In a groundbreaking move poised to redefine climate action, the United States federal government is on the cusp of introducing an innovative program. This program will offer financial incentives to companies engaged in the direct extraction of carbon dioxide from the Earth’s atmosphere. This transformative initiative, as disclosed by insiders familiar with the matter, has the potential to revolutionize the landscape of climate technology.
What sets this program apart is its unprecedented nature. No government has ever undertaken the task of compensating companies for the extraction of climate-altering pollutants from the atmosphere.
The Department of Energy is at the helm of this endeavor, armed with an initial budget of tens of millions of dollars. Through leveraging its substantial purchasing power, the government aims to accelerate the development and deployment of a technology that experts assert is crucial in the battle against climate change.
While an official from the Department of Energy declined to comment, the central thrust of this program is evident: to utilize the government’s influential position to drive the advancement of an emerging climate technology. This strategic approach mirrors past instances where the government’s involvement propelled progress in sectors such as semiconductors, titanium production, and the rapid development of COVID-19 vaccines.
At its core, this novel initiative wields the potential to shape market dynamics and establish benchmarks for nascent climate technologies. It also introduces a transformative concept: treating carbon dioxide as a waste product, much like other forms of waste, which necessitates public management and responsibility.
The urgency of this initiative becomes particularly evident when considering the projected growth of the carbon removal industry. To meet global climate goals, the industry must undergo exponential growth by the close of this decade.
Expected to be formally unveiled soon, the origins of this program trace back to a discreet congressional endorsement the previous year. The 2023 appropriations law mandated the Energy Department to establish a competitive purchasing pilot program focused on procuring carbon dioxide removed from the atmosphere or upper hydrosphere.
Since receiving the congressional green light, the Department has been meticulously crafting the program. In February, it solicited public input to construct a strategy that provides support for demand-driven clean energy technologies, including carbon dioxide removal. Subsequently, the Bipartisan Policy Center facilitated closed-door discussions with a range of stakeholders, including companies and nonprofits, to architect the program’s optimal design.
Notably, carbon removal stands as a rare point of bipartisan agreement in climate policy. Legislators from both sides of the aisle, including Senators Susan Collins of Maine, Bill Cassidy of Louisiana, Chris Coons of Delaware, and Maria Cantwell of Washington, have collaborated on bills aimed at enhancing government support for carbon removal initiatives.
The government has already laid the groundwork with significant initiatives designed to bolster industry growth. The bipartisan infrastructure law allocated $3.5 billion to establish large-scale carbon scrubbing facilities. Additionally, the Inflation Reduction Act introduced tax incentives for companies that sequester carbon underground instead of releasing it into the atmosphere.
The upcoming procurement program seeks to widen the government’s approach to carbon removal. Unlike existing policies that target specific technologies like industrial direct-air-capture facilities or carbon injection underground, the new program aims to support a diverse array of carbon removal techniques. This could encompass innovative approaches such as carbon remineralization, a process that transforms carbon into rock formations on the Earth’s surface.
Furthermore, this program marks a pivotal shift in the government’s role within the evolving carbon removal market. While the government has previously funded research and development within the sector, this program represents the government’s first commitment to directly purchasing carbon removal services.
However, the challenges of carbon removal are considerable. According to the Intergovernmental Panel on Climate Change (IPCC), the widespread adoption of cost-effective carbon removal technology is crucial to limiting global temperature increases to 1.5 degrees Celsius. Even in achieving this goal, the world must drastically reduce annual carbon emissions from fossil fuels to nearly zero.
Despite its significance, the sheer scale of carbon removal poses significant challenges. In 2022, the world managed to remove several thousand tons of carbon at a cost ranging from $200 to $2,000 per ton. However, by 2050, the annual removal target could escalate to an astounding 10 billion tons. Even if costs decrease to slightly over $100 per ton, the expense would still surpass $1 trillion—equivalent to around 1% of global GDP in 2023.
In conclusion, the imminent U.S. government program to provide financial incentives for carbon removal technology signifies a monumental stride towards addressing climate change. Through harnessing the government’s purchasing power and endorsing diverse removal techniques, this initiative has the potential to reshape carbon management efforts and propel us closer to achieving critical climate targets.
Empowering your carbon change with strategy management tools designed around common ESG frameworks with EmpoweredESG. Learn more about our approach to ESG strategy management and tracking by clicking here or filling out the form below.