Yesterday, hell froze over: U.S. Senate Republicans and Democrats agreed. What got these often warring parties together? Carbon Dioxide Removal. Specifically, a tax credit that incentivizes carbon capture, storage and utilization.
The FUTURE Act (Furthering carbon capture, Utilization, Technology, Underground storage, and Reduced Emissions) shows that carbon dioxide removal is a true bipartisan energy, economy and climate solution.
When introducing the bill, Senator Heitkamp (D-ND) stated, “7 out of 11 climate models from UN IPCC could not stay below 2° C warming without carbon capture.” Senator Capito (R-WV) said, “Not only will it help us protect our coal industry, which is so critical to states like West Virginia, but it will also help us expand our oil production, reduce our emissions and compete internationally as other countries continue to build coal plants to power their economic development.” Supporters of the bill range from coal companies hoping to benefit from a lower cost of carbon capture, to the Natural Resources Defense Council (NRDC) and labor organizations championing the Act's environmental protection and job creation.
How does the FUTURE Act improve 45Q?
The bill extends and expands tax credits to build the New Carbon Economy. How? It incentivizes business to develop and utilize carbon capture, utilization and storage (CCUS) technologies. This bill is even better from the iteration introduced last year, thanks in part to Center for Carbon Removal advocacy.
Currently, the 45Q tax incentive offers $10/ton of CO2 employed for Enhanced Oil Recovery (EOR) and $20/ton for CO2 injected in geological reservoirs without application to EOR. Moreover, the current incentive has a cap of 75 million tons sequestered. The most recent audits, from 2014, imply that as much as 35 million tons of the fund have already been claimed by existing projects. With an such an ambiguous cap, there is no assurance to businesses that begin implementing carbon capture infrastructure.
The bill recognizes the importance of negative emissions by increasing the incentives for non-EOR carbon sequestration to $50/ton. This is a $15 premium over EOR.
If passed, the Act will also invest in the future of negative emissions in particular. It would open up the 45Q tax credit to Direct Air Capture (DACs) projects and CO2 utilization beyond Enhanced Oil Recovery (EOR). By supporting nascent and future carbon removal and utilization technologies, potential projects can actualize much sooner.
EOR is the “gateway drug” to negative emissions technologies. By incentivizing EOR, the Act can help to reduce the costs of carbon capture and sequestration while improving the technology.
The FUTURE Act goes even further than its predecessors by explicitly establishing CO2 utilization and sequestration beyond EOR as a priority.
The Center for Carbon Removal is enthusiastic about the framing of this legislation, as it establishes negative emissions as a priority within the United States’ energy paradigm. Positively, the introduction of the Act has been framed as a vital step towards closing the ambition gap and a necessary opportunity for the executive branch to take action on ‘clean coal’ promises, despite efforts to reduce the Department of Fossil Energy's Budget.