Will Congress Supercharge 45Q—The Carbon-Capture Tax Credit—Or Scrap It?

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Will Congress Supercharge 45Q—The Carbon-Capture Tax Credit—Or Scrap It?

Bipartisan proposals are vying in Congress to increase the Section 45Q tax credit for carbon capture and sequestration, which has itself been credited with jumpstarting CO2 capture technologies.

But there is also at least one proposal to abolish it.

Section 45Q of the Internal Revenue Code offers a tax credit that varies from just under $12 up to $50 for each metric ton of carbon captured and sequestered, depending on the timing and type of project.

Proposals now in Congress could boost it as high as $175 per ton. They were outlined in a report to Congress Wednesday by Angela C. Jones, an analyst in environmental policy, and Molly F. Sherlock, a specialist in public finance, of the Congressional Research Service:

SB 2230, the CATCH Act, would increase the credit to $85 for carbon captured and stored and $60 for carbon captured and used. It was introduced by Sen. Ben Ray Lujan (D-NM).

That figure—$85—is a popular number in both parties. It’s the target figure in President Biden’s Budget Proposal, though Biden would increase the credit to $120 specifically for direct-air projects.

HR 2633, introduced by Republican Rep. David Schweikert (AZ), would amend the tax code to bump the credit to $85 per ton for carbon captured and stored, $50 for carbon captured and used. It would also make the credit permanent.

Under current law, the credit must be used for projects under construction no later than Dec. 31, 2023, and those projects benefit from the credit for 12 years.

HR 1062, the ACCESS 45Q Act, would extend the current law to 2035 without increasing the credit amount. Introduced by Republican Rep. David McKinley (WV), it allows taxpayers to receive the credit in direct payments.

HR 848, the GREEN Act, allows for a shorter extension, to 2026, without increasing the credit amount, and like most of these proposals—including Biden’s—it also allows direct payments. The bill, which contains a number of other energy proposals, was introduced by California Rep. Mike Thompson (D-Napa).

SB 969, the CCUS Tax Credits Amendments Act, would bump the credit to to $75 per ton for carbon captured for use and to $120 for direct-air-capture projects. It was introduced by Sen. Tina Smith (D-MN).

The most generous proposal comes in SB 1298, the Clean Energy for America Act, a comprehensive energy bill that would increase the credit to $175 for carbon captured and stored and $150 for carbon captured and used. It was introduced by Sen. Ron Wyden (D-Ore).

Democrats are also behind the proposal to abolish 45Q. Rep. Ilhan Omar (MN) and Sen. Bernie Sanders (I-VT) introduced HR 2102, the End Polluter Welfare Act, which deletes the carbon-capture and sequestration credit along with an array of subsidies for the fossil-fuel industries.

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