Prospects for large-scale deployment of carbon capture technologies in the next decade improved at the end of 2020 due to actions at the federal level. First, the omnibus spending package included both a two-year extension of the 45Q tax credit and massive increases in federal support for research, demonstration, and development of the suite of carbon capture management tools: capture, removal, transport, utilization, and storage. Second, the Internal Revenue Service finalized long-awaited regulations for 45Q that will provide certainty to investors and project developers. These actions boost momentum going into 2021 to grow support for priorities needed to build projects at the speed and scale required for meeting midcentury climate goals.
Key takeaways on the recent progress:
- The omnibus package provisions provide increased support for developing and deploying the carbon management technologies that are essential to a net-zero carbon economy.
- The package supports both emerging technologies and large-scale deployment of commercial technologies and infrastructure, which are both important for economywide deployment.
- The two-year extension of the 45Q tax credit and release of the IRS 45Q regulations are important next steps forward to spur project development.
- The progress signals momentum going into 2021 for growing federal support for carbon capture.
Carbon capture is an essential component of GPI’s work to achieve a zero-carbon economy by midcentury. Our work includes engagement of a broad set of interests at the federal level, including convening the Carbon Capture Coalition, whose 80-plus members build “federal policy support to enable economywide deployment of carbon capture, transport, use, removal, and storage,” and efforts to help states and regions become carbon capture ready through staffing the Regional Carbon Capture Deployment Initiative and State Carbon Capture Work Group.
Building on the success of the FUTURE Act’s passage in 2018, which expanded the 45Q carbon capture tax credit, this past year included significant progress and signals increasing federal support of carbon capture technologies to meet midcentury climate goals. As GPI vice president Brad Crabtree stated in his role as director of the Carbon Capture Coalition:
The 2020 omnibus spending package includes vitally important provisions that mark a critical next step toward a federal policy framework for economywide deployment of carbon capture and removal to put our nation on the path to achieving net-zero emissions to meet midcentury climate goals, while preserving and creating high-wage domestic energy, industrial and manufacturing jobs.
Omnibus package provides massive increase in federal support for carbon capture
The omnibus legislation provides a massive increase in authorized funding for economywide deployment of carbon management tools, including the following:
- Provides more than $6 billion in authorizations for federal programs including research, development, and demonstration of carbon capture, utilization, storage, and removal projects, from pilot projects to commercial-scale demonstrations (see a section-by-section summary).
- Expands federal support for the development of carbon utilization and direct air capture technologies.
- Provides improvements to the planning, siting, and permitting of carbon dioxide (CO2) transport and storage infrastructure.
- Extends the 45Q carbon capture tax credit by two years, providing additional certainty to project investors and developers.
The legislation also expands authorized funding to enable carbon capture for industries that are difficult to decarbonize, such as iron, steel, aluminum, cement, and chemical production, along with high temperature heat generation. These authorizations are part of a new cross-cutting program to support development and deployment of technologies key to reducing industrial emissions.
In addition to supporting carbon management technologies, the omnibus bill provides funding and establishes programs to further develop and manage deep saline storage sites in the US, which will be critical to successful, large-scale carbon management.
IRS issues final rule for the 45Q tax credit
On January 6, 2021, the Internal Revenue Service (IRS) released final regulations for the 45Q tax credit, nearly three years after reform and expansion of the credit through the FUTURE Act of 2018.
Since the passage of the FUTURE Act, the Carbon Capture Coalition worked intensively to build consensus around model guidance and recommendations to the IRS on key issues for 45Q implementation. The Coalition submitted these recommendations to the IRS in November 2018, June 2019, and August 2020. The timeline below, courtesy of the Carbon Capture Coalition, showcases major legislative and regulatory developments that led to a final 45Q ruling.
45Q implementation timeline
The IRS incorporated many recommendations previously proposed by the Carbon Capture Coalition, including:
- “Reaffirming strong standards for demonstrating secure geologic storage to claim the 45Q tax credit (the IRS rejected requests to weaken requirements that would have undermined the integrity of the program);
- Reducing the lookback period for credit recapture from five years to three, which will safeguard the geologic storage objectives of the 45Q program while addressing the open-ended risk of credit recapture that could otherwise impede private investment in carbon capture projects;
- Providing for a flexible approach to aggregating smaller industrial facilities into a single project to qualify for 45Q, significantly expanding opportunities for project deployment and emissions reductions in multiple industries and regions of the country; and
- Encouraging innovation in carbon utilization by affirming that a wide range of products manufactured from captured carbon are eligible for the tax credit, subject to requirements for lifecycle analysis of greenhouse emissions.”
Additionally, the Coalition will continue to work with Congress and the Biden administration to ensure public confidence in the 45Q tax credit by providing for transparency for the International Organization for Standardization pathway that is comparable to Subpart RR through complimentary policies and programs to the final regulations. The Coalition will also pursue complimentary legislation to incentivize economywide deployment of carbon capture, removal, transport, use, and geologic storage across industries.
These final 45Q regulations will provide long-overdue guidance for project developers and regulators, particularly for the approximately 30 publicly identified commercial carbon capture projects already under development nationwide.
Carbon Capture Coalition submits memo to President Biden’s climate team
The Carbon Capture Coalition submitted a memo to President Biden’s climate team on January 21, 2021, detailing an ambitious legislative and executive agenda to successfully meet President Biden’s stated goal of a 100 percent clean energy economy and net-zero emissions by 2050. The memo stresses carbon management’s essential role in economywide decarbonization, which is necessary to meet midcentury climate goals outlined by both the International Panel on Climate Change and the International Energy Agency.
Additionally, carbon capture projects are crucial for growing a domestic base of high-wage clean energy, industrial, and manufacturing jobs. The Biden Administration and 117th congress have the opportunity to meet ambitious climate goals while also creating economic opportunities for communities across America with the continued commercialization of carbon capture technology.
As stated in the memo:
“According to a recent Rhodium Group analysis, carbon capture deployment at industrial facilities and power plants and deployment of associated CO2 transport infrastructure in 21 states across the Midwest, Great Plains, Gulf Coast and Rockies regions can support an annual average of up to 68,000 project jobs and 35,800 ongoing operational jobs over a 15-year period and capture 592 million metric tons of CO2 per year.”
To ensure that these high-wage jobs are available to all Americans, the Coalition recommends that the administration strengthen and support federal training and apprenticeship programs.
Key priorities for the first 100 days of the new administration and 117th Congress are listed below.
Read more about the Coalition’s first 100 day priorities here.
Heading into 2021 with momentum on carbon capture
We’re excited to continue building on the momentum and progress made together with our many partners across the nation. At the federal level, we’re looking forward to the upcoming release, in early 2021, of the Carbon Capture Coalition’s updated Federal Policy Blueprint (read the 2019 version here). We’re also optimistic about growing support in Congress on legislation to ensure economywide scale-up of carbon capture, including the Storing CO2 and Lowering Emissions Act, which was introduced last year and would enable buildout of CO2 transport and storage infrastructure.
You can learn more about the Carbon Capture Coalition’s efforts on their website, including the latest updates on the blueprint release. You can learn about how we’re preparing states for carbon capture at https://carboncaptureready.betterenergy.org.
