Bipartisan support is growing for carbon capture. Both Democrats and Republicans support new efforts to enhance tax credits that reward companies for capturing CO2 and storing it underground. These credits, known as 45Q, are the primary federal policy driver for CCS.
First, President Biden’s American Jobs Plan advocates 45Q enhancements that would raise the tax credit’s value, provide a “direct pay” mechanism to monetize the credit and extend the eligibility period. Next, House Ways and Means Republicans David Schweikert, Brad Wenstrup, and Carol Miller joined House Republican Leader Kevin McCarthy in introducing legislation to increase the value of 45Q to $85/tonne per tonne of CO2 sequestered. The Republican plan makes the credit permanent and allows companies to claim the credit for an additional eight years.
What would an $85 per tonne saline storage incentive achieve? While the answer depends on the final form of the credit, a CATF analysis finds that with direct pay and a longer eligibility period, $85 per tonne would push significant carbon capture in both the industrial and power sectors. To illustrate, the enhanced 45Q credit could drive about 46 power plants to capture and store 71 million metric tons per year of CO2 in 2035. To put this number in perspective, the Petra Nova carbon capture project was designed to capture about 1 million metric tons per year.
Enhancing 45Q would also drive significant jobs in the power sector. Based on data provided by the Rhodium Group, retrofitting 46 power plants by 2035 would create an average of about 4,500 construction-related jobs per year between now and 2035. Operating the plants creates additional jobs, an average of about 4,900 jobs per year between 2025 to 2035 (1). That’s a lot of economic development, particularly in rural areas where many of these plants are located.
Carbon capture represents a key area of common ground for both Democrats and Republicans. Working together on 45Q enhancements can create the goodwill and credibility that the nation needs to combat climate change and create high-paying jobs through carbon capture.