Publication Date:
2024-01-31
Description:
The Carbon Dioxide Removal (CDR) market is experiencing rapid development, with different regions adopting distinct approaches. In Europe, the progress is primarily driven top-down through the implementation of regulations aimed at integrating CDR into various climate instrument pillars within the EU. In contrast, the United States is witnessing a bottom-up growth trajectory, characterized by the emergence of start-ups, carbon registries, marketplaces, and insurance companies, all playing a role in the expansion of the CDR sector. This surge in CDR-related businesses has been further catalyzed by substantial subsidies, particularly through the recent adjustments made to the 45Q tax credit system. The amendments were introduced as part of the "Inflation Reduction Act" (IRA) and the "Bipartisan Infrastructure Law" (BIL). Under these modifications, significant tax credits are offered for carbon capture and utilization at point sources, with subsequent storage (CCS). Notably, the tax credits have increased to 60 USD/tCO2 for carbon capture and utilization and storage at point sources, and to 85 USD/tCO2 for direct air capture and storage. The tax credits go even higher, amounting to 130 and 180 USD/tCO2, respectively, for utilization and storage if the carbon is directly removed from the air. In addition to these measures, the IRA and BIL also allocate substantial funding for forestry and sequestration projects, carbon transport infrastructure, and carbon removal hubs to test and develop technologies. Simultaneously, some top-down initiatives have been set in motion in the US, exemplified by the introduction of the Carbon Dioxide Removal Market Development Act as part of California's Cap-and-Trade Program. This act mandates emitting entities to offset a certain percentage of their emissions through CDR in subsequent years, culminating in full compensation of emissions with CDR by 2045. Moreover, the act emphasizes the promotion of domestic development by requiring that at least 50% of the negative emissions credits used by an emitting entity originate from CDR processes that directly mitigate climate impacts within the state. Against this backdrop, it comes as no surprise that the CDR start-up scene is predominantly dominated by US companies, with ocean-based removal companies accounting for approximately 10 percent of the market. However, despite their presence, ocean-based CDR projects are currently limited, with the majority focused on blue carbon projects, particularly mangrove restoration, and only a few exploring other ocean-based CDR methods. The land-based portion of the CDR market appears to be effectively addressing accounting, verification, and registry aspects, primarily due to market demand or existing regulations. Nevertheless, the development of such bottom-up approaches remains less likely for open access schemes like ocean-based CDR initiatives.
Type:
Report
,
NonPeerReviewed
,
info:eu-repo/semantics/book
Format:
text
Format:
text
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