Senate Passes Budget Reconciliation Package, Retains Mission-Critical Elements of Federal Section 45Q Tax Credit 

The following statement can be attributed to Madelyn Morrison, director of government affairs for the Carbon Capture Coalition, regarding Tuesday’s passage by the US Senate of their version of the budget reconciliation package, which contains changes to the federal Section 45Q tax credit:  

“The Carbon Capture Coalition is pleased that the Senate’s version of the ‘One Big Beautiful Bill Act’ (OBBBA), as passed by the chamber on July 1, 2025, preserves the federal Section 45Q tax credit while making modifications to the underlying statute that strengthen the utility of this mission-critical program for American energy and industrial production. The Senate-passed version of the OBBBA tax title is a testament to the robust and widespread support for carbon management—and the 45Q tax credit—cultivated in Congress over the past two decades. 

“The bill helpfully restores the ability to elect transferability for the lifetime of the credit, creates parity between credit levels for carbon utilization projects and those storing captured CO₂ in dedicated geologic storage, and importantly, does not facilitate additional harmful delays to adjusting the credit for inflation, as proposed in earlier drafts. Still, the Coalition urges Congress to enact a more appropriate inflation adjustment for 45Q than the current law allows. 

“The Coalition has been sounding the alarm on the destructive impact inflationary pressures have had on 45Q credit values and broader project economics since Congress enacted the most recent credit enhancements three years ago. Despite the most recent enhancements to the tax credit, the economics for project deployment are challenged due to a combination of inflationary pressures on raw materials and components, labor, and higher interest rates for securing capital that have occurred over the past several years.  

“In fact, between 2020 and 2024, prices of basic commodities, equipment, metals, construction labor, and engineering contractors increased between 30 and 40 percent across heavy construction and capital equipment sectors. Furthermore, 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. 

“45Q is the foundational market driver for domestic carbon management deployment, and we appreciate the Senate Finance Committee and key Senate champions for advocating for improvements that strengthen the credit’s long-term effectiveness. As the bill moves to the House for final consideration, the Coalition will continue to work with supporters in Congress to ensure that 45Q is as well-positioned as possible ahead of final passage. Ensuring 45Q remains a strong, predictable market signal is essential to deploying carbon management technologies across the American economy and maintaining our global leadership position in demonstrating and deploying these technologies.” 

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The Carbon Capture Coalition (the Coalition) is a nonpartisan collaboration of more than 100 companies, labor unions, and conservation and environmental policy organizations. Coalition members work together to lay the groundwork for the necessary portfolio of federal policies to enable nationwide, commercial-scale deployment of carbon management technologies.