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The emerging CDR sector requires substantial and predictable sources of public funding to scale to levels at which it can make a meaningful contribution to combatting climate change. Yet, in the United States, the existing 45Q tax credit is both too modest and too limited in scope to do the job. Modifying the 45Q credit or developing a new tech-neutral tax credit will require extensive advocacy in the U.S. Congress and careful attention to design.

In this webinar, held March 5, 2024, panelists from the think-tank, Third Way, and Van Ness Feldman, LLP, a law firm with extensive climate and energy expertise, discussed strategies for expanding public knowledge of, and appreciation for, the complex area of carbon dioxide removal. The panelists also shared insights from their new white paper on options for designing a tech-neutral CDR tax credit.

Panelists:

Nicholas Yoon, Policy Advisor for Carbon Management, Third Way

Kyle Danish, Partner, Van Ness Feldman, LLP

Moderator:

Wil Burns, Co-Director, Institute for Responsible Carbon Removal, American University

Three IPCC reports since 2019 have concluded that Carbon Dioxide Removal (CDR) methods are needed to accompany CO2 emissions reductions if we are to limit planetary warming to 2°C or less. Concerted efforts are underway to understand the science and develop the technologies that can deliver CDR that is scalable to the billions of tons needed to abate global warming. However, the investment needed to drive such scientific and technological advances, to be deployed at a massive scale, is correspondingly large. One way to secure such financing is through the sale of carbon offsets. At present the market for carbon offsets is dominated by so-called ‘avoidance’ offsets, by which further CO2 pollution is avoided by not harvesting forest stands, for example. Avoidance offsets, therefore, cannot deliver the CO2 removal needed to go hand-in-hand with emissions reductions. Also, the market dominance by avoidance offsets results in a price for carbon that is much too low relative to the costs associated with removing CO2 using a range of different technologies. This mismatch will hinder investment in CDR.

To rectify this issue, in this webinar held on January 30, 2024, our panelist Philip Boyd from the Institute for Marine and Antarctic Studies, made the case that offset markets must be fundamentally redesigned. This requires a focus on removal offsets, and specifically a market that is both simple in terms of facilitating transactions, but also flexible enough to accommodate a wide range of technologies that vary widely in the duration, safety, and verifiability of CDR. This webinar also advocated for a change of metrics from ‘carbon ton’ to ‘carbon ton year’ to provide both the requisite simplicity that markets need, and the flexibility to incorporate the diversity of CDR characteristics. Phil outlined how the ‘carbon ton year’ must be accompanied by a warranty to ‘bake in’ guarantees around verifiability and safety. Finally, he will emphasize how these market reforms – which will incentivize durable, safe, and verifiable CDR - must take place in parallel with efforts to develop suitable CDR technologies, based on sound underpinning scientific principles that can eventually deliver billion-ton CDR.

Panelist: Philip Boyd, Institute for Marine and Antarctic Studies, University of Tasmania, Hobart, Australia

Moderator: Wil Burns, Co-Director, Institute for Carbon Removal Law and Policy