Carbon dioxide removal (CDR), or the range of technologies and processes for removing carbon dioxide from the atmosphere and oceans, promises to be a major part of US and global climate strategy in the coming decades. Recent governmental actions have created significant financial incentives for the rapidly growing CDR sector.
Given the heightened importance of CDR technologies, some regulators and members of the public are calling for a broader range of measures to ensure that CDR projects are accurately monitored, reported, and verified. Recent governmental activity suggests that the CDR industry can expect more comprehensive regulation in the future, although such regulation likely will take time to issue. In the interim, the industry can take voluntary steps to address these issues and build support for CDR as a central pillar of the technological solutions to climate change.
Background: Carbon Dioxide Removal
Many experts—including the drafters of the latest Intergovernmental Panel on Climate Change report—argue that CDR will be necessary alongside emissions reductions as part of an all-hands-on-deck approach to mitigating climate impacts. Through significant technological achievements, CDR proponents have begun to significantly reduce the cost of carbon removal and storage, and the energy necessary to undertake CDR activities.
Reflecting an awareness of the importance of CDR as a climate solution, recent governmental actions seek to bolster the CDR industry. For example, the Inflation Reduction Act increased the § 45Q carbon sequestration tax credit for both point source carbon capture and direct air capture. The U.S. Department of Energy announced $3.5 billion to create regional direct air capture “hubs.” And the Biden Administration included CDR solutions—both engineered and nature-based—among its list of 37 “game-changing” technologies set to receive significant funding to help achieve the Biden administration’s net-zero goals.
Monitoring, Reporting, and Verification (MRV): Current State of Play
A handful of regulatory schemes govern CDR, focused mainly on reporting in the geological sequestration context. These include, for example, the Environmental Protection Agency’s Greenhouse Gas Reporting Program administered under the Clean Air Act and Underground Injection Control Program administered under the Safe Drinking Water Act, as well as the Internal Revenue Service’s § 45Q regulations. At the state level, the California Air Resources Board’s Carbon Capture and Sequestration Protocol provides MRV procedures for purposes of the state’s Low Carbon Fuel Standard, largely mirroring EPA’s underground injection regulations while being more prescriptive on certain issues.
But recent activity in this area suggests that broader government oversight of MRV may be forthcoming. For example, in February 2022, the White House Council on Environmental Quality issued interim guidance to federal agencies on improving federal oversight of carbon capture, utilization, and sequestration technologies. Such guidance, however, is only a first step toward expanded federal oversight of MRV in the CDR sector, as individual agencies must grapple with how to address these issues within their statutory mandates. The IRS is considering comments on its § 45Q regulations following the Inflation Reduction Act’s boosting of that program, which could result in further MRV standards. Most recently, outside the US, the European Union announced a proposal for an EU-wide voluntary framework for certifying high-quality carbon removals. Unlike MRV regulations in the US, which have focused on geological storage, this framework would address other types of carbon storage, including in long-lasting products and materials, such as wood-based construction, and through carbon sequestration in agricultural soils and forests.
Conclusion: The Future of MRV Regulation
Recent actions have signaled increased governmental interest in oversight of CDR activities. The CDR industry, therefore, can expect more comprehensive MRV regulations as the sector continues to grow, including on a broader range of carbon storage technologies and process steps.
Meanwhile, independent frameworks can provide some guidance for the CDR sector voluntarily to improve accountability. Yet regulatory advancements may still be necessary to provide certainty to the industry and achieve true acceptance by the public.