Blog By: Erik Farleigh

In August 2023, the Biden-Harris Administration announced its plans to invest $ 1.2 billion in two United States carbon removal start-up companies.[i] While the idea of humans exerting greater control over our environment to improve and protect the lives of humans is exciting, such a significant government investment in a burgeoning industry will have negative consequences for both the carbon removal industry and the humans who stand to benefit from it.

Carbon dioxide emissions have increased drastically in the last century due to the increased burning of fossil fuels.[ii] The increase in human consumption of fossil fuels, thereby releasing more carbon dioxide into the atmosphere, has, and will continue to have, some heating effect on the earth’s surface.[iii] However, current trends do not indicate that carbon emissions will decrease in the near future.[iv] “Even as nations diversify their energy portfolios, fossil fuels are expected to meet a majority of the world’s energy demand for several decades.”[v]

With the above considerations in mind, carbon capture is an exciting possibility if it proves to be feasible. “Direct air capture removal projects are akin to huge vacuum cleaners sucking carbon dioxide out of the air, using chemicals to remove the greenhouse gas.”[vi] In theory, carbon capture can be used to capture “more than 90 percent of carbon dioxide (CO2) emissions from power plants and industrial facilities.”[vii] What is more exciting is that beyond merely pulling carbon dioxide out of the air, “[c]aptured carbon dioxide can be put to productive use” in various building materials or in obtaining more natural resources.[viii] For example, certain U.S. companies are trying to figure out ways to use captured carbon to manufacture “jet fuel and automobile seats.”[ix]

According to the Department of Energy, the Biden-Harris administration’s 1.2 billion dollar investment is the “world’s largest investment in engineered carbon removal history.”[x] This is excellent news for the owners of the South Texas Direct Air Capture Hub and Project Cypress in Louisiana.[xi] However, what about the dozens of other carbon capture companies in the United States (not to mention those that exist abroad as well as the carbon capture companies that have not yet been founded) that might be able to do carbon capture cheaper, more effectively, and use carbon in a way that maximizes benefits for humans?[xii] The fact of the matter is that “subsidized firms get an unfair competitive advantage over firms that do not receive a government subsidy, and policymakers, instead of the market, pick winners and losers.”[xiii] Furthermore, government investment in industry distorts the market, giving a head start to companies that may not be the most economically feasible or profitable.[xiv]

One example of the strange incentives that come from government investment in carbon capture technology can be found in the Bipartisan Infrastructure Bill.[xv] The Secretary of Energy is empowered to invest in carbon “sequestration” projects.[xvi] In providing grants for carbon capture companies, the Bipartisan Infrastructure Bill added the requirement that priority shall be given to projects with lots of “storage capacity.”[xvii] Instead of incentivizing companies to put captured carbon to productive use, the law incentivizes pumping captured carbon into the ground where it is useless to anybody.[xviii] Unless there is a drastic change, of course, the “winners” of the carbon capture industry will not be the companies attempting to turn captured carbon into jet fuel; it will be the companies that acquire as much “storage” as possible.

Carbon capture is an exciting new technology. However, government distortions in this new and exciting industry have the potential to turn an exciting new technology into a dud. What is the solution? Congress should reconsider its position, amend our laws, and cease investing in carbon capture technology.

[i] Ella Nilson, Biden Administration to Invest $1.2 Billion in Projects to Suck Carbon Out of the Air, CNN Politics (Aug. 11, 2023, 5:01 AM), https://www.cnn.com/2023/08/11/politics/direct-air-capture-funding-biden-administration/index.html [https://perma.cc/3YW7-CQNG]

[ii] Rebecca Lindsey, Climate Change: Atmospheric Carbon Dioxide, NOAA Climate.gov, (May 12, 2023), https://www.climate.gov/news-features/understanding-climate/climate-change-atmospheric-carbon-dioxide [https://perma.cc/J9SZ-FS4J].

[iii] Id.

[iv] Hanna Ritchie Et Al, CO2 and Greenhouse Gas Emissions, Our World in Data, https://ourworldindata.org/co2-emissions (last viewed Sept. 15, 2023) [https://perma.cc/X959-JAE6].

[v] Carbon Capture, Center for Climate and Energy Solutions, https://www.c2es.org/content/carbon-capture/ (last viewed Aug. 28, 2023) [https://perma.cc/7MD5-CSN8].

[vi] Nilson, supra note i.

[vii] Center for Climate and Energy Solutions, supra note v.

[viii] Id. (emphasis added).

[ix] Id.

[x] Dept. of Energy, Biden-Harris Administration Announces up to $1.2 Billion for Nation’s First Direct Air Capture Demonstrations in Texas & Louisiana, (Aug. 11, 2023), https://www.energy.gov/articles/biden-harris-administration-announces-12-billion-nations-first-direct-air-capture [https://perma.cc/RHT6-A9WK].

[xi] Nilson, supra note i.

[xii] Karin Rives, Record 51 US Carbon Capture Projects Announced in 2021, but Finance, Policy Lag, S&P Global Market Intelligence, (Feb. 23, 2022) https://www.spglobal.com/marketintelligence/en/news-insights/latest-news-headlines/record-51-us-carbon-capture-projects-announced-in-2021-but-finance-policy-lag-69026384 [https://perma.cc/9XSL-8M65] (In 2021 alone, there were fifty-one new carbon capture projects).

[xiii] Veronique de Rugy, Subsidies Are the Problem, Not the Solution, for Innovation in Energy, Mercatus Center (Mar. 24, 2015), https://www.mercatus.org/research/federal-testimonies/subsidies-are-problem-not-solution-innovation-energy [https://perma.cc/V3SB-5TSN].

[xiv] Id.

[xv] Bipartisan Infrastructure Bill, Pub. L. No. 117-58, § 40305, 135 Stat. 429, 1001 (2021) (codified at 42 U.S.C. § 16293(e)(2)(C)).

[xvi] 42 U.S.C. § 15801(4); 42 U.S.C. § 16293(e).

[xvii] Bipartisan Infrastructure Bill, supra note xv.

[xviii] Id.