Senate Finance Committee Preserves 45Q, But Value of Credit Will Continue to Erode Until 2028

The following statement can be attributed to Jessie Stolark, executive director of the Carbon Capture Coalition, on today’s release of the Senate Finance Committee’s draft legislative text of the budget reconciliation package’s tax title:

“The Carbon Capture Coalition is still digesting the text to ensure we fully understand the impact the changes to the 45Q statute will have on project deployment. And while the Coalition is pleased to see that the Senate Finance Committee’s tax title for the budget reconciliation package retains and builds on the most recent enhancements to the federal Section 45Q tax credit, we are very concerned that this bill, as written, will do material harm to project developers’ ability to build projects by moving the date that the credit begins indexing for inflation from 2027 to 2028.

“Inflation rates, reaching historic levels since the enactment of enhancements to the 45Q credit in 2022, have already had an outsized impact on the deployment of carbon management technologies across the American economy. The text released today will only cause further erosion of the tax credit, making it harder for these projects to bounce back from years of significant inflationary pressures and rising costs of project deployment.

“Analysis shows that 45Q has already lost more than half of the 2022 increase in inflation and other cost pressures, essentially reducing the $85 per ton credit value to $68 per ton, while the cost of building and deploying projects only continues to increase. While the Senate text increases credit values for certain end uses of captured CO₂, without intervention, inflation will immediately offset this value increase and never truly recover.

“The tax title of the Senate’s ‘One Big Beautiful Bill’ Act makes the following modifications to 45Q:

• Restores transferability to the lifetime of the tax credit. The House-passed version of the “One Big Beautiful Bill” Act phased transferability out for projects that began construction more than two years after enactment, significantly limiting the credit’s utility. The Senate version wisely reinstates this provision, substantially impacting taxpayers’ ability to effectively claim and monetize the credit.
• Increases the credit values for CO₂ captured and used for carbon reuse or EOR from industry and power sources to $85 per ton (previously at $60 per ton) and $180 per ton (previously at $130 per ton). With parity, carbon management project developers have additional flexibility in project development for the end uses of captured CO₂.
• Adjusts the indexing year from 2027 to 2028. Moves the base indexing year for 45Q back one year, from 2025 to 2026. 
• Retains a version of the House’s foreign entity of concern language, restricting foreign adversaries’ or foreign-influenced entities’ ability to elect 45Q and other clean energy tax credits.  

“45Q is the foundational driver for domestic carbon management, and we appreciate the Senate Finance Committee and key Senate champions ensuring that 45Q is largely preserved in the Senate Finance Committee’s draft text. The tax credit must remain a strong market signal for deploying carbon management technologies across the American economy if we are to maintain our global leadership position in demonstrating and deploying these technologies.

“45Q has been the lynchpin for deploying carbon management technologies in the US since it was restructured and made more widely available in 2018. Since then, it continues to demonstrate its utility and effectiveness to American businesses. Clearly, 45Q is a good policy and is working as Congress intended, by driving significant investment in carbon capture technologies across the country and in various sectors.

“In the days ahead, the Coalition will continue to sound the alarm about the damaging effect inflationary pressures have had on driving up the cost of carbon management deployment across sectors. As Congress continues to negotiate the details of the broader package, the Coalition will work with lawmakers to ensure 45Q keeps pace with evolving economic realities. The continued success of the 45Q tax credit is important not just to the American carbon management industry, but to providing abundant, reliable, and clean energy and materials that underpin the American economy.”

###

The Carbon Capture Coalition is a nonpartisan collaboration of more than 100 companies, unions, conservation and environmental policy organizations, building federal policy support to enable economywide, commercial-scale deployment of carbon management technologies. This includes carbon capture, removal, transport, reuse, and storage from industrial facilities, power plants, and ambient air. Members of the Coalition work together to advocate for the full portfolio of policies required to commercialize a domestic carbon management sector and inform policymakers and stakeholders on the essential role this suite of technologies must play in achieving these shared objectives.