Carbon Removal at Airports (2024)
Chapter: 6 Funding and Financing Considerations
CHAPTER 6
Funding and Financing Considerations
6.1 Funding and Financing for CDR
Cost was identified consistently as a barrier for many CDR pathways during the literature review, industry interviews, and discussions with leading organizations. As with the CDR pathways, funding and financing are rapidly evolving to close the gap and boost new technologies, start-up companies, and infrastructure to support the scaling of CDR in the United States.
The passing of the IRA in 2022 has brought about much funding potential for U.S. emissions-reduction projects. The IRA followed the prior year’s Bipartisan Infrastructure Law (BIL). Collectively, the associated funding programs will make many previously uneconomical—but crucial—projects viable. These programs also support the goals of the Department of Energy’s (DOE’s) Carbon Negative Shot initiative, which calls for innovation to capture CO2 from the atmosphere and store it at Gt scales for less than $100 per metric ton (Mt) of CO2 equivalents. Several key provisions specifically related to CDR are described later (This is not an exhaustive list; it focuses on federal programs available in the United States).
Many of these funding opportunities are time constrained and may not be available in the same capacity at the time of publication and after. Despite the potential lack of relevance in the future, these funding sources indicate the growth in financial support for decarbonization and carbon-removal projects. It is likely that if these specific sources are not available, others will be. Tracking DOE updates, aviation industry organizations, and carbon-removal organizations will help airports stay up-to-date with events and funding opportunities. An update to this report or a follow-up synthesis may be helpful to address the rapidly evolving nature of CDR and the funding sources to better inform airports.
Looking ahead, CDR technology will scale and ultimately become more affordable. As costs associated with CDR drop, funding will be less critical. It is possible that the amount of financial support available today will be allocated to projects of different types as CDR scales and becomes cheaper.
6.1.1 BIL—Regional DAC Hubs
The BIL requires the DOE to provide funding to projects that contribute to the development of four regional DAC hubs. The program is administered by the DOE’s Office of Clean Energy Demonstrations, in partnership with the Office of Fossil Energy and Carbon Management (FECM).
Project Eligibility
Each DAC hub must fulfill certain obligations: facilitate the development of DAC projects; be able to capture and sequester or use at least 1 million Mt of CO2 from the atmosphere annually;
demonstrate its capture, delivery, and sequestration or use of technology (such as biofuel development); and have the potential to be developed into a regional or interregional carbon network to facilitate carbon sequestration or use. Each project will demonstrate a DAC technology or suite of technologies at commercial scale and store the CO2 permanently in a geologic formation or through its conversion into products.
Eligible projects include the following:
- Chemical DAC technologies
- BiCRS
- Ocean-based carbon removal (i.e., direct ocean capture)
- Enhanced mineralization
(Refer to Chapter 2 of this report for more details on these project types.)
Funding Amounts and Timelines
The BIL includes $3.5 billion for these DAC hubs. The initial funding opportunity announcement (December 2022, with letters of intent due by January 24, 2023, and full applications under review as of August 2023) consists of more than $1.2 billion. These funds are intended to begin the process for conceptualizing, designing, planning, constructing, and operating DAC hubs. The DOE expects to provide up to $3 million per project for up to 12 feasibility studies as part of this initial phase. Subsequent phases are anticipated to include a design phase (up to $12.5 million per project for up to eight studies) and project development phases (up to $50 million per project for up to two hubs) (U.S. DOE 2022; FedConnect n.d.; Wu and Gibbs 2022).
6.1.2 BIL—DAC Commercial and Pre-Commercial Prize
The DOE’s FECM is distributing a total of $115 million to promote diverse approaches to DAC. This program is split into three prizes: the DAC Pre-Commercial Energy Program for Innovation Clusters (EPIC) Prize, the DAC Pre-Commercial Tech Prize, and the DAC Commercial Prize.
Project Eligibility
The DAC Pre-Commercial EPIC Prize awards funds to regional incubator teams that “submit creative and impactful plans to support entrepreneurs and innovators in the DAC space and create meaningful community engagement to support both emerging and established DAC incubators and accelerators in implementing those plans to develop strong clusters, resources, and connections for energy start-ups and entrepreneurs” (American-Made Challenges 2023a).
The DAC Pre-Commercial Technology Prize awards funds to teams that “identify a critical need in the DAC industry, develop a solution to address this gap, and test the idea to a degree of scale. It aims to focus on the steps of ideation and entrepreneurship needed to prepare a technology and business for commercialization.” As teams achieve technology milestones, they will win increasingly larger prizes (American-Made Challenges 2023b).
The DAC Commercial Prize awards funds to teams that have already developed a technology with the ability to capture CO2 and scale this to achieve a removal target. As teams scale-up their technologies over the course of four phases, they will win increasingly larger prizes (American-Made Challenges 2023a).
Funding Amounts and Timelines
The DOE will provide up to $15 million in prizes to incubate and accelerate R&D of breakthrough DAC technologies through the initial prize (anticipated to officially launch in 2023). The DAC Commercial Prize provides up to $100 million in prizes to qualified DAC facilities for capturing CO2 from the atmosphere.
The DAC Pre-Commercial Technology Prize is anticipated to officially launch in 2023 with submissions due in fall of 2024. The DAC Commercial Prize was launched in July 2023, with submissions due in October 2024.
6.1.3 BIL—Technology Commercialization Fund (TCF)
As part of the BIL, the DOE’s Office of Technology Transitions (OTT), in partnership with FECM, issued a lab call to accelerate commercialization of CDR technologies, including DAC, by advancing MRV best practices and capabilities.
Project Eligibility
Projects led by the DOE National Laboratories, plants, and sites, and supported by diverse industry partnerships spanning the emerging CDR sector are eligible for this funding. The DOE’s OTT is encouraging diverse stakeholders from industry and other nonfederal entities to partner with the National Laboratories to support the emerging carbon-removal sector (U.S. Department of Energy 2022).
Funding Amounts and Timelines
The laboratory call was issued in December 2022, with concept papers due January 20, 2023, and full applications due March 3, 2023. The DOE’s OTT anticipates awarding $15 million to three to five projects, with an approximate budget of $3 to $5 million each.
6.1.4 BIL—Carbon Utilization Procurement Grants
Beginning in fiscal year 2022 and extending for 5 years, the DOE will distribute $310 million to entities to “procure and use commercial or industrial products that utilize CO2 in a manner resulting in a product with significantly lower GHG emissions than alternatives. This funding supports FECM’s mission to lower GHGs in the supply chains in enabling lower GHG supply chains as well as in supporting technologies to productively use CO2 for decarbonization” (U.S. DOE, n.d.).
Project Eligibility
This program is available to states, local governments, and public utilities to procure and use commercial or industrial products that
- Use or are made from anthropogenic carbon oxides and
- Result in significant “net reductions in lifecycle greenhouse gas emissions compared to incumbent technologies, processes, and products” (U.S. DOE, n.d.).
Funding Amounts and Timelines
In December 2022, the DOE’s NETL issued a notice of intent on behalf of FECM indicating that a funding opportunity announcement will be issued in the second quarter of 2023. This initial funding opportunity will include up to $100 million at a 50-percent cost share.
6.1.5 IRA—Investment Tax Credits
The IRA provides up to $180 per ton of CO2 removed from the atmosphere by DAC through the 45Q tax credit. Although there were already tax credits available for such projects, the IRA significantly increased the amounts as discussed in the following sections.
Table 14. Available IRA tax credits.
| End Result | Current Tax Credit ($/ton) | IRA—Point Source ($/ton) | IRA—DAC ($/ton) |
|---|---|---|---|
| Underground storage | 50 | 85 | 180 |
| Utilization | 35 | 60 | 130 |
Note: Assumes compliance with prevailing wage and apprenticeship requirements.
Eligibility
The 45Q tax credit is available to a wide range of developers and carbon-capture and carbon-removal technologies. Notably for airports, 45Q includes a direct pay provision that nontaxable entities can leverage.
Funding Amounts and Timelines
Table 14 compares the new tax credits available through the IRA to those that were previously available. The point-source amounts are included for reference only; the focus of this report is on carbon removals, under which DAC would fall. Likewise, only certain utilization projects would qualify as removal (e.g., if they meet the criteria discussed previously). Enhanced oil recovery is a third option included in 45Q, but it is omitted from this table due to its inability to qualify as carbon removal.
Under the IRA, the tax credits are available for up to 12 years beginning after the equipment is put in place (an LCA is required for utilization projects). The credits will also be adjusted for inflation beginning in 2027 (Clean Air Task Force 2022).
6.2 Additional Opportunities
In addition to the programs and opportunities discussed previously, airports may benefit from the following:
- Potential to monetize carbon-removal projects and sell the associated credits: In this option, the airport would own and operate the CDR project, using some credits for their own net-zero goals and could sell any additional carbon-removal offsets. First, developing and selling carbon offsets is limited currently from a revenue-generation side, due to there not being a federal regulatory system to drive demand. Second, the types of projects that can be implemented on airports sometimes do not align with the market for selling those offsets. However, this is rapidly changing, and at some point, the economics of developing and selling carbon offsets as an airport could be more feasible.
- Partnerships with tenants or other stakeholders to support funding of projects: This option would allow existing tenants or other stakeholders that may also have net-zero goals to help fund a CDR project in exchange for carbon-removal credit. This may allow an airport to fund or scale-up a CDR project that they would not have otherwise been able to fund.
- Customer contributions to support funding of projects: This option mirrors what many airports are doing with The Good Traveler program, where users of the airport may purchase offsets to account for their emissions from flying. This scenario provides an offset program that could offer carbon-removal offsets specifically. The Good Traveler program currently is looking into options to include carbon-removal offsets as part of their offerings. However,
- these offsets, if purchased by users, are not owned by the airport to offset their emissions, but rather would address Scope 3 (aircraft emissions).
Airports may compare off-airport removal projects and purchasing removal offsets to the existing practice of purchasing carbon offsets to negate residual emissions, for example, as part of an airport’s participation in the ACA program at Levels 3+ or 4+. However, carbon-removal offsets are likely to remain more expensive than emissions avoidance and reduction offsets for at least the near term. Refer to the carbon-market section in Chapter 1 for information related to the VCM.
