Inflation Reduction Act with Historic Enhancements to Carbon Management Tax Credit Heads to President’s Desk
August 12, 2022 | Legislation
WASHINGTON, DC – The Carbon Capture Coalition applauds the final passage of the Inflation Reduction Act of 2022 which includes nearly $370 billion in climate and energy spending – the most robust investment in climate and energy policy in the nation’s history.
“Today’s final passage of the Inflation Reduction Act of 2022 marks a historic step forward in fostering the economywide deployment of carbon management technologies to achieve midcentury emissions reduction targets, while safeguarding high-wage jobs that sustain families and communities and ensuring the long-term viability of key domestic industries,” said Coalition External Affairs Manager, Madelyn Morrison. “When coupled with the groundbreaking investments made in the November 2021 enactment of the Bipartisan Infrastructure Law, these provisions represent the most expansive and far-reaching federal policy support to scale carbon management technologies in the world.”
Together, these two packages contain all of the Carbon Capture Coalition’s top priorities in the 117th Congress, as outlined in the Federal Policy Blueprint, the group’s foundational consensus-based platform for the 100+ industry, labor and non-profit organizations that come together to form the nonpartisan Coalition.
Though the Inflation Reduction Act was passed through the budget reconciliation process, this landmark bill contains broadly supported carbon management priorities drawn from bipartisan legislation introduced earlier this Congress and subsequently endorsed in President Biden’s American Jobs Plan. Throughout the 117th Congress, the Carbon Capture Coalition worked on a bipartisan basis with lawmakers to support a raft of measures to enhance the 45Q tax credit, which were all included in the final package. They include:
- Direct Pay:
- For profit entities: Under the Inflation Reduction Act, project developers will, for the first time, have the option to access direct pay for the full value of the tax credit, for the first five years after the carbon capture equipment has been placed in service. The remaining seven years of the credit must be financed through alternative means.
- Tax-exempt entities: These enhancements are even more expansive for tax-exempt organizations, i.e. nonprofit projects, cooperatives, and municipal utilities, which have the option to access direct pay for the entire lifetime of the credit (12 years).
- Multiyear Extension of the Commence Construction Window: The commence construction deadline for carbon capture, direct air capture or carbon utilization projects will extend seven years to December 31, 2033;
- Increased Credit Values for Industry and Power Projects: The value of 45Q will increase to $85/ton for storage in secure geologic formations from industrial and power generation carbon capture and $60/ton for either carbon utilization or secure storage in oil and gas fields;
- Increased Credit Values for Direct Air Capture Projects: The credit value will increase to $180/ton for storage in secure geologic formations from direct air capture and $130/ ton for carbon utilization or secure storage in oil and gas fields;
- Dramatically Reduced Annual Capture Thresholds: The carbon threshold for credit-eligible carbon capture facilities will decrease dramatically, leading to a significant increase in 45Q-eligible projects.
“Not only does this bill provide transformative enhancements to the federal Section 45Q tax credit, the program’s largest reform to date, but it reinforces the essential role carbon management must play in achieving midcentury climate goals while providing a critical pathway to creating and retaining the high-wage jobs base communities and families depend upon, and positioning our nation’s industrial, energy and manufacturing sectors as leaders in technology innovation. As we look toward the full implementation of these important enhancements, we remain committed to working closely with our federal and external partners to ensure that these groundbreaking policies work as efficiently and effectively as intended.”
You can find a fact sheet on the Inflation Reduction Act of 2022 here.
Convened by the Great Plains Institute, 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, utilization, and storage from industrial facilities, power plants, and ambient air.