US carbon capture storage hit by inflation, Trump

Reuters

30-04-2025

Summary
Investment in large U.S. carbon capture storage facilities has been dented by inflation and Trump's spending freeze, impeding greener pathways for cement and other industries.
April 30 - Carbon capture utilisation and storage (CCUS) is seen as a key tool to reduce carbon emissions from industrial operations and power plants, but making the leap to larger commercial projects is proving challenging.
CCUS allows CO2 to be captured from burning fossil fuels and either stored or utilised in other industrial processes.
Carbon capture technology is particularly useful in hard-to-abate sectors, such as cement, steel and chemical production. Tax credits introduced by the Biden administration helped to spur early projects but the future of support under President Donald Trump is uncertain.
CCUS must be widely deployed at scale to become more economical and larger commercial projects are few and far between. Most operational CCUS projects are based on enhanced oil recovery in the oil industry.
CHART: Sources of US CO2 emissions in 2022
While some customers are prepared to pay a premium for decarbonised products, CCUS requires large investments and attracting investors is difficult. Many companies have funded first of a kind projects from their own balance sheets, a spokesperson for energy technology firm Baker Hughes told Reuters Events.
'There is an established investment infrastructure and fundraising capability for traditional oil and gas and LNG projects, but for CCUS, clean power and other new technologies — it is far more challenging,' the spokesperson said. 'For unproven technology at scale, external funding is simply not there except for in very rare circumstances.'
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Soaring power demand for AI and data centers may offer some additional pathways for CCUS projects. Last month, Baker Hughes signed a partnership with Frontier Infrastructure to develop integrated CCUS, gas-fired power and data center projects across the United States.
"By integrating gas-fired energy with the potential for permanent carbon storage, we are creating a direct, reliable power solution tailored to evolving industrial needs," Frontier CEO Robby Rockey said in a statement.
Tax credits
The Biden administration boosted investment in CCUS projects by issuing 45Q tax credits and direct grants to encourage investment.
The credits offer $85 per ton of CO2 sequestered providing wage and apprenticeship standards are met and they spurred the announcement of more than 270 projects that "span the carbon management value chain" and are at different levels of technology readiness, Christian Flinn, Public Policy Manager for the Carbon Capture Coalition, told Reuters Events.
However, inflation has eroded the value of the tax credits and pushed up project prices.
Developers face roughly 30% higher capital costs due to post-pandemic inflation, high interest rates and permitting difficulties, Howard Herzog, Senior Research Engineer with the MIT Energy Initiative, said.
'The optimism that the Bipartisan Infrastructure Bill and the Inflation Reduction Act generated is all but gone,' he said.
Credits alone do not offer enough support for many projects, including most of the 90 U.S. cement plants in operation, according to Peter Findlay, Director, CCUS Economics at Wood Mackenzie.
Wood Mackenzie forecasts U.S. CCUS capacity will double to 104 million tonnes a year by 2034.
'Increased and more certain incentives to decarbonise would spur this number higher," Findlay said.
Funding unclear
The Biden administration's Infrastructure Investments and Jobs Act has already spurred $1.7 billion of federal and private investment in CCUS projects, said Flinn. The act provides funding for CCUS power generation and industrial demonstration projects, CO2 pipelines and four regional Direct Air Capture Hubs.
In December 2024, the Department of Energy (DOE) opened applications for $750 million of funding for commercial scale projects at one coal-fired plant or two industrial facilities; $450 million for large-scale CCUS pilot projects; and $100m for the design of CO2 transport and storage infrastructure. DOE said it had begun negotiations with Calpine over part financing the addition of 2 million tonnes a year CCUS capacity at its 896 MW gas combined heat and power facility in Baytown, Texas.
However, the fate of the support announced in December is uncertain as a result of the Trump administration's spending review.
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State initiatives can also drive investment, such as California's low carbon fuel standard, and pressure on large companies by shareholders also plays a role, Herzog noted.
The Trump administration may opt to keep the 45Q credit as many CCUS projects are in Republican states and the financing required is relatively small, Findlay said.
DOE grant programs may be more at risk, he warned.
Cement leaders
CCUS is playing a growing role in decarbonising the global cement industry.
The technology is essential for the cement industry to meet net zero, a spokesperson for German multinational Heidelberg Materials told Reuters Events.
CCUS could account for 36% of global carbon reduction towards net zero carbon concrete by 2050, according to a roadmap set out by the Global Cement and Concrete Association.
Heidelberg Materials has proposed a CCUS project at its Mitchell cement plant in Indiana that would supply 2 million tonnes of CO2 a year for storage or use from 2030. Test well drilling began in January with $8.9 million funding from the DOE's CarbonSAFE project.
Heidelberg will open its first large scale CCUS facility this year at its Brevik plant in Norway in Northern Europe. The project will be able to capture 400,000 tonnes/year of carbon and was made possible by strong government support, the availability of co-funding and social acceptance for CCUS technology in Norway, the company spokesperson noted.
The public sector plays an important role 'in ramping up green markets and accelerating the shift to climate-friendly products by adapting its procurement procedures," the spokesperson said.
U.S. federal legislation over the past decade laid the groundwork for CCUS deployment but this must 'mark the beginning, not the end, of necessary efforts to build the portfolio of available federal policies for carbon management technology deployment," Flinn said.