Carbon capture and storage: Opportunities for federal action to support domestic energy production and industrial innovation
This blog is part of a series that explores the federal policies and actions needed to deploy next-generation geothermal, sources of nuclear energy (both fission and fusion), and carbon capture and storage – technologies the Trump administration indicated as priorities on Earth Day. The policy brief highlighting these technologies can be found here.
Carbon capture and storage (CCS) technologies have been successfully demonstrated and commercially deployed in the United States over the last five decades. In recent years, there has been a surge in carbon capture project announcements thanks to bipartisan federal policy enacted in the Infrastructure Investment and Jobs Act (IIJA) and enhancements to the 45Q tax credit, all underpinned by 15 years of bipartisan support.
Today, there are more than 270 publicly announced carbon capture projects across the United States, representing a total of $77.5 billion in capital investment. Increasingly, state policymakers, too, are recognizing CCS technologies as an essential solution that supports American global competitiveness, domestic energy production, pollution reduction, and job creation. What’s more, in April this year, the Trump administration also reaffirmed its support for CCS.
Despite this apparent consensus, the U.S. House of Representatives recently passed legislation that poses a risk to U.S. leadership in carbon management technologies which threatens industrial innovation and clean firm power generation. Included in the bill are provisions that would hinder the deployment of CCS technologies by cutting important pathways to project financing. Concerningly, the Department of Energy (DOE) has also recently announced the cancellation of a total of 10 carbon capture and utilization projects from the Carbon Capture Demonstration Projects Program, the Carbon Capture Large-Scale Pilot Program, and the Industrial Demonstration Program. These cuts halt important and innovative projects at gas and coal power plants, cement facilities, and other industrial sites nationwide.
According to DOE, every dollar of federal support for carbon management projects can generate up to four dollars in economic activity through equipment orders, construction, job creation, and regional supply chain growth. Recent DOE cancellations of key demonstration and pilot projects now threaten to halt that momentum. More concerningly, DOE is also proposing over $7 billion in cuts to CCUS pilot and demonstrations in the Presidential Budget Request of 2026, as highlighted in the table below.
Table 1. Unallocated IIJA funds intended as presented in the Presidential Budget Request pf 2026.
| Amount | Account | Program | Authorization |
|---|---|---|---|
| $2,084,700,000 | Carbon Dioxide Transportation Infrastructure | Carbon Dioxide Transportation Infrastructure Finance and Innovation Program | Subtitle J, Title IX, EPAct 2005, amended by Sec. 40304 |
| $68,640,068 | Fossil Energy and Carbon Management | Front-End Engineering and Design, Carbon Capture Technology | Sec. 962, EPAct 2005, amended by Sec. 40303 |
| $1,163,735,574 | Fossil Energy and Carbon Management | Carbon Storage Validation and Testing | Sec. 963, EPAct 2005, amended by Sec. 40305 |
| $2,002,474,357 | Fossil Energy and Carbon Management | Regional Direct Air Capture Hubs | Sec. 969D, EPAct 2005, amended by Sec. 40308 |
| $6,630,000 | Fossil Energy and Carbon Management | Precommercial Direct Air Capture Prize Competitions | Sec. 969D(e)(2)(A), EPAct 2005 |
| $66,705,000 | Fossil Energy and Carbon Management | Commercial Direct Air Capture Prize Competitions | Sec. 969D(e)(2)(B), EPAct 2005 |
| $573,319,000 | Office of Clean Energy Demonstrations | Carbon Capture Large-Scale Pilot Projects | Sec. 962(b)(2)(B), EPAct 2005 |
| $1,400,655,719 | Office of Clean Energy Demonstrations | Carbon Capture Demonstration Projects Program | Sec. 962(b)(2)(C), EPAct 2005 |
To counter this regressive action, drive industrial innovation, and remain a global energy leader, the Senate must both protect and enhance federal carbon management policies. As global markets demand cleaner goods, CCS is a necessity for U.S competitiveness.
Protecting and enhancing 45Q tax credits is essential for U.S. leadership in carbon capture and storage.
Congress must prepare 45Q for next-generation deployment by increasing the incentive to $120/ton. While the current 45Q credit – up to $85/ton for saline sequestration – is competitive for sectors like ethanol and natural gas processing, it falls short for higher-cost applications, particularly due to inflation in recent years. According to the Carbon Capture Coalition’s analysis, cement, steel, refining, and some power projects often face abatement costs well over $100/ton. To drive widespread deployment across hard-to-abate industries, the 45Q credit needs to rise to $120/ton or more. Readjusting the credit value to account for inflation that has occurred so far this decade would also help, as current credit values won’t start adjusting for inflation until 2027. This would help close the cost gap and send a strong market signal to domestic manufacturers and their international customers.
Figure 1: Current 45Q credit levels across most sectors are falling short of covering NOAK costs
Congress must halt the erasure of early-stage demonstration projects during the appropriations process. Congress should ensure that funding for demonstrations and pilots across industrial sectors, including refining, steel, cement, chemicals, and fossil power generation, is made available by this administration. DOE has already pulled the rug out from the U.S. cement industry with its recent cuts to pilot and demonstration projects, which were authorized by the legislative branch with bipartisan support. While DOE cut 10 CCS pilot and demonstrations in May, China announced seven major industrial and power CCUS project just weeks before. However, Congress can act to reverse this. There are still unallocated funds in the programs authorized by the bipartisan IIJA, approximately 1.35 billion for Carbon Capture Demonstrations and a further 728 million for large-scale carbon capture pilots.
DOE justified cancelling several carbon-capture demonstration projects by claiming they were “not economically viable and would not generate a positive return on investment for taxpayers.” But pilot and demonstration programs exist precisely to support promising technologies that are not yet commercially viable or fully scaled; they aim to de-risk innovation, attract private capital, and drive down costs over time. Applying a strict near-term profitability test to decide which projects survive amounts to DOE picking winners rather than creating a level playing field. The results bear this out: DOE terminated both cement-sector CCUS projects—even though cement capture typically costs less per ton than coal power capture—while allowing one coal-power CCS project to proceed.
If DOE’s real concern is that the canceled projects do not align with the administration’s broader power or policy goals, then Congress should direct the department to issue a new funding opportunity specifically tailored to carbon-capture projects that advance those objectives while still honoring the programs’ original congressional mandate. Maintaining targeted pilot and demonstration funding would stabilize investor expectations in U.S carbon management policy, accelerate first-of-a-kind CCUS deployments at home
while helping American companies secure the first-mover advantage by commercializing —and ultimately exporting—the next generation of CCUS technologies.
Table 2: Canceled carbon capture projects announced May 30, 2025
| Project Name | DOE Program | Technology | Sector | Award Execution Date | Total Award Amount | Total Including Private Capital | Project Location | Future Jobs Lost |
|---|---|---|---|---|---|---|---|---|
| Sutter Decarbonization Project, Capline | Carbon Capture Demonstration Program | CCS | Gas power + CCS | 8/1/2024 | $270,000,000 | $540,000,000 | Yuba City, CA | 260 |
| Baytown Carbon Capture and Storage Project, Calpine | Carbon Capture Demonstration Program | CCS | Gas Power | 7/1/2024 | $270,000,000 | $540,000,000 | Baytown, TX | 280 |
| Mitchell Cement Plant Decarbonization Project, Heidelberg Materials | Carbon Capture Demonstration Program | CCS | Cement | 8/12/2024 | $500,000,000 | $1,000,000,000 | Indiana | 20-25 permanent, 1,000 construction |
| Carbon Capture Pilot at Vicksburg Containerboard Mill | Large Scale Carbon Capture Pilot Program | CCS | Pulp & Paper | 9/1/2024 | $4,304,715 | $5,380,894 | Vicksburg, MI | 90 construction |
| Carbon Capture Pilot at Cane Run Generating Station | Large Scale Carbon Capture Pilot Program | CCS | Gas Power + CCS | 9/1/2024 | $72,016,473 | $90,020,591 | Louisville, KY | 40-100 construction |
| Carbon Capture Pilot at Dry Fork Station | Large Scale Carbon Capture Pilot Program | CCS | Coal Power + CCS | 8/1/2024 | $49,032,200 | $61,290,250 | Gillette, WY | 40-60 construction, 20-25 operational |
| Sustainable Ethylene from CO2 Utilization with Renewable Energy | Industrial Demonstrations Program | CCS, Alternative Product | Chemicals | 12/16/2024 | $200,000,000 | $400,000,000 | Gulf Coast Location | 40 permanent, 200 construction |
| Star e-Methanol, Orsted Star P2X LLC | Industrial Demonstrations Program | CCS, Alternative Product | Chemicals | 12/9/2024 | $99,000,000 | $198,000,000 | Chambers County, TX | 350 |
| Lebec Net Zero Cement Plant Project, National Cement Company of California, Inc. | Industrial Demonstrations Program | CCS | Cement | 12/4/2024 | $500,000,000 | $1,000,000,000 | Lebec, CA | 25 |
| Baytown Olefins Plant Carbon Reduction Project, Exxon Mobile | Industrial Demonstrations Program | Hydrogen, CCS | Chemicals | 12/17/2024 | $331,885,548 | $663,771,096 | Baytown, TX | 300 construction, up-skilling |
Congress must protect the transferability provision within the 45Q tax credit to enable project financing. Transferability allows project developers to sell 45Q credits to investors, unlocking upfront capital and enabling participation from startups and smaller firms that do not have sufficient tax liabilities to fully leverage the credits. Removing this provision would add costs to project financing for no public benefit. As shown below in Figure 2, in 2024, the elimination of transferability would increase costs from about 5 cents per dollar to 30 cents by forcing developers to utilize tax equity markets directly. Transferability has proven its value to project developers, large and small, as an efficiency mechanism allowing developers to avoid costly and inefficient tax equity markets. Without the ability to use these transferability provisions, carbon management project development and deployment will slow significantly, leading to many projects, particularly smaller ones, failing to reach a final investment decision.
Figure 2: Average return on 45Q in tax transfers
Figure 3: Average return on 45Q in tax equity markets
The administration must finalize and implement key safety and permitting rules, including updated PHMSA regulations for CO₂ pipeline transport. Regulatory clarity is critical to accelerating infrastructure buildout and overcoming permitting delays. Some states, like California, have introduced moratoria on pipeline development in anticipation of PHMSA’s updated rules. Further delays in implementing updated PHMSA rules will pose serious risks to project development in those states.
Congress must safeguard regulatory frameworks like the Greenhouse Gas Reporting Program (GHGRP), which the EPA is threatening to eliminate, to ensure robust monitoring, reporting, and verification of captured CO₂, not to mention serving as a critical resource for emissions data across multiple industries. This is essential for maintaining accountability, enabling the use of 45Q tax credits, and protecting public investment. In fact, today, it is impossible to claim the 45Q credit and comply with IRS regulations without reporting under the GHGRP.
Congress must continue to hold hyperscale data center developers accountable for the power infrastructure they require. Leading U.S. technology companies—Microsoft, Google, and Amazon—have made high-profile commitments to decarbonize their electricity consumption. Microsoft has pledged to match 100% of its electricity use with zero-carbon energy by 2030. Google aims to power all data centers with carbon-free energy 24/7 by 2030 and reach net-zero emissions by the same year. Amazon claims it already matches 100% of its operations with renewable energy as of 2023 and is targeting net-zero carbon by 2040. However, the details behind these commitments often remain vague. While these companies are rapidly expanding their capacity to meet rising AI-related power demand—an effort increasingly framed as essential to national competitiveness with China—Congress must ensure that the energy infrastructure built to support this growth genuinely advances U.S. energy security goals.
While the Department of Energy cuts demonstration projects, Congress must extend support for critical carbon management infrastructure and leverage what has already been built. Pairing already funded CarbonSAFE sites with data powered by newly built natural gas turbines with carbon capture is one example. Efficient permitting of carbon dioxide pipelines is also key. This could include Congress introducing a federal siting pathway for interstate pipelines to align with the federal authority granted to natural gas pipelines under the Natural Gas Act, or state-level reforms. This would address siting challenges that currently delay projects and help translate federal investments into steel in the ground.
EPA must be equipped to handle primacy and Class VI well applications. Advancing CCS will also require a clear-eyed focus on permitting efficiency. A critical area of progress has been state primacy over Class VI wells, which govern the long-term geologic storage of CO₂. Several states—West Virginia, Texas, and Arizona—have recently advanced their primacy applications. West Virginia received final approval in early 2025 and now has full permitting authority. Texas finalized its Memorandum of Agreement (MOA) with EPA in April, and this month, EPA announced its proposal to approve Texas’s application. Arizona’s application is currently under public comment following EPA’s proposed rule in May. Louisiana, which was granted primacy in 2023, recently secured a legal victory in the 5th U.S. Circuit Court of Appeals, which dismissed a lawsuit challenging EPA’s decision.
Table 3: Status of Class VI Primacy
| State | Primacy Status |
|---|---|
| Louisiana | Primacy granted (2023 & upheld in court May 2025) |
| North Dakota | Primacy in effect (2018) |
| Wyoming | Primacy in effect (2020) |
| West Virginia | Primacy in effect (since Feb. 2025) |
| Arizona | EPA propose to approve application (May 2025) |
| Texas | EPA propose to approve application (June 2025) |
As more states pursue primacy, Congress must ensure that EPA is properly staffed and resourced to handle both the growing volume of primacy applications and the surge in Class VI well permit applications from states without primacy. The administration is proposing sweeping cuts to the EPA, posing a serious risk to EPA’s institutional capacity. Congress must ensure the Underground Injection Control (UIC) program, which governs the safe permitting and operation of Class VI wells for CO₂ storage, remains intact.
Congress must act to protect and strengthen the foundation of U.S. carbon management leadership. This means rejecting proposed cuts to pilot and demonstration programs that are essential for innovation. At the same time, Congress should take steps to enhance the 45Q tax credit and unlock the next wave of carbon capture projects. Without swift action, the U.S. risks ceding its competitive edge in deploying carbon capture technologies.
