Carbon Sequestration with Julio Friedmann

TRANSCRIPT

Katherine Gorman (00:05):

You are listening to Climate Now. I’m Katherine Gorman.

James Lawler (00:08):

And I’m James Lawler. And in this episode, we’ll be diving into carbon capture and storage or CCS technology, and specifically the policies around CCS that will make this a feasible technology, the economics of CCS deployment and where these two things intersect. We’ll also look at some of the policies that are already supporting carbon capture and storage, as well as what we’ll need to further incentivize widescale deployment.

Katherine Gorman (00:33):

Today our guest on the podcast is Dr. Julio Friedmann. He’s a senior research scholar at the Center on Global Energy Policy and lead of the Carbon Management Research Initiative at Columbia University’s School of International and Public Affairs. Dr. Friedman, thank you so much for taking the time to join us today. We really appreciate it.

Julio Friedmann (00:51):

It’s a real pleasure. Thank you for having me.

Katherine Gorman (00:54):

So, we ask all of our guests the same question first. How did you get where you are? What’s been your journey to Columbia?

Julio Friedmann (00:59):

I’ll tell the short version of the story, which is I worked for three years in the Obama Administration and I absolutely loved it. And I went back to my home base, which was Lawrence Livermore National Lab. My time in government made clear to me that the important part of clean energy deployment is policy and finance. And the two things you can not work on in a national lab are policy and finance. So, I began to look for other opportunities, and at the end of the day, through discussions with our founder, Jason Bordoff, I chose to come to Columbia and I could not be happier. Carbon capture is something I’ve been working on really since 2001. And even then, the arithmetic was pretty straightforward. Like we knew that to get to zero, you needed to do a lot of additional things and everything was hard and we needed to try a bunch of stuff. And I was able to take what I learned as a geoscientist during my doctorate and my own work in the oil and gas industry and reapply it to this foundational and difficult environmental challenge of climate change. And it’s been a primary focus ever since.

Katherine Gorman (02:09):

What was your role in the Obama Administration? What kind of problems were you working on?

Julio Friedmann (02:13):

First and foremost, we worked on an innovation agenda. We had a budget that grew while I was there up to a total of about $600 million a year, really focused on the environmental challenges of fossil fuel use and almost all of that money was focused on reducing emissions. I also had the good fortune though of partnering with federal agencies to try to figure out how to get regulatory processes in place to ensure safe and secure disposal of CO2. But we worked with governments around the world, Europe, the Middle East, China and Japan, to try to figure out how to partner on innovation and a partner on projects. And we worked with industry to figure out what it took to get them to yes, so that we could start deploying this climate technology in a reasonable way. And I had the good fortune of meeting lots of people from lots of backgrounds across the US and around the world to do that work.

James Lawler (03:05):

Many people think of government as a place where, you know, ideas sort of stagnate and things don’t really get done. It sounds like you, you know, have favorable memories of your time working on some of these problems. I wonder if you could share perhaps some of the things that you’re most proud of having accomplished, engaged in those discussions that you just described.

Julio Friedmann (03:29):

Sure. One of the things that I’m pretty pleased with is that by the time I left, we put 10 million tons of carbon dioxide underground.

James Lawler (03:38):

How did you, how did you do that? Did you go and grab it? How did you, how did you accomplish that?

Julio Friedmann (03:44):

That was a team effort, for sure. But in part some of that was enabled by the stimulus package that came through in 2009, in 2010, and a number of projects started including a hydrogen carbon capture project in Port Arthur, Texas, and an ethanol carbon capture project in Illinois. We started doing retrofits in the energy and industrial sector. And those are very difficult things to pull off. They need many, many hands to make them succeed. And in that context, sometimes the government can help get things over the finish line. Another thing that we helped do, I think, was laid the seeds of work for future action. We put language in the federal budget recommending carbon capture tax credits, and those were the progenitors of 45Q and 48A and some of the other carbon capture tax credits that are out there that are helping finance real projects. And I was very pleased to be party to that effort. Last but not least, I was really pleased with the partnership we established with China, that has since waned. The partnership is not where we would like it to be or where the world needs it to be. But for a period of time under Secretary Kerry’s leadership and others, we really made progress in terms of emissions reduction with China and with innovation with China. And I think that kind of collaborative sensibility was very welcome and still very important.

James Lawler (05:12):

Dr. Friedmann, could you give us a description of 45Q and what these other policies are?

Julio Friedmann (05:18):

The easiest way to describe them is they’re like the wind production tax credit, you get paid to do something good. In this case, generate zero carbon electricity from wind. Or they’re like the solar investment tax credit. And that’s just what they are. If you buy solar panels, you get a 30% tax break on the capital costs. In the case of 45Q, that is a tax credit for storing carbon dioxide. You get paid when you don’t emit CO2 and in doing so, it creates a set of revenues and opportunities for tax rebates and so forth that a company can use to finance a project.

Katherine Gorman (05:53):

Is your focus on retrofitting power plants with CCS technology?

Julio Friedmann (05:58):

That’s a big part of my focus, and that can come from steel plants or cement plants or chemical plants. It can come from refineries or ethanol facilities. It can come from gas power plants, or coal plants, or biopower plants. It can also come from the air. We can also capture CO2 directly from the air and store it underground. And the whole reason to do any of these things is just climate. That’s the only reason to do any of that, is to just reduce emissions. At its heart carbon capture and storage is an emission abatement technology, and that’s all it does. And so that has been a big part of our focus and in part that’s because there will be segments of every market where that’s the cheapest and easiest alternative to implement, by a large margin. Not everywhere. There’s lots of markets where renewable power or biofuels or something else is a cheaper and more actionable solution. But in many markets, CCS is the thing that’s fast and cheap.

Katherine Gorman (06:52):

So what percentage of global emissions could we realistically capture?

Julio Friedmann (06:57):

When you look at the global budget of carbon and what you’re going to do, a pretty robust finding is somewhere between, you know, say 10% and 20%. I usually use 1/7^th, 14% or so seems to be pretty solid. That’s a split globally between power and industry. Typically half of that as industry and half of that is power. And about 70% of that is outside the OECD. So mostly it’s in developing Asia, in India and China and Southeast Asia, these countries, in Latin America, about a third of it in countries like the US Canada, Japan, Europe.

James Lawler (07:37):

I just want to make sure I’m tracking this percentage that you’ve just described, it’s the percentage that you believe we can capture?

Julio Friedmann (07:43):

That’s out of the total 51 billion tons that we emit today, we’re going to go after about a seventh of that. So on the order of 5 to 7 billion tons of carbon capture is what we’re talking about. And we could do more. It would cost more money if we did more. We could do less. We would emit more if we did less, or it would cost more to fix climate if we did less. So that’s a pretty robust finding. The smart answer is on the order of 10% to 20%, 5 to 8 billion tons of CO2 every year. That requires a lot of stuff to get it done. An important part of your question, we are not limited by the geology. This is a common misunderstanding. It is widely known in our community that the global storage capacity of conventional stuff is between 10 and 20 trillion tons of storage.

James Lawler (08:34):

When you say conventional stuff, what do you mean by that?

Julio Friedmann (08:36):

Saline formations, depleted oil and gas fields, these kinds of things. Unconventional stuff is like shale, basalts, and mineralization. That’s unconventional. If you include the unconventional options, you have 10,000 trillion tons of storage. So we’re not limited on the geology. Some places don’t have the good geology, like Japan and Korea don’t have the good geology. North America is blessed with good geology. So the Gulf of Mexico is one of the very best places to do this. And just in the Gulf of Mexico, we have a trillion tons of capacity. So, you know, given the fact that we, as a nation emit, what, on the order of, you know, 8 billion tons or 6 billion tons a year, like, a trillion will get us a long way.

James Lawler (09:25):

That’s very interesting. So if geology is not a limiting factor, what stops us from tapping into these storage sites and, you know, doing this at scale?

Julio Friedmann (09:33):

The key limiting factors are threefold. First is access to the geology. This is not like a mineral resource, it’s something else and who owns it and how you get access to it is actually a challenge. It’s something the federal government hasn’t exactly sorted out yet. Even on federal lands, like the Bureau of Land Management, they have a process by which you can lease it and stuff, but in many states in different jurisdictions, the ownership is complicated and heterogeneous, it’s hard to aggregate enough capacity to do this. One of the better places to do it in the US is actually offshore for that reason, only one owner, which is the federal government or the state of Texas or somebody. So you can just go to one place and say, hey, we want access to the port line.

A second is pipelines. In many cases, the sources of CO2 today are not where the good storage sites are. So for example, one of my favorite ones is New Jersey. New Jersey has got a lot of refining and chemical emissions. They don’t have good places to store CO2 nearby. So you would need to build a very long pipeline someplace to store the CO2. That’s hard to do in New Jersey.

The third thing that you need, really, and this is the major challenge, is cash. It took us a long time to build policies that allowed us to finance renewable projects, but we had stuff like renewable portfolio standards, the investment and production tax credits, we had mandates from states, we had corporate procurement actions. We had all these things. We have mass manufacturing in China. We have the Energiewende in Germany, and then suddenly we were able to finance these things. The policies for carbon capture were just emerging five years ago. There was no way to make your money back. So you couldn’t finance a project. Now with things like 45Q, the low carbon fuel standard in California, the policy landscape is maturing to the point where we can finance the projects, and these other questions around pore volume and pipelines and infrastructure are starting to come together.

Katherine Gorman (11:32):

Let’s talk about policy for a second. Do you think that a universal price on carbon, I mean, should we ever actually agree on one, would be the optimal solution or I guess, incentive for wide-scale adoption of CCS technology, or are we going to be relying on this sort of patchwork of policies across the world for a long time?

Julio Friedmann (11:51):

I do not believe a universal price on carbon is in the cards anytime, ever. I think it may be the most economic efficient pathway, but I don’t see it happening. One of the things that I learned while I was in the US Government is that we didn’t make policy in other countries. Like, so I don’t know how we would pass a law like that in Russia or in Saudi Arabia or in China, seems unlikely. Right? But I also think it’s not strictly necessary. This patchwork of approaches actually is working. Canada has $170 economy-wide, carbon tax. That’s awesome. That’s about the right level. A couple of other countries do, Norway and Sweden and Switzerland are starting to get up to that level. In our country, we do things with a patchwork of regulation and tax policy that seems to be effective for our political situation.

In Japan, they’re paying a bunch of green premiums to try to get the job done. Different countries have different ways of doing it. And the UK, they have a combination of green stimulus and contracts for differences. That was hugely important to get offshore wind built in the UK, for example. They didn’t need a universal carbon price. Let me say, by the way, that for the existing policies we have, nobody in the world was clamoring for a renewable portfolio standard 30 years ago, somebody just passed it. Like we don’t need to hold our hands on that stuff. We don’t need global accordance. What we need is we need to start doing things. We should stop asking ourselves what we should be doing and start asking ourselves what we can do. And what we can do is we can build stuff.

Katherine Gorman (13:29):

So what you’re saying is that we need a construction agenda alongside our reduction agenda.

James Lawler (13:37):

So Dr. Friedmann, let’s say we’re contemplating building a coal-fired power plant, and, you know, I want to sell my electricity to the grid. I know that with CCS technology, I can strip out about 90% of my emissions from the flue gases from this plant. But of course, it’s going to increase the price of electricity that I’m selling. And I’m just wondering, does the math work with access to programs like 45Q and other tax incentives? Can I actually, can I do this economically, currently, today?

Julio Friedmann (14:06):

So first of all, I think that power’s not a great place to start this conversation. We’ll start it, but I’d rather focus after that on other things cause they’re more illustrative, but let’s talk about power plants. Our Center (SIPA Center on Global Energy Policy) published a bunch of research exactly on this, and we’ve got another report coming out in a few weeks, in which we look at what policies would deliver finance in the power sector in the US. It varies by fuel. It varies by who owns the plant. If it’s a merchant plant, it’s very different than if it’s a utility-owned plant. The risks are different. The costs are different. If it’s a new build versus a retrofit, these things are different. But functionally at today’s prices 45Q is not quite enough. But with the Catch Act proposed at $85 a ton, you get most of the power sector.

And it’s literally just that change. Similarly, one of the proposals is to add direct pay to 45Q so that you don’t have to have this appetite to get the rebates. That opens up a whole bunch of projects. And so these small incentives changes really matter. I think it’s more helpful though, to think about this in terms of something like this steel mill. Power plants are entirely, like generate power locally, sell it in a regional market. Like that’s how power plants work. And there’s lots of options for power generation. There’s renewables, there’s hydro, there’s nuclear, there’s coal, there’s gas, there’s biogas. There’s all these things that you can do. If you look at a steel mill, you don’t have a lot of options, right? There’s very few things you can do. About half of your emissions have nothing to do with your energy supply.

Half of your emissions are by-product chemistry. And you are part of a global commodities market. If you change your price by a couple of percent, you lose all your market share. That doesn’t happen in the power sector. And there you still, if you wanted to add CCS to a plant, you would also be adding cost for sure. So then the question as well, do we put all of US steel out of business or do we do something else? Right? So we have to think about what constitutes the right incentive package. Also, if we look at the US steel mills, are they close to CO2 storage sites or not? If they’re not, we need to think about pipeline networks to build them because unlike a power plant that just throws electrons onto the grid, moving molecules is a different prospect. You can’t just throw CO2 onto the CO2 grid.

So we have to think a little differently about this. An analogy that I think is helpful is to think about inkjet printers and digital TV. When inkjet printers were invented, they went to market that year. And the reason why is because people could plug them into their wall and print with them. When digital TV was invented, it took 20 years to get it to market because you needed digital converters, you needed a fiber optic cable, you needed standards and protocols for acceptance, you needed people to start broadcasting in digital. There was a whole set of changes that were needed for that innovation to get to market. Now it’s standard, but there was a lot of gnashing of teeth. There was money lost and made in that transition that was very real. If we’re thinking about decarbonizing global industry, cement, steel chemicals, it’s going to look more like that. We’re going to have to build infrastructure. We’re going to have to create policies like 45Q. Europe announced potential border tariffs as one way to handle the trade exposed risk their industries face. And it’s going to take some time to sort this out. In that context, carbon capture is still the cheapest, and in some cases the only, way to reduce those emissions. Excellent. So we should get going with that. So what can you do becomes an important question to ask yourself.

James Lawler (17:54):

So what can one do? I mean, if you’re operating as a steel mill, for example, does it work out economically to retrofit your plant with CCS and take on these extra costs, which will likely be added to the cost of your product and still be competitive in that market?

Julio Friedmann (18:09):

I want to say this as clearly as I can, and I hope that it comes across clearly. Whether or not it makes economic sense is up to us. We decide that. So there’s additional cost to doing that. Excellent. Does it make economic sense? That’s up to us. If we had a, you know, a $100/ton CO2 green tariff for green steel, if we provided a production tax credit for steel, the way that we do for electricity, we could pay for that. Okay. We don’t do that today, but that’s our decision, right? And in Canada they have something that looks like that it’s called an output-based rebate. So they have an emissions cap. And then say, if you go below that cap, the government will pay you money. If you go above that cap, you owe the government money. It’s not exactly a cap and trade, but they say, we are going to look at your output and if you’re doing better than the average bear, we’re going to pay you a premium. That incentivizes good behavior. That’s a policy choice Canada made years ago. It’s one we explored in Waxman-Markey and decided not to enact. But again, that’s up to us.

James Lawler (19:13):

Got it. So are there any policy levers that we can say yes to today that have the potential to make CCS technology more viable?

Julio Friedmann (19:20):

The bills that are coming out of Senator Chuck Schumer’s package, the $3.5 trillion package, and Senator Manchin’s compromised infrastructure bill that was struck with the White House. There’s a lot of stuff in there that would go a long way to making carbon capture and storage economically viable. And in these sectors: in steel and chemicals, in cement, in power for natural gas and for coal and for biomass. Like, there’s enough in there to get going on that. So the answer to your question, does this make economic sense varies by a month. If we pass these laws today, they would make economic sense. And if we don’t, no they won’t. So they’re up to us, what I will say. And this is a common misconception. There is no technical problem to this. We can build a CO2 pipeline from a steel mill to a storage site.

We know cause we have 5,000 miles of CO2 pipeline in the United States. They’ve been regulated since 1972 by the Department of Transportation. We can permit CO2 storage wells. The EPA has been in that business since 2010. We’ve been injecting CO2 underground since 1972. We know how to do the capture. That technology was invented in 1930. And the first project was fielded in 1938. And there’s a dozen companies around the world that will sell you a unit with a performance guarantee and a rapper. And the prices are coming down. There’s a dozen companies out there that’ll say that they can beat those other company’s prices. And you’ve made a point earlier about, well, 90% capture, like that’s, again, something we decide. That’s a convenient price point, but if you want it to get 95% capture, 97% capture, that would cost 7% more. 7%, that’s a choice we make. Right? And so we can, in some technologies, like the Net Power system emit zero, like truly zero. And so we, we know how to do these things. There’s not a technical limit. And the CO2 storage systems work. We have been storing CO2 underground for 50 years without incident, without leak, without problem. Nature has been storing CO2 underground for 280 million years and it’s worked fine. So we know how to do it. We’ve been doing it well, the technologies exist. Those are not the barriers. The barriers are us. Do we choose to do this or not?

Katherine Gorman (21:46):

Yeah. That is the question. And Dr. Friedmann, I’d love to dig in a little bit given your expertise and your depth of understanding here, what do you think are the topics that get missed in this conversation when it’s being had in the public sphere?

Julio Friedmann (22:06):

There’s two things I’d like to mention actually. And this is often, both of these are often lost in the conversation. The first is, if you retrofit an existing facility, you reduce criteria pollution, period. You reduce sulfur, you reduce nitrogen, you reduced mercury, you reduce particulates, you reduce VOCs. That has been measured over and over and over again at the places we’ve done this. So if you retrofit an existing facility, there’s clear environmental benefits beyond climate. You can really reduce the pollution loads and that’s particularly good for disadvantaged communities. There’s this question about whether we should use CCS as part of an equitable transition. I would argue that if you do it smart, yeah. Because disadvantaged communities can get direct benefits from that. And it’s not just high paying jobs and it’s not just, you know, job sustaining or new jobs. You get direct environmental benefits from it.

And if you combine it with stuff like blue hydrogen production, then you can further decarbonize diesel and you can further decarbonize buses and public transit and all these other things. There are ways to add, again, additional environmental and public benefits from this. We just need to be clever about how we do it. We need to keep our eyes on that as a goal, but absolutely we can do this. There is no doubt. There is no scientific question. Carbon capture, retrofitting existing facilities, reduces pollution loads substantially. The other thing that I think is lost on this is, unlike a lot of other clean energy systems, which are personal choices, like you buy an electric vehicle or you stop eating meat, or ones where you say like, you’re just going to plug into the grid with renewable power, right, carbon capture is born as a collaborative effort. It is cross-sectoral. You have to go from the power sector to geoscience. There are many regulatory bodies involved in it. You are building large stuff. So there’s public acceptance at the forefront. The finance is lumpy and expensive upfront. So you need to get partnerships going on this. In some cases, the people who take custody of the CO2 are not the same people who dispose of the CO2. You have to build infrastructure. It’s born collaborative. And I think that is both a difficulty and a challenge with carbon capture, but it’s also an opportunity, because ultimately climate change is at its heart, a collaborative undertaking. We need to figure out how to work together on difficult stuff. And in that context, I see carbon capture as a good test particle for how we tackle a bunch of other difficult questions around the world, through collaboration, through partnership and through generosity.

James Lawler (24:44):

And who would be best positioned to lead these kinds of CCS efforts, given that they involve bulky upfront capital expenditures, and you know, there’s a requirement to integrate many different parties. Are there organizations or companies today that you believe are well positioned to take this on and lead the charge here?

Julio Friedmann (25:04):

Right. So first of all, let’s say that internationally, the United States is best positioned to do this.

James Lawler (25:10):

You mean the US Government?

Julio Friedmann (25:11):

The nation of the United States of America is best positioned. That will include governments. Companies. NGOs. It will include a bunch of people. But if you look around the world, who’s able to best do this. The United States is best able to do so. Canada has a lot of game. The UK has a lot of game. Norway has a lot of game. Japan and China have good players. But this is ours to lose. This is an opportunity for the United States to demonstrate global leadership and deep decarbonization rapidly. And if we’re going to hit the climate goals that President Biden’s announced, we’re going to need to do a whole bunch of it in the next 10 years or else the country won’t hit its goals, like that is also known. The clean electricity standard alone would not deliver the more aggressive climate targets we need to do more on top of that, and CCS, I think is likely to be part of that outcome.

In terms of what groups are best positioned to do this. Let me start by saying, I don’t think utilities are the ones, right? And I don’t think that the people who produce the emissions are generally best configured to do this. So steel mills and cement plants, they have something to contribute. They want to get into the space. They’re starting to get into it, but they can’t really pull it together. At the end of the day, actually it looks like the skillsets of the oil and gas industry and energy companies. They build pipelines, they run big capital projects, they understand the subsurface. And this creates its own challenge because there’s such distrust between the body public and oil and gas industries, might I say, well-earned distrust, that that creates its own barrier. And I think we’re already seeing that not all companies are the same in this regard. In Europe, for example, Equinor and Shell are really leading on this. Shell announced a 10 million ton a year carbon capture project in Edmonton. Like that’s pretty good. That’s not business as usual. That’s a pretty substantial departure from business as usual. And it’s as big a departure as building offshore wind farms is, like, that’s also something these guys are doing, but they have these skills and so forth to do it.

Katherine Gorman (27:25):

Thank you so much, Dr. Friedman for your time really, really appreciate it. That is it for this episode of the podcast. You can check out our other interviews, watch our videos and sign up for our newsletter at climatenow.com. And if you want to get in touch, email us at contact@climatenow.com, or tweet at us @weareclimatenow. We hope you can join us for our next conversation.