Carbon Capture and Sequestration (CCS) is faced with a shaky outlook for development in the US, as policymakers have turned their focus to more actionable energy prospects such as shale gas and deepwater oil, industry participants have shelved a number of key projects, and public funding for the technology will be more limited moving forward. In turn, proponents of CCS will be forced to adopt more financially sound models for new projects, including the optimization of revenue streams, while at the same time addressing the critical risks surrounding project liability and the uncertain policy environment for new energy technologies. This week’s GR Energy and Climate Brief analyzes the current landscape for CCS in the US and identifies the range of hurdles that are affecting future growth for the sector.

For over a decade, Carbon Capture and Sequestration (CCS) has been envisioned as a key part of the future of the American power system – but the absence of a price for carbon, and the slow distribution of government funding support has lead to significant setbacks for the industry. Even as the Obama Administration maintains an announced goal of bringing up to ten CCS demonstration projects online by the end of 2016, the centerpiece of its efforts – Future Gen 2.0 – is on the ropes and other government-backed projects have been shuttered. Today’s GR Energy and Climate Brief assesses the state of CCS in the US today and prospects for this technology moving forward.

The Policy Environment Surrounding CCS: CCS development in the US has been driven by policy – first and foremost was the expectation that the country was moving forward with some carbon pricing system that would change the economics of coal-powered electricity, followed by the belief that there would be significant government funding for R&D and private sector demonstration projects. Both now face tremendous uncertainty. Hopes for a price on carbon were dashed by the collapse of Waxman-Markey in late-2009, and both a federal RES and CES are on life-support with little chances of success in this Congress. Likewise, the outlook for government-funding of CCS is uncertain. According to analyst Adam Aston of the Global CCS Institute, CCS has seen the least spent, both nominally and as a share of its budget, of any energy program in the stimulus: As of the first quarter of this year, only $132 million of the $4.4 billion funded for CCS had been deployed and a number of demonstration projects slated for stimulus funding have been withdrawn. In recent months, the DOE appears to be shifting its focus toward research and development: in September, the DOE announced funding for $575 million more on 22 projects to accelerate carbon capture and storage R&D for industrial sources spread across thirteen states, with the goal of developing advanced post-combustion technologies for capturing carbon dioxide from coal-fired power plants. Given budget debates and increased scrutiny on DOE programs, we're unlikely to see major new commitments post ARRA to support these programs. It's likely the committed funds (about half the total) will continue to be slowly dispersed, but a worst case scenario would be that the stimulus money remains unspent, leading to growing pressure from Congress or a new Presidential Administration to return the unspent CCS ARRA funds, perhaps as part of a budget deal or a later negotiation on DOE funding.

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