poured billions of dollars into carbon capture demonstration projects that were never completed. The only commercial power plant in the country to use carbon capture and storage shut its emissions-cutting operations last year during the pandemic, and later announced it would suspend them indefinitely. This hasn’t stopped some companies from continuing to try to implement the technology.

“CCS for power plants is something of a boondoggle,” Nicholson said.

As the case for carbon capture power plants has collapsed, supporters have argued that the technology is still worthy of support because of the role it could play in decarbonizing industry or in removing carbon dioxide from the air. The bipartisan infrastructure bill provides $3.5 billion to direct air capture technology, according to recent drafts.

But many environmental advocates warn that much of the rest of the money in the infrastructure bill is likely to go toward expanding some of the more problematic uses of the technology.

There are about a dozen carbon capture plants operating in the United States, most of which are attached to natural gas processing, ethanol or fertilizer plants, which produce emissions that are high in carbon dioxide and therefore relatively cheap to capture. The vast majority of that captured carbon dioxide is then sold to oil companies, which pump the gas into depleted oil reservoirs to squeeze more petroleum out of the ground. The companies say most of the carbon dioxide stays underground permanently, though long-term monitoring is limited. Either way, the gas serves as a tool to produce oil that would otherwise be left underground.

Exxon and other companies have already received hundreds of millions of dollars for capturing carbon dioxide and selling it for use in oil fields through a federal CCS tax credit, which was created in 2008 and then expanded in 2018. At the same time, Exxon led an ultimately successful lobbying campaign to strip the requirement that the Environmental Protection Agency oversee the operations of companies that claim the credit, to ensure the greenhouse gas is not escaping into the atmosphere.

In December, after lobbying from industry, Congress extended how long companies could claim that credit, as part of an omnibus budget bill. Now, energy and industrial companies are pushing lawmakers to take advantage of the reconciliation bill to further expand the tax credit and increase the amount of money that companies can claim for capturing emissions, whether or not the gas is used to produce more oil.

“The last thing that U.S. taxpayers should be doing is subsidizing fossil fuels, especially subsidizing drilling for oil,” said Jim Walsh, senior energy policy analyst at Food and Water Watch, an environmental group.

A New Interdependency?

The December omnibus bill and the bipartisan infrastructure bill currently moving through Congress include numerous other measures that support carbon capture technology, including fast-tracked environmental reviews, billions of dollars for demonstration projects and loan guarantees and billions more to fund projects that make hydrogen from natural gas with carbon-capturing equipment. One section of the infrastructure bill encourages states to waive property taxes for carbon capture projects for at least 10 years. Axelrod, of the Natural Resources Defense Council, said these are the latest in a series of policies that industry has won.

“What happened over the course of a decade of legislation is all these little individual pieces and policy mechanisms have been passed into law that basically subsidizes industry,” he said, “and the industry in this case is pretty overwhelmingly the fossil fuel industry.”

Other provisions in the infrastructure bill would pour billions into building carbon dioxide pipelines and funding research into making plastics and other products out of the gas. Walsh said the funding could make it harder to phase out fossil fuels, by creating new jobs and economies that depend on their emissions.

“It’s creating this new interdependency on fossil fuels,” he said.

Many environmentalists also warn that, even if carbon capture and storage proves successful, it fails to address other damage caused by the industry and its products.

“What we’re talking about is essentially allowing environmental injustice to continue, and in fact doubling down on it,” said Kendall Dix, policy lead at the Gulf Coast Center for Law and Policy, a climate justice-focused nonprofit. He said many Gulf Coast communities face unacceptable toxic pollution from petrochemical plants that could continue to operate for longer if fitted with carbon capture equipment.

Nicholson, of the Institute for Carbon Removal Law and Policy, said environmentalists’ concerns are real. But he said that doesn’t mean the government can’t carefully fund the research and development of technology that could help remove carbon dioxide from the air years in the future, even as it acts to phase out fossil fuels now.

“It’s a little tricky trying to treat it as a zero-sum game,” he said, adding that the key will be whether government support for carbon capture acts to test the technology or simply to support the fossil fuel industry. “How this money is going to be spent will really matter.”