Mar 14 -- The Department of Energy (DOE or the Department), Office of Fossil Energy and Carbon Management (FECM) is issuing this Notice of Intent (NOI) to notify interested parties of its intent to launch a Voluntary Carbon Dioxide (CO2) Removal Purchasing (CO2 RP) Challenge. Comments and recommendations are invited by May 15, 2024 regarding the intended structure, objectives, and implementation of the CO2 RP Challenge as proposed within this NOI.
The CO2 RP Challenge will call on other organizations to purchase small and growing quantities of high-quality, permanent CO2 Removal (CDR) credits. The CO2 RP Challenge will operate in coordination with DOE's Carbon Dioxide Removal Purchase Pilot Prize (CDR Purchase Prize), through which the Department will award up to $30,000,000 across ten prize winners that successfully deliver their committed CDR credits. In addition, the Challenge will invite CDR suppliers that were not selected for or did not apply to the DOE CDR Purchase Prize to seek designation as a “next wave” supplier that demonstrates promise for other future DOE or private sector CDR credit purchasing efforts. CDR credit suppliers participating in the CO2 RP Challenge through pursuit of designation within DOE's list of “next wave” CDR credit providers will submit CDR credit proposals to DOE for review.
Large-scale carbon dioxide removal (“CDR”) is critical to reach net-zero targets by 2050 and is anticipated to serve an important role as a counterbalance for hard to abate sectors and a mechanism to reduce atmospheric carbon dioxide. The US Long Term Strategy expects that at least 100 million tonnes of technological CDR (in addition to land use, land use change, and forestry (LULUCF) approaches) will be required for the US to achieve net-zero by 2050. Leading analyses by scientific bodies like the Intergovernmental Panel on Climate Change (IPCC) and the National Academies of Sciences (NAS) anticipate that CDR will be needed at least at the gigatonne scale by mid-century to deliver on the Paris Agreement goals. While these analyses collectively make clear that reducing emissions directly (i.e., without carbon credit purchases) is the primary long-term strategy for climate mitigation, in the vast majority of cases, CDR is essential as a complement to these efforts to avoid exceeding committed emissions targets and accelerate the pace of mitigation.
Currently, CDR pathways across the DOE portfolio are at varying levels of technical maturity and few pathways have been commercially demonstrated. Further, while a diverse portfolio of CDR approaches holds significant promise towards delivering on the United States' Long-Term Strategy, these pathways face common challenges to achieve scale, including factors like (1) cost, (2) measurement, reporting, and verification (“MRV”), and (3) resource constraints. For this reason, DOE announced a “Carbon Negative Shot” initiative at the 2021 United Nations Climate Change Conference (commonly referred to as COP26), aimed at catalyzing innovation across a portfolio of approaches to enable gigatonne-scale CDR at less than $100 per tonne CO2 e net removed for at minimum 100 years, inclusive of MRV, within a decade. In addition to piloting an extensive portfolio of CDR pathways, advancing and establishing MRV best practices and guidance, and investing in research and development to support supply (“push”), DOE is exploring opportunities to establish workable demand (“pull”) incentive mechanisms. . . .
Launched on September 29, 2023, the CDR Purchase Prize is a historic, first-of-a-kind government purchasing program for permanent CDR credit purchasing. The CDR Purchase Prize follows in the footsteps of private businesses and coalitions that have shown how relatively small-scale purchases of CDR credits can have an outsized impact on catalyzing technology innovation and the advancement of standards for robust MRV and carbon accounting.
The CDR Purchase Prize will award up to $35M of CDR credit purchases, across four CDR areas of interest: (1) direct air capture (DAC), (2) enhanced CO2 mineralization, (3) biomass carbon removal with storage (BiCRS), and 4) other planned and managed carbon sinks with secure geological storage or equivalent. The first-round application for the program closed on December 14, 2023. In spring 2024, DOE will announce up to 25 semifinalists that have submitted the highest quality CDR Credit Concept Proposals for how they plan to deliver independently verified, high-quality CDR credits to the US government with secure geological or equivalent storage. DOE will then release the final rules for how semifinalists will be evaluated and selected to secure one of the 10 finalists awards, which will provide finalists up to $3M upon delivery of their verified CDR credits. DOE's CDR Purchase Prize is designed to catalyze further voluntary CDR credit purchases in several ways, including:
• Supplier transparency for prospective CDR credit purchasers: DOE and the National Labs will conduct rigorous technical diligence on all applicants, and our pool of semi-finalists will offer a portfolio of CDR project developers with a high chance of delivering robust CDR credits in the near future.
• Purchase contract norms: DOE will set norms for what qualifies as high-quality CDR credits, and what MRV methods and broader delivery terms are appropriate for CDR credit purchasing, including efforts such as publishing model CDR credit purchasing templates and term sheets for private buyers to use as a starting point for their own purchases.
• Motivation for further action: DOE's initiative is designed to show the importance and urgency of purchasing CDR credits today, so that governments and businesses alike invest more resources in CDR now. In addition, the CDR Purchase Prize is designed to challenge CDR suppliers to sign up as many new private purchasers as they can by including the number of external purchase commitments as part of the selection criteria for from the semifinals to the finals. This will simultaneously enable DOE to amplify the demand for high-quality CDR credits with the greatest scalability and demand, while also providing potential CDR credit purchasers in the private sector with a short list of projects that have successfully undergone initial DOE assessment.
• Enhancing CDR credit demand integrity: DOE will model how CDR credit purchasing organizations can account for credit purchases and retirements transparently and with the care needed to ensure that credits do not substitute for emissions reductions.
DOE recognizes that the CDR Purchase Prize alone is insufficient to catalyze the marketplace for CDR credits. Even with the selection criteria encouraging semifinalists to secure as many purchases as possible, DOE recognizes that the pool of CDR credit purchasers must be significantly larger than at present for the industry to scale successfully. CDR is likely to be essential for many organizations to meet net-zero goals, yet only a few dozen organizations have purchased permanent CDR credits to date. This means that potentially thousands of additional organizations that have committed to net-zero climate targets will need to start buying permanent CDR credits at small and growing scales today. If organizations fail to begin purchasing CDR today, the field will fail to scale CDR supply as quickly as needed, and CDR solutions will not be available at the cost, scale, or with the necessary MRV standards and community safeguards needed to achieve net zero targets. Furthermore, regulators and civil society groups have indicated that permanent CDR can represent an especially high integrity approach for carbon credits to meet disclosures or other regulations around carbon credit and net-zero claims. Organizations that build out permanent CDR portfolios today may attain advantages in the context of any future carbon-related regulatory compliance regimes.
Yet despite the imperative for voluntary CDR credit purchases today, several factors are inhibiting the growth of voluntary CDR credit markets, including:
1. Insufficient incentives: . . .
2. High prices: . . .
3. Complicated procurement: . . .
4. Voluntary carbon markets (VCMs) challenges: . . .
To further support the CDR credit purchasing market, DOE intends to launch a two-pronged CO2 Removal Purchasers Challenge (“CO2 RP Challenge”). By engaging with both CDR credit buyers and suppliers, the DOE CO2 RP Challenge will enhance market transparency and bolster the quality and integrity of CDR credit supply, to accelerate, improve, and scale the CDR credit market.
a. Credit Buyers -- DOE will ask for any organization or government that discloses its GHG inventory to join the “CO2 RP Challenge” by purchasing a small and growing volume of permanent CDR. . . .
b. CDR Credit Suppliers -- DOE will encourage additional CDR credit suppliers to join the CO2 RP Challenge by offering to evaluate a new round of credits using the process implemented in Phase 1 of the CDR Purchase Prize. . . .
Carbon Dioxide Removal Purchase Pilot Prize:
https://www.energy.gov/fecm/carbon-dioxide-removal-purchase-pilot-prize
DOE Announces Intent to Launch Voluntary Carbon Dioxide Removal Purchasing Challenge:
https://www.energy.gov/fecm/articles/us-department-energy-announces-intent-launch-voluntary-carbon-dioxide-removal
FRN:
https://www.federalregister.gov/d/2024-05269