IRA triggered the upsurge of environmental protection investment and construction in USA

Since the United States signed the Inflation Reduction Act (IRA) in August 2022, the development of hydrogen and carbon capture and storage (CCS) projects in the country has been significantly promoted. At present, many American enterprises are stepping up investment in related projects and planning new projects.

Darren Woods, CEO of ExxonMobil, said on the conference call of the fourth quarter performance at the end of January that the company has many activities in the hydrogen and CCS low-carbon fields, especially in the United States. The implementation of IRA has attracted more investors to pay attention to the investment interest in the low carbon field of the United States, and further strengthened the company’s investment commitment to hydrogen and CCS projects.

In December 2022, ExxonMobil increased its planned investment in low-carbon solution business from $15 billion to $17 billion in 2022-27. In January 2023, ExxonMobil awarded a front-end engineering and design contract to build the world’s largest low-carbon hydrogen production facility at its production base in Bay City, Texas. The project will produce 1 billion cubic feet of blue hydrogen per day and provide CCS for third-party carbon dioxide emitters. The CCS project will store 10 million tons of carbon dioxide per year. For ExxonMobil’s olefin complex project in Beicheng, if hydrogen is used instead of natural gas as the fuel of cracking furnace, the project can reduce carbon dioxide emissions by 30%. The final investment decision of ExxonMobil Beicheng low-carbon hydrogen project is expected to be made in 2024, and it is planned to be put into operation from 2027 to 2028. ExxonMobil Bay City low-carbon hydrogen project is the preliminary project of the company’s Houston CCS center, which can capture and store 50 million tons/year of carbon dioxide by 2030 and 100 million tons/year of carbon dioxide by 2040.

Chevron, another major American oil company, is also building low-carbon businesses such as hydrogen and CCS. The company believes that IRA may reduce investment risk to some extent. Michael Worth, CEO of Chevron, said on the company’s fourth quarter performance conference call: “There is no doubt that IRA may accelerate some investment activities in hydrogen and CCS projects in the United States. Enterprises hope that this can reduce technical risks and costs and improve the attractiveness of these investments.”

BP believes that IRA’s incentives for CCS will increase to support its greater application in the power sector, industrial sector and production of blue hydrogen. Spencer Dell, the chief economist of BP, said in the BP2023 World Energy Outlook Report that through IRA and other incentives, the company expects that the deployment of CCS in the United States will exceed 100 million tons/year by 2035, and close to 400 million tons/year by 2050. Finally, IRA can decarbonize not only the chemical industry, but also all energy-intensive manufacturing industries in the United States. This requires hundreds of billions or even trillions of dollars of hydrogen and CCS investment.

Dow Chemical values the preference of IRA for carbon dioxide collection projects. Jim Fitlin, CEO of the company, said: “Through the IRA, we have seen the rise of the price of carbon dioxide emissions. Now the price of carbon dioxide emissions has increased to the maximum of $85 per ton.” In this context, enterprises will pay more attention to carbon capture, and the IRA has provided tax credits, which has greatly promoted the development of carbon capture. According to the data of Gibson Law Firm of the United States, IRA will increase the tax credit for carbon dioxide capture used to improve oil recovery or some industrial applications from $35 to $60 per ton, and the tax credit for carbon dioxide capture used for geological storage from $50 to $85 per ton. “This has a great incentive to capture carbon dioxide. What we need to do now is to establish a carbon capture center and a hydrogen center to achieve this goal,” said Fitlin, citing an analysis by the American Chemical Council (ACC). “The United States needs to establish 6 to 8 hydrogen/carbon capture centers in strategic locations to decarbonize 85% of the entire chemical industry. The funds and carbon prices brought by IRA will help us achieve this goal.”

Driven by the IRA, in addition to CCS, which represents blue hydrogen, the United States will also increase its investment in green hydrogen. Green hydrogen includes the use of renewable energy to electrolyze water. BP predicts that the use of low hydrocarbons in the United States will increase to 4 million tons/year by 2030 and to 26 million tons/year by 2050. Dell said: “The hydrogen incentive measures in the IRA particularly support green hydrogen. By 2050, green hydrogen will account for about 60% of the low hydrocarbon in the United States, while the proportion will be about 25% in 2022.

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