Reform of 45Q

• The U.S. Congress in February passed bipartisan legislation to reform the Section 45Q tax credit for carbon capture and storage. The legislation, introduced as the FUTURE Act, by Senators Heitkamp, Capito, Whitehouse, Barrasso and 21 other Senators, was included in the budget bill the President signed on February 9.

• Read more about this landmark legislation in this blog post from Carbon Capture Coalition co-convener Great Plains Institute.

• Read more about the potential environmental impact of this legislation and the role carbon capture might play as part of a broader energy policy effort in this blog post from Carbon Capture Coalition co-convener Center for Climate and Energy Solutions.

Fast Facts 

• Section 45Q now has a new provision to provide for a credit of up to $35 per ton (ramping up over ten years) for other beneficial uses such as converting carbon emissions into fuels, chemicals or useful products like cement.
• The changes to 45Q include removing the cap on credits and allowing eligible projects that begin construction before January 1, 2024 to claim the credit for up to 12 years after the carbon capture equipment is placed in service.
• Under the new law, the threshold for industrial sources of carbon emissions is lowered to ensure that a broader range of industries can participate in the 45Q program and the definition of qualified facilities and qualified carbon is expanded to allow for more uses.

Why This Matters 

• This legislation was significant for its reform and expansion of policy promoting carbon capture technologies. Its passage represents enactment of one of the most significant energy and environmental legislative accomplishments in recent memory.

• Earlier this month, Senate Environment and Public Works Committee Chairman John Barrasso and a bipartisan group of Senators who had supported the FUTURE Act (which is now law, see above) introduced the USE IT Act to foster continued development and deployment of carbon capture technologies.

• The Carbon Capture Coalition submitted a letter to the Senate Environment and Public Works Committee in support of this legislation. Read the letter on the Carbon Capture Coalition website here.

• Learn more about the legislation and support for its enactment on this webpage from the Senate Environment and Public Works Committee.

Fast Facts 

• The USE IT Act would establish a $25 million prize program for early stage direct air capture research and demonstration.
• THE USE IT Act would provide $50 million in federal funding for research and development of new uses of captured carbon.
• The USE IT Act would clarify that CO₂ pipelines are eligible for the Fix America’s Surface Transportation Act.

Why This Matters 

• • Direct Air Capture technologies can be used for carbon “recycling” or “removal.”  For example, while different uses of CO₂ have varied requirements, utilizing captured CO₂ to increase concentration in a greenhouse has shown to increase production rates up to 40 percent. Because direct air capture technology is still developing, it is important that more incentives be provided to improve the technology. Currently there is only minimal policy support from the federal government to support air capture technology.
  • On the basis of cost per ton of CO₂ emissions avoided, carbon capture at industrial facilities and power plants with enhanced oil recovery already compares cost effectively with other options, especially at the higher levels of emission reductions. Increasing federal and state policy support for carbon capture, utilization and storage will accelerate deployment across a variety of applications.
  • The development of five major CO₂ pipeline corridors as recently proposed by a bipartisan state work group would expand on the existing network of pipelines to create a national infrastructure that could supply up to an additional 150 million tons of CO₂ annually for enhanced oil recovery (EOR) and storage, creating an annual economic activity of $30 billion through pipeline construction, capital investment in carbon capture systems and EOR equipment.