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OpenAir’s response to OCED’s RFI concerning federal funding for state and local-level CDR procurement and advanced market commitments.

In January 2023, the U.S. Office of Clean Energy Demonstrations (OCED) released a request for information on the “Department of Energy’s Use of Demand-Side Support for Clean Energy Technologies” (OCED-RFI-23-1.) Below is a copy of OpenAir’s response, authored by Brooklyn-based advocate Toby Bryce and submitted on March 1, that lays out a series of recommendations related to carbon dioxide removal as a component of the program.

Summary:

OpenAir proposes demand-side support and market shaping for long-duration carbon dioxide removal (CDR) via federal funding of pilot state-level public procurement programs along the lines of the Carbon Dioxide Removal Leadership Act (CDRLA) policy framework. The CDRLA is standards-based, method-neutral, and designed to drive innovation; and the policy employs a competitive reverse auction mechanism, with a multi-factor “scorecard” to explicitly factor environmental justice, co-benefits, and other non-price considerations.

RFI Response:

Category A: Most effective demand-side support measure for given technologies 

  1. What are the potential benefits and drawbacks of DOE implementing demand-side support measures in a given industry (e.g., carbon dioxide removal, hydrogen, lowcarbon cement and concrete, low-carbon steel, sustainable aviation fuels)? 

There is clear scientific consensus that carbon dioxide removal (CDR) will be needed at gigatonne (Gt) scale by mid-century for us to have any chance to limit warming to 1.5 or even 2 degrees celsius. We are currently at Kt global scale of long-duration CDR, and significant public sector demand-side support measures for CDR are urgently needed this decade to accelerate scaling of this set of climate solutions that are essential to meeting our climate goals.

Benefits of implementing public-sector demand-side support measures for CDR include, beyond giving us a chance to meet our climate goals and scaling early deployment and increasing “shots on goal,” the opportunity to purposefully and thoughtfully shape the nascent commercial market for CDR to factor important non-price considerations such as equity and environmental justice; job creation, with a priority on union jobs; transparency and the opportunity for public sectoral learning; agricultural and ecosystem co-benefits; and minimizing potential harms and other negative externalities. An additional market shaping opportunity relates to developing and advancing high-quality, science-based measurement, monitoring, reporting, and verification (MRV) standards for CDR, which is a critical priority for the sector and where strong and thoughtful public-sector support can be catalytic.

The only drawback of implementing these measures is the fiscal cost – however these expenditures will pay for themselves multiple times over in terms of climate benefit as well as accelerating the commercial development (and associated U.S. tax base and job creation) of what is forecast to be a trillion-dollar industry in the second half of the twenty-first century.

  1. What would be the most effective demand-side support measure DOE could use to support commercial scale-up of a given technology (e.g., reverse auctions, advanced market commitments, contracts-for-difference, direct procurement, pooled offtake vehicles)? 

OpenAir is a strong believer in the power of direct public procurement to provide demand-side support for an early market like long-duration CDR. This procurement can beneficially take the form of advanced market commitments (AMCs) implemented via a simple reverse auction mechanism (as outlined below) to encourage price competition, explicitly factor non-price considerations, and deliver transparency and accelerate learning for the larger CDR market.

a. What are the most important considerations for DOE in exploring advanced market commitments in particular? 

The single most important consideration for DOE in exploring AMCs for long-duration CDR is to make the commitments standards-based and method-neutral. There are a number of currently viable CDR pathways – biomass-based carbon removal and storage (BiCRS); marine CDR (mCDR); mineralization; in addition to direct air capture (DAC) – with more pathways and methods to be discovered in the coming years and decades. DOE should not “pick winners” but rather let the market compete. AMCs that are standards-based and method-neutral offer the desired opportunity for market acceleration and shaping while allowing science, technology, and commerce to combine to deliver the best outcomes.

Key standards for CDR projects supported by any AMC are:

  • Additionality – CDR projects must demonstrably result in net new carbon removal that would not have otherwise occurred without the procurement support, and not take credit for carbon removal that would have occurred in a no-intervention scenario.
  • Durability – OpenAir favors a minimum durability of 100 years.
  • Net Negativity – CDR projects must be highly carbon-efficient in terms of emissions / gross removal (80%+), and to the greatest extent possible powered by dedicated renewable energy deployment.
  • Verifiable – The project must deliver net-negative carbon removal with full cradle-to-grave lifecycle analysis of process emissions, and with total net CDR measured, monitored, and verified by third-party science-based standards acceptable to DOE.
  • Equity and Justice – The project must be welcome in its community, equitably deployed, deliver co-benefits, and not create harms or other negative externalities.

OpenAir further recommends a procurement “scorecard” to evaluate projects. We can provide an example with sample weighting of key factors, which include:

  • Price per tonne.
  • Jobs creation – with a further preference for union jobs.
  • Community benefits – with a preference for benefits to EJ / Justice40 communities.
  • Agricultural and ecosystem co-benefits.
  • Carbon efficiency (emissions / total gross removal) – with a preference for incremental renewable generation.
  • Land-use and water efficiency.
  • Durability in excess of 100 years.
  • Project and pathway scale potential.
  • Delivery term (preference for projects that deliver CDR sooner rather than later).

A final consideration is transparency. OpenAir strongly favors the publication of all submitted proposals and CDR purchase agreements as an integral feature of public procurement programs – along the lines of what Frontier has so successfully pioneered with their voluntary purchases.

b. What are the most important considerations for DOE in exploring other demand-side support measures (reverse auction)? 

Reverse auction is OpenAir’s preferred procurement mechanism to deliver transparency and encourage a competitive selection process – see EDF’s excellent 2021 policy brief on the topic (focused on DAC but applicable to long-duration CDR more generally). At the CDR market’s current nascent stage, the auction process should be kept simple (e.g. not multi-round), and the selection process should explicitly factor non-price considerations (as outlined in the above scorecard) so as to avoid a simple “race to the bottom” on price. 

Category B: Implementation of demand-side support measures. 

[questions 3-4 not answered] 

  1. What are the benefits and drawbacks of DOE directly executing demand-side support measures? 

  2. What are the benefits and drawbacks of DOE working with a government-sponsored enterprise or government corporation to execute demand-side support measures? 

In addition to the state-level CDR procurement programs we are seeking to advance, OpenAir is strongly supportive of federal legislation such as the CDRLA and CREST bills that include a federal CDR procurement component. We are also supportive of the Energy Futures Initiative’s CO2 Secure proposal for a government-sponsored enterprise – which we see as an extremely compelling medium-term option – but we cannot wait for these to become law or rely solely on the federal government for demand-side support measures. We must start the scaling and market-shaping of CDR today, to meet our climate goals and so that the sector is ready for higher-volume procurement programs in the coming years. Our belief is that climate action is essential at every level of government, and we propose that the DOE support the direct procurement of CDR by state governments, as we will outline in the section that follows.

Category C: Other questions for entities potentially interested in providing demand-side support measures in partnership with DOE. 

[question 7 not answered]

  1. Are there other approaches DOE should consider to execute demand-side support measures? 

OpenAir proposes that DOE create a program to fund standards-based, method-neutral direct public procurement of long-duration CDR at the state-level per our Carbon Dioxide Removal Leadership Act policy framework, which is pending legislation in New York and Massachusetts, and advancing in a number of other states. 

Interested states would apply for DOE funding for an initial three-year pilot of the program (which for a large, populous state like NY, for example, would cost ~$25M as the CDRLA legislation is currently written). If the program is successful, states would then be responsible for finding a state-level funding source to continue operations.

The catalytic effect of this distributed, state-level CDR procurement – which again we see as complementary to federal procurement programs – should not be under-estimated. We also believe that delivering this funding via states will have bipartisan appeal. Key benefits include:

  • Develop and foster a nationwide capacity for CDR that will be integrated into every state’s economy at the community level on up.
  • Leverage high-quality state climate agencies and authorities such as NYSERDA and MassCEC to scale and accelerate CDR market development.
  • Broad-based market shaping with a priority on environmental justice; equitable project deployment; factoring of agricultural and ecosystem co-benefits and preventing harms; and advancing and standardizing high-quality MRV. 
  • Broad-based jobs creation and economic development – including EJ / Justice40 communities; rural communities; and displaced oil-and-gas communities – with a priority on stable, high-paying union jobs.
  • Funding of smaller projects and “community CDR.” Dramatic scaling the number of “shots on goal” to accelerate learning and spur innovation.

[questions 9-12 not answered]