Coalition Recommends Tax Priorities for Inclusion in COVID-19 Stimulus Legislation

The Carbon Capture Coalition is recommending tax provisions for inclusion in economic stimulus legislation to address the impact that COVID 19 has already had on current carbon capture projects and prospects for future deployment. The stimulus legislation rightly focuses on the immediate health and jobs of Americans, and the Coalition’s recommendations are appropriately targeted to stimulate economic activity and protect and create jobs by providing financial certainty to investors, leveraging private capital and ensuring access to existing incentives.

Tax equity markets that finance clean energy and industrial projects have seized up, imperiling economic activity and jobs right when they are needed most. Projects under development to capture and use carbon from industrial facilities, power plants and ambient air through direct air capture are especially at risk, just as project developers and investors are gearing up to build out a carbon management industry in response to the reformed Section 45Q credit enacted by Congress in February 2018.

In this context, the Coalition recommends the following top priorities for inclusion in the current tranche of stimulus legislation:
• Implementing direct pay as a mechanism for project developers to monetize 45Q directly amidst the current paralysis of tax equity markets for investment; and
• Extending the 45Q tax credit for at least five years to prevent the cancelation of carbon capture, use, removal and geologic storage projects that are currently underway due to mounting concerns that projects risk not meeting the current January 1, 2024 deadline due to current market turmoil and investment uncertainty.

Further, the Coalition recommends additional tax policies as Congress considers subsequent stimulus legislation:
• Prevent disallowance of 45Q under the Base Erosion and Anti-Abuse Tax (BEAT) to expand the pool of available tax equity investors to finance carbon capture projects, once market confidence is restored and tax equity investment resumes; and
• Fix the 48A tax credit to enable developers of carbon capture retrofits at power plants access to roughly $2 billion in federal funds that are already available for this purpose.

The Carbon Capture Coalition applauds efforts by Congress to respond decisively to this national emergency. We support efforts by members to bolster the stimulative economic and jobs impacts of existing energy tax credits by advancing provisions such as direct pay and extension of commence construction. The urgency of these measures and the beneficial impact they can have on jobs and investment are underscored by the fact that the American Wind Energy Association and Solar Energy Industries Association have also called on Congress to include direct pay and extension in stimulus legislation. Similarly, Fatih Birol, executive director of the International Energy Agency, has encouraged policymakers in a statement to include carbon capture and other clean energy technologies in national stimulus policies aimed at COVID-19.

Carbon capture and removal are climate essential strategies. It is critical that Congress include the Section 45Q tax credit in these stimulus provisions, along with tax credits for other low and zero-carbon technologies. Doing so will help restore project developer and investor confidence in the emerging carbon capture sector, enabling 45Q-inspired projects to proceed and contribute to economic activity and jobs, while ensuring the long-term, economywide scale-up of carbon capture and removal to meet midcentury climate goals.

Further background on these tax policy recommendations can be found here.