The carbon capture, utilization, and storage (CCUS) world is abuzz with news that Senators Heidi Heitkamp (D-ND) and Sheldon Whitehouse (D-RI) have introduced legislation to extend and enhance the 45Q tax credit. Wondering what all the excitement is about, and why it could be important for the development of negative emissions CCUS projects in the future? Read on to learn more!
What is “45Q,” and what is the Heitkamp-Whitehouse bill that was just introduced?
45Q is the section of the tax code that provides credits for businesses that use CO2 for enhanced oil recovery (EOR) and for CO2 injection into underground geologic formations. Businesses that capture and utilize/store CO2 in these ways can help reduce the amount of CO2 in the atmosphere, in turn mitigating climate change. The Heitkamp-Whitehouse bill would significantly increase the scope of entities eligible for the credit as well as the size of the credit – increasing its climate mitigation impact. Importantly, the bill also explicitly makes eligible non-EOR CO2 utilization activities (known more broadly as Carbon Capture and Utilization, or CCU), such as conversion of CO2 to synthetic fuels or use of CO2 in algae biofuel production operations.
What has been the reception of this bill, especially among the community of CCUS proponents?
The CCUS community is very excited about this new legislation (see this National Enhanced Oil Recovery Initiative press release). The existing 45Q credits have failed to provide a strong enough incentive for CCUS projects, and as a result, many promising CCUS technologies have failed to find meaningful markets.
This bill has received special attention in part because there are few other incentives for CCUS projects at either the Federal or state level anywhere in the U.S. There are no carbon markets at any level in the U.S. that enable CCUS projects to participate. And while there is some R&D funding for CCUS technologies, there is little deployment support for these projects beyond 45Q.
How can this bill pave the way for carbon-negative CCUS projects to flourish in the future?
In nearly every climate modeling scenario consistent with the Paris Agreement goals that the IPCC analyzed for its last Assessment Report on Climate Change, carbon-negative CCUS projects are deployed at enormous scale. This 45Q legislation on its own is unlikely to lead to the rapid development and deployment of large-scale biomass-fired power plants coupled with CCS, as envisioned in these IPCC modeling scenarios. However, the 45Q legislation may spur increased deployment of other potentially carbon-negative bioenergy + CCUS systems (such CCUS coupled with ethanol production or co-fired coal+biomass electricity projects) and fossil CCUS projects — both creating opportunities for technology learning and innovation. If additional complementary policies related to CCUS are passed (for example if CCUS projects were able to access financial tools such as Public Activity Bonds, Master Limited Partnerships, and CO2 price stabilization contracts), we could see significant advances in CCUS deployments in the near future.
Collectively these “pathway” CCUS projects could provide a bridge to carbon-negative CCUS projects in the future. Some of the ways that the pathway CCUS projects supported by 45Q legislation could lead to negative emissions include:
- Reducing the costs of CO2 capture technology – the innovative technologies developed and deployed for CCUS projects today may bring down costs for carbon-negative, biogenic CCUS projects in the future.
- Building geologic storage experience and regulation – the mapping of geologic storage resources, and the development and implementation of measurement and verification protocols for CO2 storage for CCUS projects today will not have to be recreated for carbon-negative projects, making it quicker to build these projects in the future.
- Growing markets and industry supporters – the increase in infrastructure (such as CO2 transportation pipelines and storage/utilization facilities) and demand for CO2 created through CCUS projects today can make it easier for carbon-negative CCUS projects to gain a foothold in the market in the future.
- Creating regulatory frameworks for future negative emissions projects – 45Q provides a demonstrated, bipartisan framework for advancing targeted negative emissions policy in the future.
What do fans of negative emissions think about this bill?
“We are pleased to see so many of our legislators in Congress supporting policies that encourage private sector investment in CCUS. Such policies are essential to accelerate the deployment of carbon-reduction and negative carbon technologies – essential elements of addressing climate change and energy security.” — Jeff Erikson. Global CCS Institute, General Manager of the Americas
“If these proposed tax credits are enacted, they would drive cost-effective CO2 reductions in both the industrial and power sectors that together account for more than half the CO2 emissions in the US. Production tax credits have worked with renewables, and they need to be available for carbon capture.” — John Thompson, Clean Air Task Force, Director Fossil Transition Project
“The most recent US Senate proposal to improve and enhance the federal 45Q carbon capture tax credit is a welcome example of policy leadership. The strong bipartisan support for carbon capture reflects a broad recognition of its importance to our energy mix. In enacted, this tax credit will directly support commercial activity in carbon capture which will drive the development of even lower carbon and carbon negative technologies in the future.” — Sasha Mackler, Summit Power, Vice President