Carbon capture, utilization, and storage (CCUS) technologies offer a practical path to advance American energy dominance while achieving cleaner production methods. The United States is experiencing a historic period of electric load growth, driven by a resurgence in domestic manufacturing and the expansion of data centers. Technologies like carbon capture empower power producers and businesses to produce clean, affordable energy and products, while creating jobs and strengthening our nation’s industrial base.
The Credit for Carbon Oxide Sequestration (45Q) is the key federal incentive to deploy carbon capture technologies and is designed to overcome the high up-front capital costs this technology faces. Without targeted federal support, American energy innovators may be unable to quickly leverage carbon capture technology at scale. By reducing project costs and attracting private investment, 45Q is accelerating the adoption of carbon capture technologies nationwide and allowing us to better compete globally.
CARBON CAPTURE: SUPPORTING ENERGY DOMINANCE
CCUS systems capture carbon dioxide (CO2) emissions from power plants, factories, and other industrial sources such as steel and cement production. The CO2 can then be stored underground or repurposed into valuable products like fuels, concrete and chemicals. Innovations like direct air capture (DAC) even pull CO2 straight from the atmosphere to then be used in industry. These technologies are not reliant on heavy-handed regulations or government overreach—they harness private-sector innovation to address emissions while continuing to leverage abundant, affordable domestic energy resources such as natural gas.
CCUS is a relatively nascent technology with varying degrees of economic viability across different applications. Fortunately, it is quickly becoming cost-effective in sectors such as ethanol production, hydrogen production and natural gas processing. However, more advanced applications like DAC still face high upfront capital costs. Widespread deployment of CCUS is also hindered by a lack of transportation and storage infrastructure, as well as lengthy permitting processes for geologic storage projects. These roadblocks reiterate the need for significant, comprehensive permitting reform.
THE 45Q TAX CREDIT: ACCELERATING AMERICAN TECHNOLOGY
The 45Q tax credit addresses these cost barriers for CCUS technology by incentivizing up-front project development investments. The credit is not new: it was originally enacted in 2008, expanded in 2018 and again in 2022. Today, 45Q includes important direct pay and transferability provisions that now make it possible for taxpayers to leverage the credit to affordably invest in CCUS technology.
45Q provides a 12-year, performance-based tax credit for every ton of CO2 a company captures and either stores or uses productively. The 2022 amendments made carbon capture projects increasingly financially viable across a broader range of sectors. The addition of the direct pay and transferability provisions further increased the attractiveness of the credit, as these made it possible for taxpayers to leverage the credit to affordably invest in CCUS technology.
REPUBLICAN LEADERSHIP ON CARBON CAPTURE INCENTIVES
45Q enjoys longstanding Republican support. Prior to the 2022 expansion and extension of 45Q, Republican lawmakers championed several proposals to expand tax incentives for carbon capture technologies. In 2021 alone, this included:
- Sens. Shelley Moore Capito (R-W.Va.), Kevin Cramer (R-N.D.), John Hoeven (R-N.D.), John Barrasso (R-Wyo.), Chuck Grassley (R-Iowa), and Joni Ernst (R-Iowa) co-lead the Carbon Capture, Utilization, and Storage Tax Credit Amendments Act of 2021, which sought a five-year extension for 45Q.
- Rep. David McKinley (R-W.Va.) introduced the bipartisan Accelerating Carbon Capture and Extending Secure Storage through 45Q (ACCESS 45Q) Act to extend 45Q by 10 years and allow it to qualify for direct pay.
- Reps. David Schweikert (R-Ariz.), Brad Wenstrup (R-Ohio) and Carol Miller (R- W.Va.) introduced legislation to increase the value of 45Q from $50 to $85 per ton, extend the credit’s eligibility period from 12 to 20 years, and expand eligibility.
POLICY RECOMMENDATION: MAINTAIN THE 45Q TAX CREDIT
A robust carbon capture ecosystem can play an important role in achieving American energy dominance and expanded utilization of American energy resources. Continued availability of the 45Q tax credit will:
- Increase U.S. Energy Security and Global Competitiveness: Integrating CCUS into natural gas or ethanol production keeps American energy competitive. Enhanced Oil Recovery (EOR) injects captured CO2 into oil wells to increase recovery rates and boost domestic oil output while cutting emissions, reducing reliance on foreign energy imports and supporting stable fuel prices for families and businesses.
- Strengthen Grid Reliability: By enabling low-carbon baseload power from abundant domestic resources such as natural gas, CCUS helps maintain grid stability and prevents premature closures of power plants.
- Accelerate Project Investments: Since 2023, companies have announced a total of $56 billion in carbon management technology investments across the country.
Create Highly Skilled Jobs: The National Energy Technology Laboratory estimates that expanding the CCUS industry could create up to 1.8 million jobs through the construction, operation, and maintenance of capture facilities, pipelines and storage sites – largely in the Midwest, Appalachia and southern states.