Glossary

EPA Proposes Emission Limits for Fossil Fuel-Fired Power Plants – Is Industry Up for the Challenge?

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EPA Proposes Emission Limits for Fossil Fuel-Fired Power Plants – Is Industry Up for the Challenge?

by: Noah Gannon | August 16, 2023

Boyertown, Pennsylvania (August 17, 2023) – On August 8, 2023, the public comment period ended for the Environmental Protection Agency (EPA) proposed Clean Air Act emissions limits and decarbonization technology guidance for fossil fuel-fired power plants in the United States. The proposed rule considers how different Electricity Generating Units (EGUs) are used, including the resource type and load capacity, and prescribes control technologies such as Carbon Capture and Storage (CCS) and Hydrogen co-firing to reduce emissions.

Scientists estimate the proposal, if enacted, will reduce 617 million tonnes of CO₂ emissions by 2042. Additionally, economists value potential associated benefits at $64-$85 billion, including health benefits, such as 1,300 avoided premature deaths and 300,000+ cases of asthma symptoms.

In anticipation of potential legal challenges, the EPA structured the current proposal within the context of the recent 2022 West Virginia vs. EPA decision in which the Supreme Court limited the EPA’s rule-making authority.

Client Impacts

The proposed rule presents both challenges and opportunities for the energy industry. Challenges include extensive capital expenditure costs, limited CCS and hydrogen supply and infrastructure, a volatile regulatory climate, and a lack of regulatory frameworks to enable use and large-scale deployment of these projects.

However, CCS and low-GHG hydrogen offer asset owners the opportunity to entrench their existing infrastructure investments within the energy landscape and provide a dispatchable low-carbon energy resource to utilities looking to balance daily and seasonal renewable energy fluctuations.

Alternatively, some asset owners may consider reducing capacity to under 20% to avoid implementing any controls or under 50% to qualify as an intermediate load with less stringent standards. There will be impacts on grid reliability if a mass shutdown of gas-powered resources occurs before the buildout of batteries and other forms of energy storage.

Proposed Technology-Based Standards

The proposal consists of Technology-Based Standards designed to allow the power sector continued resource and operational flexibility, facilitate long-term planning, and consider the cost-effectiveness of emissions controls. Specifically, the proposal requires CO₂ emissions control at fossil fuel-fired power plants starting in 2030 and phases in increasingly stringent CO₂ control requirements over time. The proposed requirements vary by:

The type of unit rather than fuel type (i.e., new or existing, combustion turbine or utility boiler, coal-fired or natural gas-fired)
How frequently it operates (base load, intermediate load, or low load (peaking), and
Its operating horizon (i.e., planned operation after certain future dates).

These variations hope to achieve the Standard’s goals of cost-effectiveness and operational flexibility. For example, the installation of controls such as CCS for coal and gas plants and low-GHG hydrogen co-firing for gas plants are more cost-effective for power plants that operate at a greater capacity, more frequently, or over extended periods. The table below outlines the Best System of Emissions Reduction (BSER) by phase and unit type.

Low-GHG Hydrogen Pathway

As shown above, the low-GHG hydrogen pathway offers an incremental approach through hydrogen co-firing to reduce emissions with increasing volume as hydrogen supply networks are developed. The proposed carbon intensity of low-GHG hydrogen at 0.45 kgCO₂e/kgH₂, “well-to-gate,” is exceptionally aggressive and much lower than all international Low Carbon Standards, as shown in the graphic below. As a result, this standard may be met with blue (coal/natural gas feedstock) and green (renewable energy feedstock) hydrogen, as well as pink (nuclear-powered) hydrogen.

The International Energy Agency predicts total hydrogen production will need to be 180 MMT by 2030, up from 90 MMT today, to reach net zero emissions by 2050. Currently, low-GHG hydrogen production represents only 1% of total hydrogen production, challenging project developers to increase product while greening their hydrogen process with renewable resources to meet new regulatory requirements, like the EPA’s proposed standards.

At current U.S. power demand and portfolio, about 1.5 trillion kWh is produced annually by gas turbines subject to this ruling [1]. Assuming a standard combined cycle unit has a 60% overall efficiency, 30% hydrogen co-firing would require 747 billion kWh of raw energy, almost 10X current hydrogen production levels. In creating this rule, the EPA attempts to dramatically scale hydrogen demand in the U.S.

The energy needed to produce hydrogen leads to as much or more energy used to produce hydrogen as is recovered when the hydrogen burns.

If project developers can create a supply, hydrogen transportation will present another hurdle. Hydrogen can be transported by pipeline, tanker, rail, and truck, but ammonia and liquefication are the best delivery methods for longer distances and have the biggest impact on costs. Approximately 1,600 miles of hydrogen pipelines are currently operating in the U.S., primarily in the Gulf Coast region, in support of petroleum refineries and chemical plants [2]. Converting the nations existing natural gas pipeline to carry a blend of hydrogen would only require modest upgrades compared to more substantial modifications for pure hydrogen. Industry initiatives and the DOE H2Hubs program take a grassroots approach to increasing regional engagement.

Importantly, the Inflation Reduction Act (IRA) includes Hydrogen Production Tax Credits, which offer producers $3/ kg H₂ for ten years for low-GHG carbon intensity for projects that begin construction by 2033 with retrofit facilities eligible. While direct pay and transferability allow revenue streams for companies with low tax liabilities, the credit cannot be stacked with the Carbon Capture and Sequestration Credit (45Q), which may disincentive co-locating CCS and low-GHG hydrogen controls.

Using electricity to produce hydrogen, only to be re-converted into electricity through co-firing, results in as much or more energy being lost than is recovered for grid use. This makes hydrogen co-firing for electricity a much less efficient process than traditional electricity transmission. We believe hydrogen is better applied in the transportation industry given its quick refueling, easy adoption, and decent conversion efficiency for fuel cells and hydrogen-compatible ICEs. This leaves CCS as the most practical and economically viable control technology for fossil fuel-fired power plants in the U.S.

Carbon Capture and Sequestration (CCS) Pathway

According to the IEA, Carbon Capture and Sequestration projects capture more than 45 million tCO₂ annually from 40 facilities globally. Although CCS deployment has increased with over 500 projects in various stages, the IEA estimates that deployment remains substantially below the level required to achieve net zero emissions by 2050. Similar to low-GHG hydrogen, project developers face a handful of challenges in meeting CCS demand generated from new regulatory requirements:

First, CO₂ lacks national pipeline infrastructure but has a history of industrial uses, primarily enhanced oil recovery (EOR). This infrastructure is primarily in the Gulf Region and the Dakotas. Last month, Exxon Mobile bought Denbury, the largest CO₂ pipeline network in the country, in a bid to accelerate Exxon’s carbon capture goals.

The Department of Energy has also prioritized CO₂ transportation and sequestration, with $8.5B earmarked for CCS in the infrastructure package. The bill envisions four regional direct air capture hubs, prioritizing localized networks over a nationwide pipeline.

The IRA included a Carbon Capture and Sequestration Credit (45Q), which offers up to $85 per tonne for storage of CO₂ in deep saline geologic formations. For other uses, such as low-carbon fuels, chemicals, building materials, or enhanced oil recovery (EOR), the credit falls to $60 per tonne, with direct pay for the first five years after the equipment is placed in service.

Implementation

States will have 24 months to submit plans establishing performance standards and transparency requirements for power plants within their state borders if the proposed rule is enacted, as shown in the timeline below. Plans must include an environmental justice analysis of impacted communities and meaningful engagement with affected stakeholders. States are encouraged, but not required, to develop emissions trading and averaging schemes. A less stringent standard may be requested for facilities with long-remaining useful lives.

The future of this legislation is not certain. Four major grid operations — PJM Interconnection, Midcontinent Independent System Operator, Southwest Power Pool, and the Electric Reliability Council of Texas — have filed joint comments that grid reliability will “dwindle to concerning levels.” A coalition of 21 states, led by West Virginia, have also filed comments warning about the legal implications of the rule. With the 2024 presidential election approaching, a Republican administration could repeal this rule before the enforcement period begins. Individual states and joint ISOs/RTOs must decide if they will proactively plan for controls or wait and see, hoping external players derail technology implementation and CO₂ standards.

[1] Regional Clean Hydrogen Hubs | Department of Energy
[2] Electricity data browser – Net generation for all sectors (eia.gov)

About ClimeCo

Over the last 14 years, ClimeCo has supported corporates in hard-to-abate sectors and energy asset owners in decarbonizing their operations by evaluating policy updates and incentives, supporting decarbonization project implementation, leveraging environmental markets, and becoming trusted decarbonization technology experts. Please inquire with the ClimeCo team to learn more about our case studies and service offerings.

Contact us at +1 484.415.0501, info@climeco.com, or through our website climeco.com to learn more. Be sure to follow us on LinkedIn, Facebook, Instagram, and Twitter using our handle, @ClimeCo.

Equinox Maritime Utilizes Marsoft’s GreenScreen in its Ongoing CO2 Reduction Investments

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CONTACT
Nancy Marshall, SVP, Marketing
+1 484.415.7603 or nmarshall@climeco.com

Equinox Maritime Utilizes Marsoft’s GreenScreen in its Ongoing CO2 Reduction Investments

BOYERTOWN, Pennsylvania (July 25, 2023) – In a new collaboration, Equinox Maritime and Marsoft will quantify and certify the CO2 savings from retrofit initiatives made by Equinox in the company’s continuing efforts to minimize its CO2 footprint.

GreenScreen makes a strong business case for installing best practice energy-saving devices. The program helps secure an audited and documented statement of reduced CO2 emissions that delivers incremental revenue and return on investment. The first GreenScreen project has been listed on the Gold Standard website and the first carbon credit issuances will be made before the end of 2023.

“Equinox has long been committed to decarbonization,” says the Director of Equinox Maritime. “At Equinox we are continuously focused on the performance improvement of our fleet and meeting the environmental expectations of our clients. We are therefore extremely excited about this new step forward. We have already jointly reviewed GreenScreen’s confirmation of the carbon savings made from four of our ships and are looking forward to working with Marsoft and ClimeCo to originate the credits, and to our industry’s continued efforts to reduce its CO2 footprint.”

Four of Equinox’s vessels have been screened to confirm the significant fuel-saving benefits from the retrofits installed. Equinox’s technical manager commented, “The project was for four of our Supramaxes – and the GreenScreen analysis verified that the savings from the Schneekluth ducts and spoilers were performing as expected, even a little better. We are very proud of our technical team and yard partners and this important commitment to the environment.”

Dr. Arlie Sterling, President of Marsoft, added, “Despite the many environmental and financial advantages of installing energy-saving devices, the investment can still be difficult for owners to finance. We help owners overcome that financing barrier by addressing some of the risks around the retrofit decision, and by making the business case more attractive. The industry is beginning to see the real value of the carbon markets to accelerate the pace of decarbonization today,”

Marsoft’s GreenScreen program complements Equinox’s longstanding environmental commitment by accurately assessing the emission reductions from the retrofits – a requirement to enroll the ships in a Gold Standard program. Marsoft’s collaboration with ClimeCo, a leader in the carbon markets, secures premium pricing for Equinox’s carbon credits in the voluntary carbon markets.

About Marsoft

Established in 1984, Marsoft provides expert, objective, and timely support for investment, chartering, and financing decisions. Marsoft’s quantitative models and expert judgment have improved the quality of decision-making for almost four decades. Marsoft decision support systems integrate data and analysis to enrich our client’s decision-making process, including the integration of climate-focused initiatives such as the Poseidon Principles.

The analytical platform underpinning Marsoft’s GreenScreen services was developed in collaboration with the MIT SeaGrant Design Laboratory.

Marsoft is committed to working with the shipping industry to minimize CO2 emissions and support the UN Sustainable Development Goals while meeting all stakeholder requirements. Marsoft is a founding member of the  Blue Sky Maritime Coalition, whose mission is to accelerate the decarbonization of North American waterborne trade.

For more information, press only: Lorraine Parsons; LParsons@marinemoney.com

For more on Marsoft and GreenScreen: www.marsoft.com

About ClimeCo

ClimeCo is a global company focused on offering a full range of sustainability advisory with a balance of industrial and nature-based carbon solutions that meet the diverse needs of clients’ climate programs. We also provide specialized technical solutions for hard-to-decarbonize industries. From developing methodologies to support GHG reduction innovation to advising on solutions for optimal sustainability impact to reach Environmental, Social, and Governance (ESG) goals, ClimeCo is the right partner to help address environmental challenges.

For more information or to discuss how ClimeCo can drive value for your organization, contact us through our website climeco.com. Follow us on LinkedIn, Facebook, Instagram, and Twitter using our handle, @ClimeCo.

The Importance of Protecting & Restoring Peatlands

by: Jay Reese | July 26, 2023

For generations, people have viewed peatlands and wetlands as unproductive, waterlogged areas that could be altered or drained for more productive uses, such as cropping or construction. Phrases like ‘bogged down in the details’ or ‘a mire of a situation’ reflect the historical negative connotations of these habitats. While these ecosystems may not seem productive from an anthropogenic lens, peatlands store twice as much carbon as all the forests in the world combined, [1] despite only accounting for three percent of the earth’s landmass. Preserving and protecting these essential ecosystems is crucial to managing carbon emissions and achieving sustainability goals.

Partially degraded peatlands may have large pits dug from peat harvesting. These pits fill with water and become small ponds.

Introduction to Peatlands

Peatlands are a type of acidic wetland ecosystem in which the soil is so waterlogged that anaerobic conditions occur. This inhibits the decomposition of dead plant matter, causing an accumulation of peat, which is made up of partially decayed plant matter and is rich in carbon. Several different types of peatlands are often categorized by their water sources, including but not limited to moors, bogs, fens, swamp forests, marshes, and even permafrost tundra.

These ecosystems can be found across the planet, from lowland coastal areas to high-elevation mountainous regions and in every climatic zone [2]. Due to its high carbon content, peat has a variety of uses, including fuel, substrates for planting, and filtration media for industrial processes. Because of its multiple benefits in human society, peat bogs are overexploited, as the peat harvests much faster than it naturally regenerates. Peatland degradation also occurs when the land is drained by artificial means to be used for grazing, agriculture, or development. Because of this, 15 percent of the world’s peatlands have been fully drained, and even more have been subject to peat harvesting and partial drainage [3].

When peatlands are drained, they can no longer fulfill their role as a carbon sink and instead become a source of CO₂emissions. For example, when drained, tropical peatlands emit an average of 55 metric tons of CO₂per hectare per year [4]. Specifically, when the organic peat material mixes with oxygen (a result of draining), its decomposition rate accelerates tremendously, releasing large quantities of CO₂ and contributing to global warming. Drained peatlands also become more susceptible to wildfires, highly emissive events that can devastate the ecosystem and environment. For example, in Indonesia in 2015, over half of wildfires occurred in degraded peatlands. Peak carbon emissions from these fires exceeded the daily rate for the entire United States economy [5]. In total, emissions from degraded peatlands make up five percent of all anthropogenic CO₂emissions, a staggering amount, considering drained peatlands make up less than 0.4% of the land on Earth [5]. As these numbers suggest, peatlands are crucial in the global carbon cycle. Accordingly, plans to avoid catastrophic climate change must include better management of peatlands to maintain and restore their role as an essential carbon sink.

Peat forest fires are notoriously difficult to extinguish as they burn primarily underground. Once burned, it can take hundreds of years for peat to reaccumulate in the ecosystem.

Elements of Successful Peatland Projects

The most essential step in rehabilitating degraded peatlands is restoring the original hydrology of the site. Often peatlands are drained artificially through the construction of drainage canals. Damming these canals can be a highly effective measure to restore the original hydrology and eliminate the risk of further drying and subsidence. However, more than restoring hydrology alone is needed to reclaim the site in highly degraded peatlands. Additional reclamation efforts may be necessary to restore the site to its original function, such as reintroducing native plant species. The work required to restore each peatland varies depending on the level of degradation experienced at the site. However, the climate benefits of peatland restoration far outweigh the costs, making peatland restoration an essential and cost-effective strategy for meeting our climate goals.

The Verra Registry has two methodologies related to peatland restoration: VM0027 and VM0036. The first methodology applies to project activities in which drained tropical peatlands are rewet by constructing permanent and/or temporary structures (e.g., dams) which hold back water in drainage waterways. There are yet to be any projects registered with Verra using this methodology. VM0036 applies to project activities implemented to rewet drained peatlands in temperate climatic regions. There is one project currently under validation on the Verra Registry utilizing this methodology in China, which anticipates the rewetting of nearly 1,300 ha of drained wetlands.

Benefits of Peatland Restoration

There are many benefits associated with restoration works that target peatlands. The most obvious benefit is the reduction of CO₂emissions accompanying peatland rewetting and the maintenance of this essential carbon sink. However, the benefits of these projects go far beyond emissions alone. Rewetting peatlands greatly reduces the risk of destructive wildfires and significant flood events affecting populated areas. Wildfires on degraded peatlands can persist for long periods, leading to negative impacts on regional air quality, so mitigating this can improve the health of surrounding communities. Like other natural wetlands, Peatlands also act as a sponge, absorbing water quickly during wet periods and releasing it slowly during dry periods, so they play an important role in flood mitigation. When peatlands are dried and the peat soils compacted, they lose this ability to regulate flood waters and can increase the risk of disastrous flooding affecting local economies and livelihoods.

There are also vital community benefits associated with protecting and restoring peatlands. Indigenous communities, for example, rely heavily on peatlands for their abundant natural resources and cultural significance and are deeply affected by peatland degradation. Restoring peatlands is essential in protecting indigenous peoples’ livelihoods and cultures. In conjunction with the reduced natural disaster risk, these projects can profoundly improve the well-being of nearby communities. These projects also have many benefits associated with biodiversity because peatlands are unique ecosystems with specialized ecological communities that rely on waterlogged, carbon-heavy soils to survive. Plants that thrive in these conditions have known uses for local communities, including medicinal purposes and food sources. They also support a unique makeup of insect and animal communities and are essential ecosystems for maintaining biodiversity on our planet.

Bogs, a common name for wetlands that accumulate peat, typically can be found in cooler, Northern regions in areas where glaciers transformed the landscape.

Project Opportunities

Exploring emerging project opportunities within the nature-based solutions space means assessing both risks and rewards of potential peatland projects and reviewing the findings to make informed decisions for engaging with partners on peatland restoration.

There are many ways to preserve and restore degraded peatlands and create benefits for all stakeholders, including communities that rely on these ecosystems. The voluntary carbon market has proven valuable in securing funding for nature-based solutions projects, and peatland restoration projects are no different. There have been many successful peatland restoration projects across various carbon registries, all harnessing the free market’s power to fund these vital restoration projects.

Peatland restoration projects take work. They require meticulous planning, high-level diligence, and many resources. However, the climate benefits of these projects are undeniably extensive, and the added benefits to communities and biodiversity make these projects highly worthwhile. We are eager to see the opportunities for preserving and restoring peatlands because protecting our peatlands is protecting our future.

[1] Peatlands store twice as much carbon as forests – here’s what we can do to save them
[2] What are peatlands?
[3] Peatlands store twice as much carbon as all the world’s forests
[4] Destruction of Tropical Peatland Is an Overlooked Source of Emissions
[5] Peatlands and climate change

About the Author

Jay Reese is a Penn State University student and Project Development Intern at ClimeCo. They are working towards a Bachelor of Science in Environmental Resource Management, with minors in Environmental Engineering and Watersheds & Water Resources. Jay’s time at ClimeCo focuses on providing essential support to the team in all phases of project development. With graduation in December, Jay is eager to continue their career in a field that helps people and the planet. As a part of their undergraduate studies, Jay studied abroad in Ireland. While abroad, they had the opportunity to visit a peat bog and learn about the substantial climate and biodiversity benefits of protecting these ecosystems.

Carbon Capture & Storage: The Need, The Landscape, The Opportunity

by: Jessica Campbell | April 26, 2023

The Need

The scaling of Carbon Capture and Storage (CCS) globally is now widely accepted as necessary (rather than desired) when it comes to achieving net-zero commitments and the targets set out in the Paris Agreement. McKinsey & Company estimated that we need to reach at least 4.2 gigatons of storage per annum (GTPA) by 2050, which represents a growth of 120 times current activity level [1]. Estimates by other groups, including the International Energy Agency (IEA), place the volumetric need anywhere between 3 – 10 GTPA to get us 5 – 10% of the way to net-zero. The International Panel on Climate Change (IPCC) has indicated that under ideal economic conditions, CCS has the potential to contribute between 15–55% of the cumulative mitigation efforts required to stay within 1.5 degrees. However, for this economic potential to be reached (i.e., to achieve economies of scale), “several hundreds of thousands of [carbon dioxide] CO₂ capture systems would need to be installed over the coming century, each capturing some 1 – 5 MTCO2 per year” [2]. This represents a deployment of projects and technology that is unprecedented in its rate and scale. All this to say, no matter which source you look at, the message is clear; we need tremendous amounts of geologic CO2 storage, and we need it at pace.

The Landscape

Despite the scientific consensus on the need for CCS, the path to implementing projects at scale comes with challenges. For one, the regulatory landscape of countries and jurisdictions to deploy CCS at scale are at varying readiness levels, with most falling in the ‘dismally unprepared’ category. Fortunately, there are many regions throughout Europe, the US, and Canada, where the regulatory frameworks are well developed due to decades-long oil and gas activity, including some dedicated geologic CO₂ storage and its relative – Enhanced Oil Recovery (EOR). Even with more advanced regulatory frameworks, CCS projects still face a series of other challenges, including (but not limited to): 1. mineral rights ownership and disputes, 2. back-logs and long lead times for appropriate well permitting (i.e., Class VI in the US), 3. lack of CO₂ transport and pipeline infrastructure, and 4. public opinion/acceptance.

The last one, ‘public opinion and acceptance’, often does not receive the attention it deserves as a potential disruptor and real threat to progress on scaling CCS. In just one example, an open letter to the US and Canadian governments was signed by over 500 groups in 2021, calling for a halt to all support for CCS projects [3]. Due to the complex nature of our energy systems, how they interface with society, and an unfortunate history of ecosystem and environmental justice abuses, it should not come as a surprise that CCS is caught in the crosshairs given the size and the wide variety of potential applications for the projects, cross-sectoral and economy-wide. It will take a cohesive, patient, and relationship-based approach to help educate and repair some of the damage done. Unfortunately, it is a common misconception that CCS is a band-aid solution that will distract from the energy transition and investment in alternate fuels. The reality is that CCS will enable the energy transition, with the key word being transition. CCS will allow the production of lower-cost low-CI hydrogen and other alternate fuels needed to reduce emissions in hard-to-abate sectors. Short-term access to these fuels is critical to achieving emission reductions now and allows time for the supply of renewable fuels and energy sources to ramp up to meet the ever-growing demand.

Regarding environmental markets, CCS projects are considered an emissions avoidance rather than a removal since the CO₂ never actually enters the atmosphere. Logically, the prevention emissions should be valued equally compared to removing them after the fact. Nevertheless, a false dichotomy occurs in the market, where removal-based credits are viewed as superior to (i.e., trading at 2–3 times the price) avoidance credits and activities. The value differential is a function of capital cost – direct air capture (DAC) and other carbon removal technologies and activities are currently more expensive to implement. Still, there is also a component associated with optics, which is unfortunate. Analogous to a bathtub full of water, the bath would never drain if one pulled the plug but kept the tap running. Removals are an exciting technology development associated with vital natural system restoration projects and activities. However, we are still too early in the energy transition to focus our attention too squarely on removals – we still need high-quality avoidance projects that have the potential to mitigate emissions on the gigaton scale, which includes CCS. As is a common theme throughout this blog, we need more of both, not either/or.

Despite the regulatory challenges and bumpy road ahead, hundreds of companies have either proposed CCS projects or are evaluating opportunities, including many of ClimeCo’s clients. In this valiant pursuit, ClimeCo has accepted the challenge and is working to support our clients through strategic advisory services and de-risking investment through partnerships and optimization of multiple potential revenue streams.

The Opportunity

The recent changes to the Inflation Reduction Act (IRA) and the opportunities it has created for CCS are generally understood – albeit in theory. Projects that plan to sequester CO₂ in secure, geologic formations can receive up to $85 per tonne of CO₂ injected under the 45Q tax credit. What is often less clear are the opportunities for additional revenue streams, specifically within the voluntary carbon market (VCM), and the rules around stacking the various available incentives. Opportunities for value creation outside of the VCM arise from low-carbon fuel markets and green premiums for low-carbon products. How these fit together within an optimized organizational strategy while achieving broader emission reduction goals can be challenging to navigate. Although ClimeCo takes a holistic approach to value creation via all channels, the paragraphs below will highlight the recent developments that will open pathways in the VCM.

Historically, North America’s only VCM methodologies for generating carbon credits from CO₂ sequestration activities were specifically designed for and limited to EOR. The absence of a methodology for geologic storage was just a symptom of the economic realities of pure geological storage projects – most would just not pencil at previous incentives levels, even with stackable carbon credits. However, the new IRA is a game changer, placing hundreds of millions more tonnes per annum within the realm of potentially economical or marginal. The VCM is ramping up to help projects falling in the ‘uneconomic’ or ‘marginal’ categories to be economic and to de-risk the investments by diversifying the revenue streams. The cost of CCS projects varies widely by industry. Those in hard-to-abate sectors have a particularly high cost of capture to low purity and/or concentration of CO₂ streams. Fortunately, there will be at least one, if not two, new VCM methodologies available in the near term that will allow for the creation of voluntary carbon credits from CCS. This opportunity will be particularly advantageous for those in hard-to-abate sectors where the $85 per tonne alone is not enough.

The American Carbon Registry (ACR) is in the process of finalizing its methodology that would allow for carbon credits created from the following activities: geologic storage, direct air capture (DAC), EOR, and bioenergy with CCS (BECCS). We expect the methodology to be available by the end of 2023.

Verra is working with the CCS+ Initiative to develop a series of modules for CCS projects for credit creation in the VCM. Verra has indicated that the first module will allow for crediting of the same activities as under the ACR methodology; however, it needs to be clarified as to whether any negative emissions (i.e., removals) associated with BECCS will be included in the first release.

For organizations at various stages in the CCS project development journey, it will be necessary to understand all the potential revenue streams associated with the project, including voluntary carbon credits as well as other value-creation opportunities in low-carbon fuel markets, compliance markets, and additional government grants and funding and the associated value, risks, challenges, and optimization opportunities. It is also important to understand how utilizing the VCM fits within the broader organizational strategy, emission reduction targets, and a product’s value in the market (i.e., green premiums).

[1] McKinsey & Company, Scaling the CCUS Industry to Achieve Net-Zero Emissions
[2] Intergovernmental Panel on Climate Change (IPCC), Carbon Dioxide Capture and Storage
[3] Oil Change International, Open Letter to US and Canadian Governments

About the Author

Jessica Campbell, Director of Energy Innovations, leads ClimeCo’s CCS and Low Carbon Fuels Program. She is passionate about the power of utilizing environmental markets to expedite decarbonization goals and supporting our clients through the energy transition.

Glossary

EPA Proposes Emission Limits for Fossil Fuel-Fired Power Plants – Is Industry Up for the Challenge?

EPA Proposes Emission Limits for Fossil Fuel-Fired Power Plants – Is Industry Up for the Challenge?

Equinox Maritime Utilizes Marsoft’s GreenScreen in its Ongoing CO2 Reduction Investments

Equinox Maritime Utilizes Marsoft’s GreenScreen in its Ongoing CO2 Reduction Investments

The Importance of Protecting & Restoring Peatlands

The Importance of Protecting & Restoring Peatlands

Carbon Capture & Storage: The Need, The Landscape, The Opportunity

Carbon Capture & Storage: The Need, The Landscape, The Opportunity

Sources

Additional Resources