Why Exxon Mobil is spending $4.9 billion on a company that pumps carbon dioxide back into the earth

• Exxon Mobil this week announced plans to acquire oil producer Denbury.
• Denbury also has a business of capturing carbon-dioxide emissions.

Exxon Mobil is trying to position itself for a low-carbon world by buying a company that stores planet-warming emissions.

The largest US oil major said Thursday it would acquire Denbury, which has the largest network of carbon dioxide pipelines in the country, for $4.9 billion. Denbury is also in the business of what's called enhanced oil recovery, which involves using carbon dioxide to collect more oil from wells.

Exxon's move follows the passage last year of the Inflation Reduction Act, which includes tax breaks for companies that capture and store carbon dioxide — injecting new life into the nascent and controversial industry.

The IRA is set to pump almost $370 billion over a decade into a range of efforts to help fight the climate crisis and put the US on a path to slash carbon emissions by 40% by 2030, a goal set by President Joe Biden.

What is carbon capture, utilization, and storage?

Carbon capture, utilization, and storage, or CCUS, refers to technologies that trap carbon-dioxide emissions, often from large industrial sources like power plants or factories.

Most of the carbon dioxide being captured today is used to pump more oil from wells, a process known as enhanced oil recovery, or to make fertilizer. The gas can also be piped underground into geological formations, including oil-and-gas reservoirs or salty aquifers, according to the International Energy Agency.

Why is Exxon buying Denbury?

Denbury gets most of its revenue from enhanced oil recovery, a technique that Exxon has a long record of using. But for Exxon, the acquisition is part of a larger strategy to stay profitable as countries try to meet global climate targets.

Rather than diversifying into producing solar and wind power, Exxon is betting that it can keep pumping oil and gas so long as it caps emissions flowing out of smokestacks at power plants and factories.

Some of that captured CO2 could be put to use by other industries, including makers of fertilizers and other chemicals. Most of the captured carbon dioxide will likely be stored underground, however.

The IEA estimates that if the world achieves net-zero emissions by 2050, less than 5% of the carbon captured would be used, while the rest would need to be stored.

Transporting CO2 requires pipelines, and Denbury has 1,300 miles of carbon dioxide pipelines; much of its network spans Louisiana, Texas, and Mississippi. Denbury also already has 10 sites where it stores carbon.

The purchase would help Exxon go deeper into this business.

"If we're able to acquire a really significant piece of existing infrastructure, that allows us to move much more quickly than if we were to try and build and replicate that infrastructure ourselves," Dan Ammann, president of Exxon's Low Carbon Solutions business, told Bloomberg on Thursday.

The deal with Denbury is one of several carbon-capture and storage deals Exxon has made in less than a year, including a plan to capture, transport, and store carbon emissions from a steelmaking plant in Louisiana by 2026.

What is the state of CCUS today?

CCUS is still a nascent industry with a troubled track record, but there's been a lot of momentum in recent years.

Around 40 commercial sites are operating around the world, with another 50 capture facilities expected to come online by 2030, according to the IEA.

For its part, Exxon has carbon-capture and storage facilities in the US, Qatar, and Australia, and at least 10 more have been announced around the world.

Is carbon capture a solution to the climate crisis?

Oil companies certainly think so, though the technology is still a major flashpoint. Many climate advocates argue that CCUS is too expensive to develop and the money is better spent on technology already proven to slash emissions at scale: solar panels, wind turbines, and electric vehicles, to name a few.

Even though the renewable energy transition is speeding up, the pace isn't fast enough yet. A United Nations panel of climate scientists earlier this year warned that the world is still way off track in achieving net-zero emissions by 2050 — a key target to avoid global temperatures from rising above catastrophic levels.

Without a more rapid shift away from fossil fuels, technology like carbon-capture and storage is critical, the scientists said.

Still, there's no guarantee that CCUS will scale up in time, either. The IEA said that even if all the planned sites come online by 2030, the entire industry combined would only be capturing about one-third of the carbon dioxide needed to hit net-zero emissions by midcentury.