CATF Releases Modeling Study That Shows 45Q Tax Credit Can Have a Major Impact On CO2 Emissions Reductions
Clean Air Task Force (CATF) today released a comprehensive report on the near-term implications of the federal tax credit (45Q) for carbon capture and storage (CCS) projects. The study found that, as a result of tax credit legislation known as 45Q, which was extended and expanded in early 2018, nearly 49 million metric tonnes of CO2 could be captured and stored annually by 2030 through CCS on U.S. coal- and gas-fired power plants, equivalent to taking seven million cars off the road.
CATF’s modeling takes into account the passage and signing one year ago of the Bipartisan Budget Act that included the expansion and extension of the 45Q corporate income tax credits. These credits are expected to enable additional deployment of CCS projects in the U.S. and as a result will help reduce carbon emissions while meeting energy needs and supporting domestic jobs. The study covers the impact of 45Q on the power sector only, although 45Q tax credits will likely spur CCS projects on industrial facilities as well.
CATF retained Charles River Associates, a leading economic consulting firm that developed the North American Energy and Environment Model (NEEM), for the modeling underlying the report. NEEM is widely used by power utilities in the U.S for making strategic capacity and rate decisions.
“Our study projects that the CCS tax incentive could result in nearly 49 million metric tonnes of CO2 captured and stored annually by 2030 through CCS on U.S. coal- and gas-fired power plants. That amount of CO2 reduction is equivalent to taking seven million cars off the road, a number greater than the number of new cars sold in the US in 2017,” said Deepika Nagabhushan, Energy Policy Associate for CATF and lead author of the study.
“Our study also projects that by 2030, 45Q could help the U.S. achieve more than two-thirds of the share of carbon capture that is needed on our power sector in order to limit global warming to 2-degrees, based on assessments by the International Energy Agency (IEA)” she said.
“So far, we’ve seen a few companies that have expressed strong interest in capitalizing on the tax breaks from 45Q,” said Nagabhushan. “As a next step, the U.S. Treasury must issue updated guidance on the requirements for claiming 45Q tax credits. After that, we can expect carbon capture projects to ramp up in the near term towards the levels modeled in our study.
“However, to achieve much wider deployment of CCS in the longer term as seen in IEA’s 2-degree modeling scenario, a suite of strategic policies would need to be implemented targeting all parts of the capture, transport and storage industries, and further extension of 45Q tax credits may be a part of that strategy.”
More findings of the study
Importantly, the modeling results show that the 45Q-induced power sector CO2 reductions are additive to those achieved through renewable sources of electricity generation.
The modeling results from the analysis also show that 45 units of coal and natural gas power plants could be retrofitted with CCS, resulting in a total of 10.8 GW of generating capacity with carbon controls. Currently one coal-fired power plant in Texas – Petra Nova – and one in Saskatchewan – Boundary Dam – are capturing CO2and sequestering it through EOR, so the prognosis for rapid expansion of the technology under 45Q is very encouraging.
The results indicated that CO2 is stored in oil fields within three regions. California would store 6.4 million tonnes per year, East & Central Texas 19 million tonnes and the Mid-Continent region 23.5 million tonnes. To assess the growth level projected by the modeling, the study compared the results to historic U.S. EOR regional growth rates, which ranged from 3.6 to 19 million tonnes per year. This suggests that the modeled regional growth rates are not out of line with previous growth periods. Furthermore, the largest rates of past growth were spurred by tax policy.