The US is building up a leadership role in CDR and CCUS – further strengthened by recent incentives such as the Inflation Reduction Act and the Infrastructure and Jobs Act. With around 80 projects aiming to be operational before 2030, the US will increase CO2 capture capacity by a factor of five to an estimated 113 Mt CO2 per year. The US also has a strong gas infrastructure and geological conditions for storage. With these favorable conditions for reducing the CAPEX of CCUS projects, the US is well positioned for capitalizing on CDR opportunities.

CDR credit market
The overall market for CDR credits is becoming substantial, with major actors investing in voluntary negative emission credits to reach net zero targets by buying credits on the voluntary market, with US tech giants as frontrunners, notably with Microsoft the largest buyers of CDR credits globally.

Tech companies have pledged net zero targets publicly and have the financial strength needed to invest in decarbonization, something Business Sweden has seen proof of in other industries as well where tech companies are driving sustainability and actively investing in reducing their carbon footprint. There is agreement that emission reductions are the key to decarbonization and that the equally necessary removals must not lower ambitions for reductions, but be used as a complement for removing existing carbon out of the atmosphere. The Oil and Gas industry has a vested interest as well as capital needed to invest in CCUS. Major O&G companies have purchased CDR credits to reach ambitious net zero goals and are starting to invest in CCUS technology, with recently announced investments in DAC companies and projects.

The voluntary credit market has received criticism questioning the long-term benefits of traditional offsets, why there is increasing demand for more rigorous standards, which will also benefit the acceptance of the new permanent removal credits such as BECCS and DACCS.

Strong push from O&G and Ethanol players

While CCUS in the US has previously largely been driven by Enhanced Oil Recovery (EOR) for boosting oil and gas production, technology investments are increasingly oriented around high-premium utilization and storage. The American ethanol industry has become a first mover in BECCS deployment with ethanol refineries receiving strong incentives to combine their production with removals through permanent storage. Voluntary credits under the Low Carbon Fuel Standard (LCFS) in markets such as California provide significant value for refineries that receive credits through reduced “carbon intensity score” with CCS. The industry is uniquely positioned to benefit from pioneering BECCS and has seen several mega projects announced. There are three major planned pipelines to consolidate biogenic emissions from major ethanol refineries in the Midwest, totaling over 40% of total biogenic emissions. Even more than BECCS, DACCS is getting higher subsidies and investment support that favors direct air capture technology.

Large bipartisan support and funding spurring investments

With the passage of the IRA and generous tax credits incentivizing CDR, more industries are exploring CCUS. Business Sweden USA have had several conversations with local actors that cite an explosion of interest from CCUS developers in the past months.
Three recent policy developments continue to drive investments and spur innovation to reduce the cost for CCUS technology:
• The bipartisan IRA bill passed in 2022 dedicates over $300 billion to climate technologies and provides generous tax incentives of $85/ton CO2e for storage or $60/ton CO2e for utilization. Under the 45Q tax credit, Direct Air Capture facilities are eligible for up to $180/ton qualified carbon oxides that are sequestered. Based on Business Sweden’s experience, these tax credits are poised to support Swedish companies in scaling up technology and establishing local production.
• The Infrastructure and Jobs Act includes another $12 billion for CCS projects. The bipartisan infrastructure law contained $3.5 billion to fund a set of large-scale, industrial facilities that will specialize in scrubbing carbon out of the ambient air. In August, the first projects receiving financing were announced totaling $1.2 Billion to regional hubs in Texas and Louisiana.
• The US department of Energy is also moving into the voluntary credits market with a
program to purchase carbon dioxide removed from the atmosphere or upper hydrosphere.
The Energy Department announced that it will create a new pilot purchase program for
carbon removal efforts, providing an “early market commitment” to CDR companies. Unlike previous policies, the novel program supports any technology that removes carbon from the air, not just an industrial direct-air-capture facility or technologies that injects carbon underground.

The support for carbon removal is bipartisan with cosponsored bills demonstrating a willingness to invest in the field. Federal incentives and programs for purchasing CDR credits will help establish a standard as well as demand for CDR credits. Incentives and programs are expected to spur investments and innovation to drive down the cost for CCUS technology. Business Sweden sees a growing interest from Swedish companies to leverage these opportunities and scale up technology as deployment becomes more cost competitive under federal programs. Swedish companies can benefit from production tax credits and collaborate with partners to partake in projects that are applying for grants. Companies providing high-quality CDR credits will also see a growing market in the US as companies race to get to net zero.

Anna Lundberg
Business Sweden
Consultant Green Energy and lead for CCUS in the US