Welcome back, climate leaders.

In today’s edition:

• 💰 Carbon capture finds a real customer

• ⛽️ Why heat waves are driving up gas prices

• ⚡️ A look at subsidies for the energy industry

Read time: 5 minutes

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BIG STORY

US government bets on carbon capture

Driving the news: The Biden administration is preparing to announce the first grant recipients of a multi-billion dollar competition that aims to expedite the emergence of a carbon removal program.

What's happening: Backed by a hefty budget and the DOE, the initiative is expected to turbocharge the direct air capture industry.

• Direct Air Capture (DAC) facilities utilize fans, filters, and other technologies to extract CO2 from the air and permanently store it underground.

• Only 27 such plants have been established globally, with the most extensive having the capacity to remove 4,000 tons of carbon annually.

• Industry insiders anticipate that the projects could receive between $3 million and $500 million in matching funds.

• These funds could be used for various purposes, from researching innovative ownership structures for DAC hubs to initiating mega-projects that can capture up to 1 million tons of CO2 annually.

Why it matters: This will not only mold the climate market but also endorse carbon dioxide as a waste product that necessitates some public management, with some concerns.

• Solely relying on carbon removal without additional measures like transitioning away from oil and gas would be a net negative for reducing emissions.

• There are concerns about the involvement of oil companies, which have historically injected CO2 underground to extract more oil from depleted wells. Some argue that DAC should not be seen as a means to extend the lifespan of the fossil fuel industry, as this could hinder public acceptance of the technology.

What's next: The success or failure of this program will likely influence global strategies on climate change and how businesses and policymakers approach carbon management in the coming years.

• Cost remains a crucial challenge, as currently, to meet climate goals by 2050, spending might exceed 1% of the global GDP (2023) yet carbon reduction is still essential.

• The cost of removing carbon using DAC facilities currently stands at approximately $700 per ton. In contrast, the Inflation Reduction Act has upped the tax incentives for DAC operators to $180 per ton for the CO2 they store permanently.

🌶 Hot take: Carbon capture, like voluntary carbon offsets, was a nice idea without clear incentives or customers. This $1.2B in grants solidifies the government as a real customer. But the moral hazard for the DAC facilities and Big Oil is real.

HOT TOPICS

1. 🚗 EV ridesharing: Despite aspirations to go all-electric in London by 2025, Uber confronts unexpected hurdles including sparse charging infrastructure and high EV costs. Only 19% of trip miles are run by electric-powered rides.

2. 🛢️ Heat wave impacts: High temperatures and previous postponed maintenance contribute to an increase in refinery breakdowns, triggering a surge in U.S. gas prices. Unpredicted incidents have hindered U.S. refineries from returning to their peak utilization rate.

3. ☢️ Nuclear: Small modular nuclear reactors (SMRs) are on the rise. Despite skepticism, the global SMR market is poised to grow from $9.5 billion in 2021 to $13 billion in 2023.

4. 💡 Energy efficiency: California's energy efficiency approach, based shows promising outcomes. The 'FLEXmarket' structure, developed by Recurve, has yielded $44.7 million through efficient retrofits and upgrades.

5. ⚡️ Grid: While FERC's interconnection reform rule is intended to expedite the integration of renewable energy sources, experts suggest it may not increase speed in areas already employing a cluster study approach.

6. 🔌 Fast chargers: The European Union has passed new legislation mandating EV fast charging stations every 60 km on major transport routes by 2025, aiming to reduce greenhouse gas emissions by 55% by 2030.

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CHART OF THE DAY

Beginning in 2016, tax expenditures and subsidies for energy grew and stabilized while direct federal support remained constant until recent temporary provisions were implemented due to pandemic-triggered economic effects.

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