Illustration: Aïda Amer/Axios
A Texas carbon capture project hailed as a key solution to climate change has been "mothballed" over low oil prices, E&E News reported on Tuesday evening.
Our thought bubble: The news is unsurprising but nonetheless emblematic of the complex relationship between climate policies and oil prices, which collapsed along with oil demand in the wake of the pandemic.
How it works: The Petra Nova project, which I visited in 2018 for this column, captured a small share of the carbon dioxide emissions from an adjoining coal plant, which were then used to extract oil out of the ground through a process called enhanced oil recovery.
- That process is expensive, so oil prices need to be higher than where they are now (around $40 a barrel) to sustain it financially.
Between the lines: Two schools of thought persist about the relationship between climate policies and oil prices.
- Oil (and natural gas) prices need to be high to force behavior change on behalf of businesses and consumers.
- Oil and gas prices should be low to allow the political room for all sides to compromise on big policy.
But, but, but: The problems with those two schools of thought, in order:
- High oil prices often compels politicians into imminent crisis mode (price manipulation! Investigate OPEC!), so they're not thinking about longer-term climate policies.
- If prices are too low, it makes it harder for more expensive technology — whether that's carbon capture or electric cars — to compete with fossil fuels. We're seeing this play out now with Petra Nova.
What we're watching: A spokesman for the company behind the project, NRG Energy, says it will come back online when "economics improve" (code for when oil prices go back up, which is not a given any time soon).
Go deeper: The oily path to combating climate change