Have a question?
Ask us!
Ask MIT Climate

How much is captured CO2 worth?

Facilities using carbon capture usually can't sell large amounts of CO2 in commercial markets—but in the U.S., thanks to tax credits, they can get $85 a ton for burying it.

 

January 23, 2023

“Carbon capture” technologies are used to separate carbon dioxide (CO2) from other gases—usually in the waste streams of power plants and industrial facilities that burn fossil fuels. In this way, the CO2 is kept out of the atmosphere, where it would contribute to climate change.
 
But carbon capture operations need something to do with all the CO2 they’re keeping out of the air. There are a few commercial markets for captured CO2, such as in carbonated beverages or greenhouses that use piped-in CO2 to grow plants. And there are other, more speculative proposals to transform CO2 into valuable products like plastics and fuel. But “utilization is very challenging,” says Howard Herzog, a Senior Research Engineer in the MIT Energy Initiative who has been working with carbon capture for over 30 years.

One problem, according to Herzog, is that “markets for CO2 are generally much smaller than the amount of CO2 we put out there.” Greenhouses and soda companies only need so much CO2, and if carbon capture grows enough to make a serious dent in climate change, it will quickly outstrip these markets.

It can also be hard to sell captured CO2 since these markets can get carbon from other, often cheaper sources. For instance, the CO2 pumped into greenhouses frequently comes from burning fuels like natural gas,1 while high-purity CO2 can be sourced from ammonia production in fertilizer plants,2 where it’s captured as part of normal operations and doesn’t need special carbon capturing technology.

Another issue is that many of the potential uses for CO2 undermine the climate benefits of capturing it in the first place. “If you’re capturing CO2 for climate reasons and you put it into soda pop, when people drink the soda pop it goes back into the atmosphere,” explains Herzog. “So you haven’t done anything in terms of reducing carbon emissions.” Meanwhile, converting captured carbon into a plastic or a fuel requires a lot of energy, and most of that energy isn’t clean. “Until we have enough low carbon energy to do that, it’s not going to make sense.”
 
If the commercial markets can’t absorb all the carbon we want to capture for climate reasons, what happens to all the excess captured CO2? Luckily, governments can step in to make carbon capture more profitable even if the free market doesn’t. Herzog explains that thanks to a federal tax credit known as 45Q, companies that capture carbon in the U.S. are probably getting better economic benefits by storing it underground than selling it.
 
Section 45Q of the U.S. Internal Revenue Code provides a tax credit for every metric ton of CO2 that’s captured and stored. Section 45Q was first introduced in 2008, and the amount paid for captured CO2 increased after the passage of the Inflation Reduction Act in August 2022.3
 
How much you get paid depends on what you do with the captured CO2, explains Herzog. It can either be injected and stored in underground geological formations, or used in enhanced oil recovery (EOR), where it’s pumped into oil reserves to squeeze more oil out. “You get 85 dollars a ton if you put it in a geologic formation and 60 dollars a ton if you use it for enhanced oil recovery.”
 
There’s also a special price for CO2 pulled directly from the atmosphere—a much more expensive process than capturing carbon from a smokestack. For CO2 captured via “direct air capture,” Section 45Q pays $180 for every ton stored in the ground and $130 when it’s used for EOR.

Section 45Q isn’t just putting a price on every ton of carbon that’s captured and stored; it’s giving the carbon capture industry a boost in other ways. When the Inflation Reduction Act passed last year, it made it easier for new carbon capture facilities to be eligible for the 45Q tax credits by, for instance, extending to 2033 when new facilities need to begin construction to be eligible.

The landscape for selling captured carbon to commercial markets may change in the future, but not in the near future, says Herzog. The amount of CO2 we can use is simply dwarfed by the CO2 that needs to be captured for climate reasons. In Herzog’s opinion, “if we’re going to do this on the billion ton a year level, most of it’s going to have to go into the ground.”

 

Thank you to Sepehr Senaye of Tehran, Iran, for the question. You can submit your own question to Ask MIT Climate here.

Read more Ask MIT Climate

Creative Commons Attribution-NonCommercial-ShareAlike 4.0 International license (CC BY-NC-SA 4.0).
Footnotes

1 Wang, Anran, et al. "CO2 enrichment in greenhouse production: Towards a sustainable approach." Frontiers in Plant Science, Vol. 13, 2022. doi:10.3389/fpls.2022.1029901

2 International Energy Agency: "Putting CO2 to use: Creating value from emissions." September 2019.

3 International Energy Agency: "Section 45Q Credit for Carbon Oxide Sequestration." Updated November 4, 2022; accessed January 23, 2023.

Fernanda Ferreira
by Fernanda Ferreira, MIT Climate Portal Writing Team
Howard Herzog
featuring guest expert Howard Herzog, Senior Research Engineer at the MIT Energy Initiative
Related MIT Groups
More Resources for Learning
Columbia Climate School: "Capturing carbon's potential: These companies are turning CO2 into profits"
Protocol: "Why the $100 per ton target for carbon removal may be 'pure fantasy'"
International Energy Agency: "Is carbon capture too expensive?"
International Energy Agency: "Section 45Q credit for carbon oxide sequestration"
International Energy Agency: "Putting CO2 to Use: Creating Value from Emissions" (Report)
Topics
Carbon Capture
Finance & Economics
Government & Policy

Want to learn more?

Listen to this episode of MIT's "Today I Learned: Climate" podcast on carbon capture.

LHF: [00:00:00] Hello and welcome to TILclimate, the podcast where you learn about climate change from real scientists and experts. I’m your host, Laur Hesse Fisher, with the MIT Environmental Solutions Initiative. We’re back with the next episode in our series on energy and climate in partnership with the MIT Energy Initiative.

So far this season, we’ve talked about ways our electricity system could burn fewer fossil fuels, so the carbon trapped in coal, oil or natural gas stays underground where it can’t warm our atmosphere. But today, we’ll be talking with two members of the MIT Energy Initiative about a technology that actually doesn’t try to replace fossil fuels. 

HH: [00:00:50] My name is Howard Herzog. I'm a senior research engineer in the MIT Energy Initiative. In about a month's time I'll be celebrating my 30th anniversary at the Energy Initiative or its predecessor the Energy Lab.

BH: [00:01:05] I'm Brad Hager. I'm a professor of earth, atmospheric and planetary sciences. … And, in addition to being a- a professor, I'm the co-director of the MIT Energy Initiative's Low Carbon Energy Center on Carbon Capture, Utilization and Storage.

LHF: [00:01:21] That’s right, they both work on something called carbon capture, utilization and storage—abbreviated as “CCUS”, or sometimes just called carbon capture, like we’ll call it today . 

HH: [00:01:36] The problem for climate change is the emission of CO2 into the atmosphere. So when you burn fossil fuels, you create CO2. The idea in carbon capture is that CO2 that's created by the burning of fossil fuels, you stop from going into the atmosphere. And you do that by capturing it and then you put it somewhere other than the atmosphere.

LHF: [00:02:06] So, why would we even consider this? Well, as we’ve heard earlier in this series, adding clean energy sources like solar, wind, and nuclear, comes with a lot of complications that we need to work out. In theory, carbon capture let’s us use the energy system that we have now, but removes the CO2 emissions from that system. 

HH: [00:02:29] The problem with climate change isn't fossil fuels. The problem is the buildup of greenhouse gases in the atmosphere, and so what we want to do is look at solutions that reduce the amount of greenhouse gases we're putting into the atmosphere. If we do that by using less fossil fuels, which I think is going to be part of the solution, so be it, but it doesn't mean that we can't continue to use fossil fuels if we have the technology to use them without putting their emissions into the atmosphere.

LHF: [00:02:58] So today, we’re diving into how carbon capture works, what we’re supposed to do with all this CO2 once we capture it, and just how realistic this is as a way to help slow climate change.

But let’s start with the basics. Because power plants and factories emit so much carbon dioxide in one place, most carbon capture happens there: from the "flue gas" that comes out of their smokestacks. Here’s Prof. Hager.

BH: [00:03:27]  The method of capturing carbon dioxide that has been used for the longest is to, run, the flue gas, through a solution of chemicals called amines. The carbon dioxide dissolves in the amines.

HH: [00:03:41]  Then you compress it to turn it into basically a liquid, a high pressure liquid. It's technically it's called a super critical fluid but it basically acts like a liquid. and then you can put it in a pipeline and you can put it down a well into the earth. And the place that right now is the biggest opportunity to store the CO2 is in deep underground formations.

LHF: [00:04:08] Engineers look for just the right places to do this so the CO2 can’t leak back into the atmosphere or into our groundwater.

BH: [00:04:17]  So we can think of a good reservoir, candidate for storing this stuff as being a layer of shale, called the caprock, to keep the fluids in place. And then underneath it, a layer of sandstone to provide empty space to put the CO2 in.

LHF: [00:04:32] Originally, I imagined these underground caves that the fluid CO2 was poured into. But actually, it’s injected into a rock, which kind of absorbs the CO2.

HH: [00:04:46]  The way to think of it is, think of you're at the beach and you have a bucket of sand, and you can put water into it and the water goes in the pores between the sand. 

LHF: [00:04:57] The CO2 then sits there, in the same way that oil has been sitting in these kinds of spaces underground naturally for millions of years.

And if this sounds like science fiction, well, actually, it’s already happening. There are around 20 facilities using carbon capture and storage around the world, although most of them aren’t power plants: they’re other industrial plants, like natural gas processors or steel or fertilizer plants. Some of them have been running for a long time.

BH: [00:05:32] The first really serious project is called Sleipner, run by the Norwegians. So in 1996, they started producing sour gas, cleaning it up, removing the carbon dioxide, and injecting it into the subsurface underneath the North Sea. And for the last 23 years, since the plant started, they have been injecting about a million tons of carbon dioxide a year into the subsurface.

LHF: [00:06:03] A million tons of CO2 is about the same amount 200,000 U.S. cars emit in a year. But burying this CO2 is not our only option for dealing with it. 

BH: [00:06:16] Recently, there's been a lot of interest in using the carbon dioxide as an intermediate product. It can be used to make plasti cs, make feed stocks for plastics, and it can even be combined with hydrogen to make, for example, jet fuel.

LHF: [00:06:33] The more useful stuff we can make out of CO2, the more reason that companies will have to capture it. Because right now, there isn’t really a big market for this captured CO2. 

HH: [00:06:48]  The amount of CO2 that we are producing from energy use will - basically is so much larger than markets for a lot of the products people are thinking of that at best it's going to be a niche solution, and you're still going to need to put it in underground reservoirs if carbon capture is going to be adopted on large scale.

LHF: [00:07:05] What does “large scale” really mean? Let’s imagine that we only capture and store one tenth of the CO2 we’re emitting today. That would be about as much liquid as all the oil consumed worldwide—a massive industry served by huge tankers, storage depots, and hundreds of thousands of miles of pipelines.

It would take a lot to repurpose or build new infrastructure for moving around CO2, and if you’re a power company, or a steel manufacturer, you might be wondering why you would pay for it. Which brings us to one of the big challenges for carbon capture: it’s pretty expensive.

BH: [00:07:56] There's additional expense that you need to build the facility to do this. And then it takes energy to do it. So the, increase in, you know, cost of electricity coming down the power line to the consumer, is on the order of 30 to 50%.

LHF: [00:08:13] At the moment, there’s not enough of an incentive for power companies to take on that extra cost. 

BH: [00:08:20] In order to promote the capture of carbon dioxide, you need some sort of economic incentive to do that. So you can have a carrot or you can have a stick. And the carrot, which is being held out right now, is the, basically tax rebates.

LHF: [00:08:36] Yeah, actually, here in the U.S., we offer companies a tax credit for capturing their carbon emissions. Right now it's about $50/ton CO2, which isn't really high enough to retrofit all our fossil fuel power plants. So that’s the carrot. And the stick?

BH: [00:08:56] The other side is putting a price on carbon and so if that's high enough, a company will, you know, voluntarily capture and- and sequester its carbon dioxide.

LHF: [00:09:07] We did a whole episode on carbon pricing in our first season, so check that out to understand how a carbon price would work.

The thing you’re hearing here, is that capturing and storing CO2 at our current power plants is possible. But we either need to decrease the costs of doing it or increase the incentives. And the policies we choose can make a huge difference to companies deciding whether to invest in something like carbon capture. 

HH: [00:09:39] Technology doesn't happen in a vacuum. Innovation doesn't happen in a vacuum. You need to create the markets and that's a political thing. I think if you had a carbon tax, it will create innovation and there's a lot of room for innovation in this area. But there's no silver bullet in dealing with climate change. There's no one solution that's going to provide the answer.

LHF: [00:10:11] If it becomes cheap enough, carbon capture could be a long-term solution for many power or manufacturing plants. Or its role could be to help us cut emissions immediately until we solve the challenges with wind, solar, or nuclear power, or energy efficiency.

BH: [00:10:30] I see this as a, a strategy that will bridge through the next three decades. And, you know, so the next 20 to 50 years. I hope that cheaper sources of electricity, of clean electricity, will be developed.

LHF: [00:10:44] So carbon capture is one more tool we can add to our clean energy toolbelt. And it’s just like all the other technologies we’ve explored in this series: powerful, but with their advantages and disadvantages, and none of them able to do the job on its own.

There’s a lot more to learn about carbon capture. We’ve left some links in the show notes to places you can learn more, including a couple episodes of the MIT Energy Initiative podcast.

Our next episode of TIlclimate is on fusion energy, so stick with us.

A quick shout out to amyleewee who left us a review on Apple Podcasts. Amyleewee says, “Super informative podcast that breaks down really complex topics into small bites and does so without placing blame! Keep up the good work!” Thanks Amyleewee, we appreciate it.

We invite you to leave us a review on Apple Podcasts as well, or wherever you’re listening from today.

Today I Learned Climate is brought to you by the MIT Environmental Solutions Initiative. Thank you to Brad Hager and Howard Herzog for talking to us, and thank you for listening.

Keep exploring

Check out these related Explainers, written by scientists and experts from MIT and beyond.

View All

Related Pieces