Carbon removal tech could help us draw down historic pollution and go beyond net-zero. But it needs the right policy.

This blog was co-authored by Maureen Lackner, Manager for Economics & Policy at EDF.

This EDF working paper explores policy tools that federal policymakers could use to quickly and responsibly begin deployment of Direct Air Capture facilities, one of several possible carbon removal approaches that could help get the U.S. to net-negative emissions, alongside essential measures to slash pollution.

Carbon Engineering’s direct air capture pilot plant. Photo Credit: Carbon Engineering

The latest report from the IPCC underlined what many already know: action is failing to keep pace with the accelerating climate crisis. A rapid, global transition to net-zero emissions is mission critical since every fraction of a degree in warming could worsen the climate damages we’re already experiencing.

Directly cutting U.S. emissions by moving toward clean energy sources will be the unquestionable priority this decade. But the report also makes clear that we need to scale up carbon dioxide removal (CDR) to reduce the likelihood of the most catastrophic impacts beyond 1.5C warming. The unforgiving math means we will need to harness scientifically-robust ways to remove carbon from the atmosphere through nature — such as managing healthy forests — and through emerging technologies.

One technology-based solution receiving considerable attention is Direct Air Capture with dedicated geologic storage (called DACCS), where carbon is pulled from the air and permanently and safely stored underground.

A number of thorny issues stand in the way of scaling up DACCS, so significant policy support for early deployment should start this decade to allow the technology to mature into a cost-effective strategy. If such maturation occurs and other critical issues are resolved, DACCS could contribute significantly to the 1 gigatonne of annual carbon removal that some estimates have projected will be needed by mid-century.

Policy support now will only add small amounts of DACCS capacity, but will begin the critical process of pushing DACCS down its “learning curve.” Learning curves reflect the simple principle that a technology’s costs decrease by a certain amount as its uptake increases. For example, solar PV was prohibitively expensive four decades ago, but as the technology grew — especially with policy support for deployment — costs plummeted. In the same fashion, standing up a few thousand tons of DACCS capacity by 2030 will tell us how steep (or shallow) DACCS’ learning curve is, and by extension, shed light on its promise as a carbon removal technology option.

To understand how policy could start pushing DACCS down its learning curve, we evaluated an array of policy tools in a new report and found that a number of different packages could effectively drive near-term deployment. Our top recommendation is a direct government procurement program, where the government auctions contracts to build and operate DACCS facilities. Here’s what you should know.

Three big challenges facing Direct Air Capture

Finding the right policy design that can scale up DACCS first requires grasping the three key issues facing the technology.

1) DACCS is an expensive and relatively untested technology. It’s currently only deployed at a small scale, since it lacks an economic driver like a carbon price or incentive large enough to fully cover all costs. Estimates for early-stage plant costs vary widely, but most are upwards of $300 per ton of CO2 pollution, far more expensive than the cost per ton of pollution for clean energy technologies.

2) There is no obvious private sector market to drive early deployment since DACCS provides a public good. Other technologies such as solar energy, for example, provide a market good (i.e. consumers pay for electricity), encouraging investment, competition and innovation that drives further deployment. With DACCS, the CO2 is stored permanently underground, serving no private market function.

3) DACCS must be deployed and governed in a responsible manner. It should not distract from other essential efforts to cut emissions, compete for renewable and low-carbon energy needed for direct decarbonization, or serve as a way for companies to justify continued production of fossil fuels and their harmful air and water pollution. Our report does not delve into the justice and equity concerns surrounding every policy we evaluated, as many of those must be evaluated on a project-by-project basis and in consultation with local stakeholders. However, it should be a critical consideration in all stages of policy development, and we highlight that certain policies — like direct procurement — may present an opportunity to implement greater justice safeguards than others. (Many have written great reports on this topic, including Carbon180, CDR Primer, One Earth and others.)

Why procurement could be the most effective policy 

Based on these challenges, DACCS will need a policy model that provides predictable finance, stability and enough initial support to get large-scale plants off the ground. Our report examined a range of policies that could meet these criteria, including capital support policies like loan programs and public competitions that could generate initial investment, operations support policies like production tax credits that can help keep plants running, and enabling policies that are important for innovation, such as federal RD&D. We outline a number of potentially effective policy “packages” to enable early deployment. Ultimately, direct procurement stood out as the most effective approach.

How it would work: 

To procure a good or service, governments often use a reverse auction to solicit bids from private companies, typically selecting the lowest qualifying cost option. Procurement via a reverse auction could create a guaranteed market for the service that DACCS provides — removing and permanently storing CO2 — thereby encouraging competition and innovation. At the same time, a well-designed auction program could provide policymakers with real-time data on how DACCS costs decline as capacity grows. Reverse auctions are a tested policy solution and are often-cited as providing the impetus behind driving down renewable energy costs.

In a reverse auction for DACCS, vendors deploying the technology could compete to secure long-term contracts with the government to provide carbon sequestration. The auction itself could be run out of an existing agency like the Department of Energy, or a new entity, like a national green bank. Crucially, the agency could set CO2 removal quantity schedules that are aligned with U.S. climate goals and require that social and environmental standards are being met.

Therefore, procurement via reverse auction can help provide the revenue certainty that’s currently missing for DACCS developers and the emissions certainty we need to ensure that the technology aligns with climate goals. This policy approach could kick-off a competitive and diverse DACCS market.

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Maturing DACCS and other carbon removal technologies is not a substitute for slashing U.S. emissions directly and as quickly and substantially as possible, although it could be essential to getting us past the net-zero finish line. This report offers federal policymakers a preliminary overview of policy options that can help DACCS reach commercial viability and be considered as one of many tools needed in the fight against the climate crisis.

Read the full working paper here.