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Three great things about the Inflation Reduction Act—and one glaring omission

By Kyle Kornack

Kyle Kornack is the U.S. Partnerships and Carbon Removal Sourcing Manager at Carbonfuture.

There’s a lot to like about the Inflation Reduction Act (IRA), the $770 billion spending bill that emerged unexpectedly this summer out of Washington’s gridlock. Nearly half of the funding will be invested in climate solutions, creating incentives that will set the United States on a trajectory to a 40% reduction in carbon emissions by 2030 from 2005 levels. Before the law, the country was on track for only a 30% cut.

A close look at the myriad provisions of the IRA reveals several ways it will accelerate Carbonfuture’s mission to enable net zero companies to invest in trusted carbon removal projects at a scale of gigatonnes. Here are three of them:

Equally important: Carbon reduction and carbon removal
  1. It supports both emission reduction and carbon removal.

Congress sidestepped the distracting debates about the relative merits of cutting carbon emissions versus removing carbon from the atmosphere. The IRA invests in both, with funding to accelerate decarbonization efforts across the economy, including deploying electric vehicles, generating clean power, producing sustainable aviation fuel, and helping farmers shift to sustainable practices.  

Large investments into Direct Air Capture technologies
  1. It invests in direct air capture.

The IRA adds $3.2 billion in tax credits to support facilities that remove carbon from the atmosphere. Known as 45Q, these credits offer more substantial funding for direct air capture (DAC) -projects that remove CO2 directly from the atmosphere-than for carbon capture and storage (CCS) -projects that collect CO2 from point sources like power plants or industrial facilities. The credits are also higher if the carbon is stored in the ground rather than used to extract oil from depleted wells.  

Tax credits for DAC projects with permanent storage will increase from $50 to $180 per metric ton, making a major dent in the cost of DAC-based carbon removal, which now runs from $200 to $500 per metric ton.

Tangible incentives to help farmers learn about and use biochar
  1. It pays farmers to use biochar.

The IRA allocates $20 billion to a series of programs that support conservation and environmental protection in agriculture, more than nine times what these programs had previously received. Carbonfuture is particularly excited about the $8.5 billion added to the Environmental Quality Incentives Program(EQIP), which now offers payments to farmers to help them offset the cost of applying biochar to enhance soil health and crop yields. The subsidies will provide tangible incentives for farmers  to learn about and use biochar in their operations.

Biochar, a charcoal-like substance made by heating organic matter in a low-oxygen environment, is among the most immediately scalable and durable methods of carbon removal currently available. The process is more cost effective than direct air capture, and it stores  carbon for more than 100 years. Using biochar for carbon removal also provides a panoply of co-benefits to society, such as diverting waste from landfills, producing renewable heat and electricity, and improving the drought tolerance of crops.

Today, Carbonfuture enables dozens of biochar facilities around the world to create premium third-party verified carbon removal credits with the world’s only complete carbon tracking system. It helps the facility owners secure long-term durable carbon revenue with advanced purchase agreements.  

For all the good the IRA will do, there is one crucial way in which the bill falls short. The omission:

Solo performance: The investment concentrates on one technology only
  1. It doesn’t invest in carbon removal methods other than direct air capture.

While encouraging farmers to use biochar is a helpful step in the right direction, much of funding the IRA provides is unfortunately limited to one technology for Carbon Dioxide Removal (CDR) - direct air capture. Operators of biochar CDR facilities don’t have access to the 45Q tax credits.

While Congress did take a technology-neutral approach to carbon removal in the 2021 Infrastructure Investment and Jobs Act - which invests $3.5 billion to support a suite of CDR technologies in the federal DAC Hubs program -  a group of senators including Joe Manchin are now calling to limit the program’s scope to DAC technology.

Direct air capture is an important technology, but it’s just one of the dozens of promising approaches to durable carbon removal. In this nascent carbon removal market.  It’s simply too early to know which carbon-removal approach will be most scalable, cost-effective, and beneficial for society. This is why Carbonfuture’s Catalyst program supports a broad portfolio of emerging CDR technologies,  including direct air capture, enhanced weathering, and ocean-assisted carbon removal.

Regardless of the limitations on carbon capture subsidies, the IRA represents an unprecedented federal investment in climate solutions that builds on other positive steps the U.S. government has taken in recent years. The Chips Act, passed earlier this summer, takes a technology-neutral approach to investing $1 billion in carbon removal research. And the “Carbon Negative Shot,” launched by the Department of Energy in 2021, kicked off a multi-agency effort to scale carbon removal and reduce the cost to $100 per metric ton by 2032.

After too long a period of inaction, US federal policy is indeed beginning to scale investment to levels warranted by the climate crisis. The next step will be to ensure the rules are set not to favor a small subset of technologies but instead support the full suite of solutions needed to secure a just and livable future.  

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