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United States of America - CCUS Incentives

    • Legislation/Regulation: 45Q Tax Credit
    • Date: Extended and enhanced by the Inflation Reduction Act (IRA) of 2022
    • Summary: Originally, the 45Q tax credit provided financial incentives for capturing and storing CO2, originally offering up to $50 per metric ton of CO2 permanently stored and $35 per metric ton of CO2 utilized or stored through enhanced oil recovery. It aims to encourage the deployment of CCUS projects across various sectors.

    The 45Q tax credit underwent significant expansions and enhancements. Here are the key changes:

      Increase in Credit Amounts

    1. Higher Credit Rates:
      • The credit amount for CO2 sequestration was increased from $50 to $85 per metric ton for CO2 stored in secure geological formations.
      • The credit for CO2 used in enhanced oil recovery (EOR) or other qualified uses increased from $35 to $60 per metric ton.

      2. Expansion of Eligibility

    2. Lower Capture Thresholds:
      • The minimum capture thresholds were lowered, making more facilities eligible. For instance, industrial facilities and power plants now need to capture at least 12,500 metric tons of CO2 annually, compared to the previous threshold of 100,000 metric tons.

      3. Direct Pay Option

    3. Direct Payment Option:
      • The enhancements included a direct pay option, which allows taxpayers to receive the credit as a direct payment from the IRS, making it more accessible to entities without sufficient tax liability to offset.

      4. Extension of the Commencement Construction Deadline

    4. Extended Deadline:
      • The deadline to begin construction on qualifying projects was extended from January 1, 2024, to January 1, 2033, giving developers more time to plan and initiate CCUS projects.

      5. Inclusion of Additional CO2 Sources

    5. Inclusion of Direct Air Capture (DAC):
      • The 45Q credit was expanded to include direct air capture facilities, with increased credit amounts of up to $180 per metric ton for CO2 captured and stored permanently.

    These changes are aimed at accelerating the deployment of CCUS technologies by making the financial incentives more attractive and accessible to a broader range of projects and facilities.
    45Q Tax Credit: https://www.energy.gov/fecm/45q-carbon-capture-incentives
    IRS Notice on 45Q Tax Credit: https://www.irs.gov/newsroom/irs-provides-details-on-expanded-45q-tax-credit-for-carbon-capture
    Congressional Research Service Report on 45Q: https://crsreports.congress.gov/product/pdf/R/R46273