Federal Budget Bill Includes Massive Tax Credits for Carbon Capture

Friday’s short government shutdown culminated in a potentially huge win for
the climate, business and investors. Among a slew of spending and tax
credits tucked into the budget bill
<> signed
by U.S. President Trump, one of them, known as 45Q
expands tax incentives for carbon capture, including from the air.  With
advocates from both sides of the aisle
the act shows bipartisan support for carbon capture technology. The policy
also signals a shift toward greater development and deployment for
something known as carbon dioxide removal

Broadly speaking, carbon dioxide removal involves two crucial steps:
trapping carbon dioxide (the main greenhouse gas causing climate change)
and reliably storing it. For every qualifying project, 45Q generates a tax
credit: $50 per ton of carbon dioxide (CO2) buried in underground storage
$35 per ton for either utilization
enhanced oil recovery.

With no cap on the available tax credits and 12 years to claim them, 45Q is
poised to do for carbon capture what similar incentives did for wind and
solar power: unleash private sector investments that catapult the
technology into its maturity. Tax credits are the first step in that
direction. The policy makes a stronger business case for development, which
in turn will drive necessary innovations that make it easier and more
attractive to take these technologies to scale.

This scaling is vital. Scientists agree
 that cleaning up past emissions of carbon dioxide is essential to meeting safe
climate targets
<>. And
45Q is the first federal acknowledgement of the role that carbon
utilization and air capture technologies will play in getting us there.

*Money for mechanical trees*Direct air capture
 (DAC) is a method for literally removing carbon from the atmosphere.
Mechanical trees suck in ambient air and chemically separate out the carbon
dioxide. From there, the captured CO2 is pumped deep underground into
sealed chambers. The end result of direct air capture, in other words, is
permanently stored CO2.

The best part? This technology is far from theoretical. ClimeWorks
<> is one of three startups–along with Global
Thermostat <> and Carbon Engineering
<>–to pull it off: Their negative emissions
 in Iceland “stores the air-captured CO2 safely and permanently in basalt,
leading us closer to our efforts to achieve global warming targets.”
ClimeWorks’ direct air capture machine in Switzerland could allow companies
to earn up to $50 per ton of CO2, depending on where it is stored after

Thus far, however, all of ClimeWorks plants have been located outside the
U.S and have been highly subsidized. Direct air capture has a near
limitless potential for carbon removal, making it a critical tool for
carbon dioxide removal. But the high cost of the technology in pilot
projects has been a barrier to wide adoption. 45Q takes an important step
toward lowering these costs. As the first instance of explicit federal
support, the bill sends a clear signal to DAC investors to continue funding
innovations that further bring down costs.

*Waste to value*45Q designates a $35 per ton tax credit for the
beneficial recycling
or utilization of captured CO2 emissions.
 Rather than storing emissions underground, CarbonTech businesses recycle
waste carbon dioxide by converting it into consumer products and materials
like plastics, transportation fuels, and chemicals. That credit is likely
to drive a handful of industrial carbon capture projects, according to a recent
study. <>

CarbonCure makes a stronger, faster-curing cement by injecting
<>waste carbon dioxide into cement mixers.
CarbonCure’s technology repurposes greenhouse gas emissions, injecting them
into concrete to yield a superior and greener product. Positively, the
extension of 45Q will incentivize more companies to reuse CO2 in novel and
creative ways by making the processes and technologies more investable and
affordable. In turn, this can help build early markets and broader
political will for carbon removal.

*Public money unlocks private dollars*Even before the extension of 45Q,
innovative investors, corporations, and startups were already working to
build an industry around recycling carbon emissions. More than $2 billion
dollars in private capital gathered at Center for Carbon Removal’s
CarbonTech Investor Roundtable last week to explore investment
opportunities. They asked for more CarbonTech businesses. They also said
policy support is critical to creating large markets for CarbonTech, in
turn increasing revenue and mitigating climate change.

It’s like the bipartisan authors of 45Q were in the room. With federal
support for carbon recycling, building a business or investing in the
carbon recycling space is less risky and potentially more profitable than
ever before.

*Strange bedfellows*45Q gathered diverse backers <>,
ranging from fossil fuel companies to unions and environmentalists. While
these stakeholders touted different benefits for the economy and the
environment, they generally agreed on the importance of federal incentives
for carbon capture and utilization. Enhanced oil recovery (EOR), an
important pathway to geologic carbon dioxide sequestration
will likely receive many of the 45Q tax credits.

But even EOR projects would help carbon capture companies reduce their
costs and get to scale.

With these learnings from EOR projects under their belt, carbon capture
companies could more easily transition to storing CO2 underground without
EOR when carbon prices increase to make such standalone sequestration
economically viable

*Cementing the victory*Here at Center for Carbon Removal, we work to grow
nascent carbon removal activities into large-scale climate solutions.
Technological, commercial, and policy barriers must be overcome in order to
do so. 45Q starts to tackle all three of these obstacles by reducing the
risks and increasing the profitability of carbon removal.  This is why CCR,
as part of a diverse coalition <>, has advocated for this
policy for years.

This victory calls for even more tenacious work on carbon removal. Center
for Carbon Removal invite you to join us in pioneering the future of carbon
removal.  We need your intellect, passion and expertise.  Here is how you
can get involved:

   - Subscribe This Week in Carbon Removal
   <> to keep abreast of the
   latest carbon removal news, events, job postings, and journal articles.
   - Join Center for Carbon Removal Investor Network
   <> for
   exclusive connections to other investors and the hottest startups.
   - Got a good CarbonTech business idea? Sign up to compete in Carbon
   Removal Labs

*Rory Jacobson is a Policy Analyst at the Center for Carbon Removal where
he researches policies with the potential to support carbon removal

*Elizabeth Reali is a Communications Intern at the Center for Carbon
Removal, where they work to build out educational materials, design digital
assets, and communicate with stakeholders about carbon removal.*

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