Way Down in the Hole, Part 11 - Carbon Capture Gets a Big Boost in Biden's Climate Bill

The Internal Revenue Code’s tax credit for carbon oxide sequestration, better known as 45Q, is fortunate to enjoy something very rare in Washington, DC, these days — generally bipartisan support. A host of changes aimed at bolstering the tax credit were included in the House-approved version of the Democrats’ central piece of legislation, the Build Back Better (BBB) Act, but it appears to have no way forward in the Senate — it was declared “dead” Tuesday by West Virginia Senator Joe Manchin, a must-have vote — which means it will likely be split into separate pieces, further complicating its path to passage. Several proposed changes to the 45Q tax credit have already been included in separate legislation, so they could still become a reality. In today’s RBN blog, we’ll look at some potential changes to the tax credit as well as measures that might restrict its use.

The idea of capturing the carbon dioxide emitted from power plants and industrial facilities and permanently storing it deep underground is widely viewed as one of the more promising ways to reduce greenhouse gas emissions. The catch is, how do you convince private-sector CO2 emitters to invest tens or hundreds of millions of dollars in carbon capture and sequestration projects? Enter federal government incentives — in this case the Internal Revenue Code’s carbon oxide sequestration tax credits, better known as 45Q, which at first glance would appear to offer certain industries significant financial incentives if they make these investments. However, while the credits — available for a variety of projects and uses — have been around since 2008 and were significantly expanded in 2018, they have not yet made much of an impact. In today’s RBN blog, we look at how the credits can add up for individual projects and how widely variable costs make carbon capture uneconomic for several industries.

It’s one thing if you’re 25 or 30 years old and your 401(k) is just getting started — you’ve got time to build it up, so don’t sweat it — but it’s quite another if you’re 60 or 65 and you’ve still got to sock away a lot of money before calling it quits. It could be argued that the environmental community is facing a quandary very similar to that of an aging boomer short on retirement savings. The fact is that the International Energy Agency’s (IEA’s) target of achieving net-zero man-made carbon emissions globally by 2050 in order to blunt the human impact on climate change will require massive new investment and a complete and well-coordinated transformation of the world’s energy complex. In the near-term, progress along that path must include an extraordinarily rapid ramp-up in the use of carbon capture and sequestration (CCS). And like an aging worker whose late discipline may be thwarted by an unforeseen health challenge, as we’ve seen with the recent energy crisis, there’s a lot that could derail progress toward those goals. Is the IEA's goal achievable? Maybe. But, as we discuss in today’s RBN blog, it won’t be easy.