Investors Are Spending More to Capture Carbon Than to Capture Wind

There’s a lot of money in carbon management. Like, a lot . Investment in the full suite of technologies designed to capture, store, and transport carbon has skyrocketed this year, according to data from Rhodium Group and Massachusetts Institute of Technology’s Clean Investment Monitor.

Overall investment in clean energy technology — which includes manufacturing of batteries, vehicles, and solar panels, clean energy generation, and retail products like heat pumps — was $284 billion in the last year, with $76 billion in the second quarter of this year alone, a record figure.

The fastest growth came from “emerging climate technologies,” which includes carbon management, which had $3 billion in investment in the second quarter — more than the $1.7 billion invested in wind generation. Compare that to the same time last year, when wind investment stood at $2.6 billion and carbon management investment was just under half a billion dollars. (Solar generation, meanwhile, had $9.3 billion in investment in the second quarter of this year, while storage saw $5.4 billion poured in.)

What changed?

Basically, wind — and its tax incentives — are hardly new to the U.S. economy, and while the Inflation Reduction Act expanded and extended those tax incentives, it was building on an existing policy. And in that post-IRA period up to today (almost exactly two years from the day the law was signed), wind, which requires long construction periods and substantial upfront spending, has been hampered by high interest rates . That’s true for solar, too, although to a lesser extent, explained Trevor Houser, a parter at the Rhodium Group, as wind projects take more time to build and so rely more on borrowed money.

With carbon management, on the other hand, the IRA was a complete gamechanger, hugely boosting the 45Q tax credit for carbon sequestered underground to as much as $85 per metric ton for capturing emissions where they happen, and then to as high $180 per metric ton for direct air capture.

“The majority of the growth that we’re seeing right now is due to that incentive,” Houser told me, as the tax credits have opened up the field to something beyond just using carbon for literal oil drilling .

Jack Andreasen, who runs carbon management policy at Breakthrough Energy, told me basically the same thing. “The boom in carbon management is driven nearly entirely by the support made available in the [Bipartisan Infrastructure Law] and IRA,” he said.

That scale of investment will be necessary to build out any reasonably sized carbon management sector, Andreasen told me. Building out new industrial and generation facilities equipped with carbon capture will be extremely capital-intensive, as will retrofitting existing facilities.

“That is the brilliance and importance of the federal funding — there is money for new builds and for retrofits. And both of these will be key in our net-zero future,” Andreasen said.

But while carbon management does have a fair amount of bipartisan political support, as with any large project, the necessary infrastructure — industrial facilities and especially pipelines — can attract local opposition . The nearly 700-mile-long planned Summit pipeline, which is supposed to link dozens of ethanol plants to a carbon sequestration site in North Dakota , has been strenuously opposed by environmental groups and landowners in Iowa , uniting progressives with a group of Republican lawmakers against the state’s powerbrokers and much of its agribusinesses interests.

“Carbon management does face similar siting and permitting barriers, particularly around pipelines,” to renewables like wind, Houser told me. And while that could potentially slow down development, “it’s starting from a lower base — you can get pretty rapid growth if you’re starting from zero.”

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