POWER July 2022 - 44

COMMENTARY
Carbon Management Tax
Policies Are Required to
Achieve Net-Zero by 2050
Madelyn Morrison
P
resident Biden signed the bipartisan Infrastructure Investment
and Jobs Act (IIJA) into law late last year,
cementing his administration's support for carbon management
technologies and their essential role in reaching our
midcentury climate objectives while preserving and expanding
high-wage jobs in America's essential manufacturing and industrial
sectors. But the IIJA is only half of the larger carbon
management policy puzzle. Still on the cutting room floor is
what many consider IIJA's sibling, the Build Back Better Act
(BBBA)-a package with robust investments in clean energy
technologies and policies needed to reach midcentury emissions
reduction targets.
Days following the historic enactment of IIJA, BBBA was
advanced by the House of Representatives. The package, in
combination with the groundbreaking carbon management provisions
included in the bipartisan infrastructure law, could deliver
an estimated 13-fold increase in deployment of carbon management
technologies, and between 210 million and 250 million
metric tons of annual emissions reductions by 2035. While the
House-passed package hit a snag in the Senate in December,
negotiations on the next iteration of the bill continue among
members of the Senate into this summer as global energy security
becomes a larger part of the national energy conversation.
Complementary Policies to IIJA's Groundbreaking
Investments
While the IIJA focused heavily upon " hard " infrastructure investments
to bolster the U.S.'s global competitiveness and
rebuild America's roads, bridges, and railways, the bill also
included more than $12 billion for deployment of carbon
management technologies at the Department of Energy. The
funding is a vital first step, providing an essential down payment
on carbon capture, removal, transport, utilization, and
storage technologies, which are necessary to meet critical
emissions reduction targets, all while retaining and creating
high-wage jobs, and fostering domestic energy and industrial
production. However, the money provided through the IIJA is
only one part of ensuring that carbon management can deliver
at climate scale. Key complementary tax measures considered
as part of the original Build Back Better reconciliation package
remain on the table for future negotiations.
Direct Pay. Carbon capture project developers could receive
45Q funds as a fully refundable direct payment that will provide
the full value of the credit directly to projects, ensuring the efficient
use of taxpayer dollars.
Multiyear Extension of the Commence Construction
Window. The commence construction deadline for carbon
capture, direct air capture, or carbon utilization projects would
extend six years to December 31, 2031.
Increased Credit Values for Industry and Power Projects.
The value of 45Q would increase to $85/ton for storage in sa44
line
geologic formations from industrial and power generation
carbon capture.
Increased Credit Values for Direct Air Capture Projects.
The credit value would increase to $180/ton for storage in saline
geologic formations from direct air capture.
Dramatically Reduced Annual Capture Thresholds. The
carbon threshold for credit-eligible carbon capture facilities
would decrease dramatically, leading to a significant increase
in 45Q-eligible projects.
Deploying Carbon Management Technologies at Scale
In order for the IIJA's historic investment to meet its full emissions
reduction potential, it is imperative that Congress pass these complementary,
comprehensive enhancements to the 45Q program
swiftly. Why now? The following three reasons make it necessary.
The tax-based carbon management provisions on the table
for the next budget reconciliation vehicle, in tandem with the
$12 billion in investments included in the IIJA, could fuel a 13fold
growth of carbon management capacity in the U.S. by
2035. If large-scale carbon management is to fulfill its needed
contribution to meet midcentury climate goals, significant
progress over the next decade is critical.
Heavy industry remains one of the highest emitting sectors
due to both its energy intensity and process emissions. Without
carbon capture, it is impossible to decarbonize this sector. Increasing
credit values for industry and power projects will lead to
millions of tons of annual carbon emissions reductions from sectors
that provide some of the most fundamental building blocks
for modern life, including steel, cement, and basic chemicals.
The enhancements to the 45Q program are some of the most
well-negotiated and bipartisan measures of the entirety of the clean
energy and industrial tax incentives being considered. Additionally,
while these enhancements would be transformational for the carbon
management industry, they provide excellent value, with an
estimated Joint Committee on Taxation (JCT) score of $2 billion, or
just over 1% of the overall proposed investment of $150 billion for
the entire clean energy tax credit package included in the BBBA.
What's Next?
While the Senate has indicated that they have begun work on a
similar package with a smaller scope and price tag, it is essential
that the carbon management provisions remain intact. Congress
must now build upon the success of the bipartisan infrastructure
bill by promptly enacting pending improvements to the 45Q tax
credit to help deploy carbon capture, direct air capture, and carbon
utilization technologies at scale to meet net-zero emissions goals.
We cannot afford to delay economywide commercial deployment
of carbon management technologies and infrastructure if midcentury
global temperature targets are to remain within reach. ■
-Madelyn Morrison is external affairs manager for the Carbon
Capture Coalition, a nonpartisan collaboration of companies,
unions, conservation, and environmental policy organizations.
www.powermag.com
POWER | July 2022
http://www.powermag.com
POWER July 2022

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