WASHINGTON, March 26, 2021 – U.S. lawmakers introduced three pieces of legislation aimed at accelerating the deployment of carbon capture, removal, and storage for a net-zero U.S.
A group of Senators led by Tina Smith (D-MN) and Shelley Moore Capito (R-WV) introduced the 45Q Carbon Capture, Utilization, and Storage Tax Credit Amendments Act of 2021, a “crucial piece of legislation that optimizes the 45Q tax credit to support carbon capture, removal, and storage as a critical means for achieving a net-zero U.S.,” said Lee Beck, CCUS Policy Innovation Director at Clean Air Task Force.
The bipartisan piece of legislation aims to optimize the 45Q tax credit by providing a direct pay elective for the full value of the tax credit, extending the date for projects to begin construction to claim the 45Q tax credit, and introducing a new value for direct air capture. The bill also extends direct pay to the 48A tax credit while making further important legislative fixes.
The bill is sponsored in the Senate by Senators Tina Smith (D-MN), Shelly Moore Capito (R-WV), Sheldon Whitehouse (D-RI), Kevin Cramer (R-ND), Brian Schatz (D-HI), John Hoeven (R-ND), Joe Manchin (D-WV), John Barrasso (R-WY), Chris Coons (D-DE), Chuck Grassley (R-IA), Ben Ray Lujan (D-NM) and Joni Ernst (R-IA).
Senators Tom Carper (D-DE), Martin Heinrich (D-NM), and Sheldon Whitehouse (D-RI) also introduced a 45Q direct pay bill. “This bill including direct pay of tax credits for the deployment of renewable energy and carbon capture technologies is an important component for near-term job creation that will help alleviate the economic impacts of COVID-19”, said Beck.
Senators Chris Coons (D-DE) and Jerry Moran (R-KS) with a group of nine bipartisan Senators introduced the Financing Our Energy Future Act, which will provide an important financial pathway for commercializing cleaner advanced technologies. U.S. Representatives Mike Thompson (D-CA.) and Ron Estes (R-KS) reintroduced a similar bill in the House of Representatives. Carbon capture is a critical-path technology for decarbonizing our energy production. Allowing these projects access to MLPs will help accelerate its deployment and cost reduction, and ultimately its wide-scale commercial use.
“It is fantastic to see so many important carbon capture-supportive bills being introduced all at once, with bipartisan and broad support, and on the heels of the country’s first comprehensive CO2 infrastructure bill, the SCALE Act. Today’s action signals increasing attention is being paid to clean, firm power, carbon removal, and industrial decarbonization”, said Beck.
Beck continued: “The passage of 45Q has led to the announcement of more than 30 U.S. carbon capture projects in industry, power, and carbon removal. The 45Q Carbon Capture, Utilization, and Storage Tax Credit Amendments Act of 2021 to optimize 45Q will not only help move these planned projects along, but will also spur further carbon capture deployment to achieve a net-zero U.S.”
The legislation also includes a new value level for direct air capture plants, which have a different cost structure — an important step to optimizing innovation policy as more is learned about deploying carbon capture, removal and storage technologies.
Carbon capture, removal, and storage technologies are important for the decarbonization of a host of different sectors in power and industry, as well as removing CO2 from ambient air. There are different costs for each application and; therefore, different levels of support required to commercialize each of them. This legislation signals the recognition that 45Q must be tailored to the cost of different carbon capture applications.
“As a next step, policymakers should assess higher cost applications in sectors such as steel, cement, hydrogen and natural gas power production, and optimize 45Q to spur deployment in these sectors”, said Beck. “These legislative provisions would make it easier for companies tap into the tax incentives provided by 45Q. They would also help to future-proof hard-to-abate domestic industries, create regional economic opportunities and high-quality jobs, all while incentivizing the permanent storage of CO2 emissions.”
The key components of the 45Q Carbon Capture, Utilization, and Storage Tax Credit Amendments Act of 2021 are:
- A direct pay option: Both the House and Senate pieces of legislation allow for a full direct payment of the 45Q and 48A tax credits. This is essential to ensure maximum efficiency in incentivizing clean energy deployment.
- Extension of the date by which projects have to commence construction: Currently, projects have to have steel in the ground by the end of 2025. The Senate bill extends this date by 5 years. This would allow more projects to be planned.
- New 45Q value for Direct Air Capture. Increases the 45Q credit value for direct air capture projects from $50 to $120 per metric ton for CO2 captured and stored in saline geologic formations and from $35 to $75 per ton for CO2 stored via enhanced oil recovery, with this value reverting back to $35 in 2030.
- Allows the 45Q credit to offset tax obligations arising from the Base Erosion Avoidance Tax (BEAT). The BEAT is a form of alternative minimum tax for corporations to ensure multinationals cannot use deductions based off taxes paid abroad to reduce their US tax liabilities below a certain threshold. Exceptions were made for some tax incentives, including credits for wind and solar energy production, and this provision aims to also include the 45Q tax credit.
- Legislative fix on the 48A tax credit. The legislation also modifies the 48A tax credit to enable facilities that install carbon capture technologies to take advantage of the credit.
Last week the U.S. House of Representatives and U.S. Senate introduced the bipartisan SCALE (Storing CO2 and Lowering Emissions) Act, which aims at building out the CO2 transport and storage infrastructure needed to scale carbon capture and carbon removal technologies via incentive mechanisms like the 45Q tax credit.
“To advance these technologies on the path to net-zero emissions by mid-century, we must improve the deployment policy framework for carbon capture, removal, and storage. This package of legislation introduced today, along with the newly introduced SCALE Act is crucial to take carbon capture, removal, and storage to the next level in the US,” said Beck. “Lawmakers should pass both immediately.”
Clean Air Task Force has been a long-time NGO advocate for the development and deployment of carbon capture and storage technology as an essential weapon in the fight against global climate change. In addition to its advocacy work, for the last two years, CATF has tracked carbon capture plans and projects on an interactive map.