CATF Statement on final 45Q Tax Credit Guidance

CATF welcomes that after almost three years, IRS has issued final guidance on how to claim the 45Q tax credit. “The clock is ticking to reduce emissions as soon as possible to fend off the worst effects of climate change,” said Lee Beck, CCUS Policy Innovation Director, and added “carbon capture, removal, and storage developers can now plan projects with certainty. This is positive momentum on the heels of the extensive carbon capture provisions passed in the last Congress.” 45Q has already led to the planning of more than 30 carbon capture and storage projects in industry, power, and carbon removal, as an interactive CATF map shows.   

CATF has offered multiple comments throughout the rulemaking process.   

CATF has supported establishing an alternative compliance pathway for CO2-EOR via the ISO standard. However, to promote transparency and protect the integrity of the credit, CATF has also called for establishing procedures for public reporting of the amount of carbon oxide sequestered using the ISO standard. The IRS has rejected this suggestion in the final guidance. This underscores the importance for EPA to amend the Greenhouse Gas Reporting Program to establish a transparent reporting pathway for projects that opt–in to the ISO standard. 

CATF strongly concurs with the IRS decision to award credits for only qualified carbon oxide that is captured and utilized, and not, as suggested by other groups, for the reduction of other greenhouse gases based on a CO2 equivalence lifecycle analysis. This is a positive step by the IRS protecting the fiscal and environmental integrity of the tax credit, as well as its intent as an incentive for the commercialization of carbon capture, removal, utilization and storage technologies vital to combat climate change.  

CATF also welcomes the shortening of the lookback period from five to three years, though the approach of a three-year look-back period that includes the year in which the leaked amount is quantified, as put forward jointly with a working group of NGOs and industry, was not accepted.

While the release of the final guidance is a positive step – particularly against the backdrop of a two-year extension of the commence construction deadline Congress passed in December – more must be done to deploy carbon capture, removal, and storage at the scale necessary to achieve net-zero emissions by mid-century. This includes, but is not limited to, a direct pay mechanism, a further extension of the commence construction deadline, and additional optimizations to better incentivize projects in different industries with distinct economics such as power, industry, and direct air capture.