Groups Want Congress to Tweak Carbon Capture Incentives

December 12, 2023

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by Carlos Anchondo (Politico Pro Energywire) Advocates say a failure to act would imperil the technology's adoption. -- A contingent of carbon capture and storage proponents is urging Congress to tweak a tax credit essential to greater project deployment.

In a letter Monday, more than 50 unions, conservation groups and energy companies called on congressional leadership to include a “targeted suite of small-scale adjustments” to the federal 45Q tax credit in any forthcoming legislative package.

Failing to address “remaining small-scale gaps in federal policy” could hinder deployment of carbon capture and removal technologies, “imperiling” jobs, economic development, energy security and “the prospect of urgently needed — and achievable — greenhouse gas emissions reductions,” the letter said.

Signatories include agribusiness company Archer-Daniels-Midland; a subsidiary of oil and gas company Occidental Petroleum; the National Wildlife Federation; CO2 pipeline developer Summit Carbon Solutions; and the Carbon Capture Coalition, a pro-CCS group with more than 100 members.

The letter, which touted bipartisan support for carbon capture and removal technologies, said “pragmatic adjustments” could further expand U.S. leadership in the sector. READ MORE

December 11, 2023

Dear Speaker Johnson, Leader Schumer, Leader Jeffries and Leader McConnell:

On behalf of the undersigned, thank you for your continued commitment to expand and accelerate the responsible deployment of carbon management technologies to provide reliable American energy, reduce greenhouse gas emissions, create and retain jobs that families and local economies depend upon, and spur investment in domestic energy, industry and manufacturing sectors. As you consider end of the year legislative proposals including taxbased policies, we urge you to prioritize a targeted suite of small-scale adjustments to the federal Section 45Q tax credit as an essential component of any forthcoming legislative package.

The 117th Congress enacted a suite of essential, widely supported enhancements to the federal Section 45Q tax credit, the foundational policy mechanism to incentivize the deployment of carbon management projects. These measures, coupled with the incremental enactment of additional supportive policies over the course of the past several years, underscores Congress’ commitment to enabling carbon management projects to fulfill their emissions reduction and job creation potential. That said, remaining small-scale gaps in federal policy threaten to impede the economywide deployment of these technologies – imperiling American jobs, economic development, energy security and the prospect of urgently needed – and achievable – greenhouse gas emissions reductions.

Thanks to robust and sustained bipartisan congressional support, the United States now provides the most forwardlooking policies in the world for the deployment of carbon management technologies and many organizations stand ready to act. However, there is still work to be done to ensure the historic investments made in carbon management over the past several years translate to widescale project deployment. Congress now has the immediate opportunity to provide a set of targeted, pragmatic adjustments to the 45Q tax credit to underpin and grow the role of American leadership in the development and deployment of these technologies throughout the remainder of this crucial decade of deployment and beyond, including:

• Indexing 45Q for inflation immediately: Increased credit values provided to projects developed in the industry, power and direct air capture sectors are the cornerstone of the recent enhancements made to the 45Q program in 2022. However, unlike other low- and zero-emissions technology tax credits recently reformed or created by the 117th Congress, the 45Q tax credit value is not adjusted for inflation until 2027. Already, much of the value increase realized in recent 45Q enhancements has been eroded due to significant inflation in both capital goods costs and energy price increases. To prevent further reduction of the credit value in today’s dollars, 45Q should be adjusted for inflation immediately.

• Creating parity between carbon utilization credit levels and those associated with geologic storage: Under the current statute, there is a $25 per ton disparity between those projects that reuse carbon emissions to manufacture valuable products versus those that securely and permanently store the captured carbon. This disparity effectively disincentivizes the development and deployment of relatively nascent carbon reuse technologies. This disparity rises to $50 per ton in relation to direct air capture projects. Removing policy barriers like the credit level disparity between carbon reuse and geologic storage in 45Q is a critical factor in boosting the availability of carbon feedstocks for reuse applications across the value chain of carbon-based commodities, specialty products, and chemicals. 2

As you consider the inclusion of tax-based policies in upcoming bipartisan legislation, there remains broad support among lawmakers and external partners to ensure these technologies can scale at the rate necessary to provide tangible emissions reductions and climate benefits, while securing American energy reliability and technology leadership. We stand ready to work with you to advance necessary policies to catalyze the deployment of carbon management and broader clean energy technologies included as part of an end of the year package or in another moving legislative vehicle this Congress. Should you have any questions about the outlined provisions noted in this letter, please contact Madelyn Morrison, Director of Government Affairs, Carbon Capture Coalition at mmorrison@carboncapturecoalition.org.

Sincerely,

Carbon Capture Coalition

8 Rivers Capital, LLC

Aircapture

ADM

Baker Hughes

BASF

Biomass Power Association

Blue Planet Systems

Braemar Energy Ventures

Capital Power Carbon America

Carbon To Stone, Inc.

CarbonCap Holdings LLC

CarbonCapture Inc.

CarbonCure

CarbonFree Chemicals

Carbonova Corp.

CarbonQuest

Cemvita

Center for Climate and Energy Solutions

CERT Systems

Chart Industries

Clean Air Task Force

ClearPath Action 3

Dioxycle

Equinor

Fortera

Fortistar

GE Vernova

Glenrock Energy

Green Plains Inc.

Growth Energy

Heirloom Holcim US

Husky Partners, LLC

International Brotherhood of Boilermakers

LanzaJet

LanzaTech, Inc.

Lapis Energy

Lydian

Melzer CO2Consulting

Methanex

Mitsubishi Heavy Industries America

National Wildlife Federation

NET Power

Oxy Low Carbon Ventures

Pennsylvania Environmental Council

Portland Cement Association

Quartz Energy Partners LLC

Renewable Fuels Association

Republic Services

Summit Carbon Solutions

Svante

United Airlines

United Steelworkers

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Excerpts from Inside Climate News: By getting more carbon dioxide under contract, the expansion would help Summit’s financial case and, critically, would open up billions of dollars in additional tax credits, without which the project would never be built. If the pipeline is built and operates at full capacity, Summit and its partners could be eligible for as much as $18 billion in federal tax benefits over 12 years. In reality, the pipeline is unlikely to get that full amount, experts say, but it could still reap many billions, potentially enough to cover most or even all of its construction and operating costs.

...

Given the sustained resistance that Summit has faced, and the project’s high costs—an estimated $8 billion for construction—the generous federal tax credit could help explain why the company is expanding its scope, rather than retreating.

Daniel Cohan, an associate professor of civil and environmental engineering at Rice University, said the scale of Summit’s potential tax benefit is unprecedented and far exceeds what any single wind or solar project would get, for example. But, he said, that might be the point.

“The government is trying to kickstart technologies that have only rarely been used,” Cohan said. “Agree with it or not, the logic of these carbon capture tax credits is to make them especially generous at first with the hope that they can be scaled back as carbon capture becomes more widespread in the future.”

The benefits are particularly large for ethanol plants, which produce a near-pure stream of carbon dioxide and are therefore among the cheapest carbon capture operations. READ MORE

Excerpt from Politico Pro Energywire:

Environmental groups and taxpayer watchdogs are pushing the head of the IRS to boost oversight and transparency of one of the carbon capture industry’s top incentives: the 45Q tax credit.

The Treasury Department agency should “implement strong oversight and transparency rules” to ensure that public dollars aren’t wasted as companies claim the credit, more than two dozen people said in a letter to IRS Commissioner Daniel Werfel.

The 45Q credit — created in 2008 and expanded most recently with the 2022 Inflation Reduction Act — can be claimed by companies that store carbon dioxide in geologic formations or reuse the climate-warming gas to produce fuels, building materials and other products.

People listed as signing the letter sent Monday included representatives from the Environmental Health Project, Taxpayers for Common Sense and Robert Bullard, a professor of urban planning and environmental policy at Texas Southern University. POLITICO’s Morning Energy newsletter reported on the letter Monday (May 13, 2024). READ MORE