Tax Credits Jump Start Midwest Carbon Capture Projects — but the Cost Will Be in the Billions

July 11, 2023

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by Erin Jordan (The Gazette) and Juanpablo Ramirez-Franco (Harvest Public Media) (NPR)... Carbon tax credits are a “challenge to industry that says ‘if you can do this thing that makes sense for the climate, the U.S. government will pay you potentially tens, if not hundreds, of billions of dollars in funding for solutions,’” Deich said.

One program, called 45Q, offers tax credits for collecting CO2 and storing it permanently underground. The credit was created in 2008, but the Inflation Reduction Act boosted the value to up to $85 per metric ton of CO2, extended the timeline for funding and made it so companies can get direct payment rather than a tax credit.

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Ethanol is considered low hanging fruit for carbon capture because corn fermentation produces a cleaner stream of CO2 than other manufacturing processes.

Summit Carbon Solutions proposed in 2021 collecting CO2 at ethanol plants across the Midwest and transporting it via pipeline to North Dakota, where the compressed gas would be permanently stored underground.

Summit and two other companies — Navigator and Wolf Carbon Solutions — now are seeking permits to build pipelines that would crisscross Iowa, Illinois, Minnesota, South Dakota, North Dakota and Nebraska to pick up CO2 at more than 50 ethanol and fertilizer plants.

All three projects face vocal opposition from landowners and environmental groups because of concerns about safety, forced easements and whether CO2 pipelines are the right approach to head off climate change.

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Another tax credit targeting CO2 emissions is 45Z, which provides up to $1 per gallon for production of clean transportation fuels. This program is brand-new and the Internal Revenue Service still is clarifying how facilities would get the money. But it’s causing some developers — even pipeline companies primarily interested in 45Q — to do a double take.

After all, 45Z allows them to make money from the CO2 they’ve collected rather than just bury it in the ground.

That’s what Adkins Energy wants to do. The ethanol and biodiesel plant, opened about two decades ago in a town of 2,700 people, two hours west of Chicago, isn’t on the route of any of the proposed CO2 pipelines.

Jeff Bonar, CEO of CapCO2 Solutions, based in New York, approached Howell earlier this year about an idea to capture CO2 at ethanol plants, combine it with hydrogen from renewable energy and make it into green methanol, a fuel being used in the shipping industry to replace diesel.

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Danish shipping giant Maersk announced last year it needs 6 million tons of green methanol a year to reach its 2030 greenhouse gas emissions target and even more by 2040 to get to net zero emissions.

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Adkins and CapCO2 Solutions might even qualify for 45V tax credits for creating hydrogen from renewable energy, Howell said. Adkins gets all its energy from a nuclear power plant in nearby Byron, Illinois.

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Government and shareholder pressure to reduce greenhouse gases has created a market for low-carbon fuels — like green methanol and sustainable aviation fuel. READ MORE

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tax policy tax credits Sustainability South Dakota shipping Regulations-Federal Oklahoma North Dakota Nebraska Minnesota Methanol/Biomethanol/Renewable Methanol markets/sales market forces Marine/Maritime Bio and Renewable/Sustainable Fuel (SMF) Jetfuel (Sustainable Aviation Fuel (SAF)) Iowa Investing Illinois Hydrogen/Renewable Hydrogen fertilizer electrofuels (e-fuels) corn ethanol Community involvement/engagement co-products carbon/CO2 sequestration Carbon Dioxide (CO2) carbon capture and utilization (CCU) carbon capture and storage (CCS) BioRefineries/Renewable Fuel Production Aviation Fuel/Sustainable Aviation Fuel (SAF) 45Z Clean Fuel Production Tax Credit 45V Hydrogen Production Tax Credit 45Q Carbon Oxide Sequestration Tax Credit

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