Major Policy Momentum on Carbon Capture as House GREEN Act Includes Key 45Q Provisions
June 22, 2020 | News
Carbon Capture Coalition Director Brad Crabtree released the following statement on inclusion of direct pay for the 45Q tax credit and extension of the credit in the Growing Renewable Energy and Efficiency Now (GREEN) Act released today by majority House Ways and Means Committee members:
“The Carbon Capture Coalition thanks Representative Terri Sewell (D-AL) for her steadfast leadership in support of carbon capture, the results of which are reflected in the GREEN Act released today. The bill provides a direct pay option for the federal Section 45Q tax credit for geologic storage and beneficial use of carbon captured at industrial facilities, power plants and through direct air capture, and it extends by two years the timeframe for projects to commence construction and qualify for the 45Q credit. The Coalition is also grateful to Ways and Means Committee Chairman Richard Neal (D-MA), Subcommittee Chair Mike Thompson (D-CA), and majority members of the House’s tax-writing committee for including its top two legislative priorities in their signature clean energy tax package.
The inclusion of direct pay for 45Q and extension of the tax credit in the GREEN Act by Ways and Means Democrats sets an important precedent by recognizing carbon capture as an essential element of our broader portfolio of clean energy technologies. Coupled with recent House Republican and bipartisan Senate measures to extend 45Q, this legislation further underscores growing bipartisan support for economywide deployment of carbon capture.
Expanded support for direct pay and extension of 45Q comes at a critical time. Accelerating the development and construction of commercial-scale carbon capture projects will help our nation meet midcentury climate goals, while jumpstarting the near-term economic activity and job creation America urgently needs to begin recovering from the economic crisis caused by the COVID-19 pandemic.
To highlight the opportunity and the importance of congressional action, the Carbon Capture Coalition released a factsheet identifying 30 carbon capture projects under various stages of development across multiple industries, in response to the bipartisan congressional reform and expansion of the 45Q credit in early 2018. The potential completion of these 30 projects would represent a tripling of the number of commercial-scale carbon capture facilities operating in the U.S. today. The factsheet also features preliminary analysis from the Rhodium Group showing each carbon capture project at representative industrial facilities and power plants generating hundreds to thousands of high-wage jobs.
House and Senate leaders must act now on a bipartisan basis to include direct pay and extension of 45Q in the next COVID-19 package in order to safeguard the jobs and emissions reduction benefits of these carbon capture projects that are now imperiled by both market uncertainty and the rapidly narrowing window to begin construction.
In normal times, a cash payment in lieu of the 45Q tax credit provides a much more effective and cost-efficient mechanism to incentivize projects than monetizing a tax credit. Now, in the midst of COVID-19, direct pay has become critical to enabling developers to finance carbon capture projects without depending on tax equity investments at a time when those markets are severely constrained.
Additionally, a more than two-year delay by Treasury and the Internal Revenue Service in finalizing guidance and proposed regulations for 45Q has shortened the time for carbon capture projects to complete development, secure financing and begin construction from six years to less than four. Extending that timeframe beyond the end of 2023 to 2025 will significantly reduce the risk that existing projects are canceled, as well as encourage companies and investors to continue expanding the number of new projects in the development pipeline, driving further economic recovery in the wake of the COVID-19 pandemic.”
For further information, the Coalition’s 45Q direct pay and extension and other economic recovery recommendations and its recently-released principles on direct pay can be found at www.carboncapturecoalition.org.