Senators’ Bill Would Offer Tax Credit Changes to Cut Amount of Carbon Sent into Atmosphere

WASHINGTON, D.C. [3/25/21]—Today, U.S. Senators Tina Smith (D-Minn.) and Shelley Moore Capito (R-W.Va.) will be leading a bipartisan group of senators in introducing legislation to reduce greenhouse gas emissions. Their bill would make tax credits that encourage carbon capture projects more available and easier to use.

The bipartisan Carbon Capture Utilization and Storage Tax Credit Amendments Act is also supported by Sens. Sheldon Whitehouse (D-R.I.), Kevin Cramer (R-N.D.), Brian Schatz (D-Hawaii), John Hoeven (R-N.D.), Joe Manchin (D-W.Va.), John Barrasso (R-Wyo.), Chris Coons (D-Del.), Chuck Grassley (R-Iowa), Ben Ray Luján (D-N.M.) and Joni Ernst (R-Iowa). This legislation would make improvements to ensure that carbon capture utilization and storage (CCUS) credits are utilized to their full potential to create manufacturing, construction, and engineering jobs and prevent carbon dioxide emissions. 

“The science is clear—climate change is real, it’s caused by humans, and we need urgent action to address it. Our bill works toward that goal by working to reduce greenhouse gas emissions,” said Sen. Smith. “Carbon capture and storage is a crucial technology for reducing emissions from biofuels, steel, and other industries important to Minnesota. Climate scientists tell us that if we are to avoid the worst of the climate crises, we will absolutely need direct air capture to pull excess carbon dioxide out of the atmosphere, and this bill provides increased support for that emerging type of carbon capture. You can see from the Senate coalition supporting this legislation that what’s good for our environment and good for our economy is bipartisan, as it should be.”

“The United States has an opportunity to be a leader when it comes to carbon capture technologies, and this legislation will help us achieve that goal,” Senator Capito, Ranking Member of the Senate Environment and Public Works (EPW) Committee, said. “Not only will it help us protect our coal and natural gas industries, which are so critical to states like West Virginia, but this legislation promotes domestic energy production and reducing our power and manufacturing sector emissions. I’m proud to reintroduce this bipartisan legislation that will make a big difference in putting American innovation to work growing our economy and combatting climate change in a responsible way, regardless of the current economic circumstances.” 

“Our bipartisan bill will incentivize innovation in promising carbon capture technologies. We’re hopeful that removing carbon from the atmosphere can be part of the solution for holding warming below the 1.5 degree C threshold, but we need to accelerate the pace of innovation to get there,” said Sen. Whitehouse.

“North Dakota is leading the way in the development of clean, reliable energy by investing and applying carbon capture and use technologies to lignite, oil, and ethanol facilities. By extending and expanding access to carbon capture tax credits, our bipartisan bill would allow innovators in our state to increase their investments, further research the technologies, and ultimately lower emissions,” said Sen. Cramer. “If our shared goal really is providing reliable energy while protecting the environment, Congress should pass our legislation and the Biden Administration should support it.”

“Every pathway to a net-zero emissions economy will rely on carbon removal and storage. That's why scaling up direct air capture is going to be critical for solving the climate crisis,” said Sen. Schatz. “Our bipartisan bill will create new incentives to develop these technologies, create good-paying jobs, and get more of these projects off the ground.” 

“The 45Q and 48A tax credits are an essential part of our efforts to advance the development of CCUS technologies, which will enable our nation to continue utilizing all of our abundant energy resources while also reducing emissions,” said Sen. Hoeven. “Our legislation will enhance these important incentives, making them more effective and accessible as CCUS is developed and implemented. This is about supporting good-paying jobs, making our nation energy secure and maintaining our baseload power sources to ensure the reliability and affordability of the electric grid.”

“Carbon capture, utilization, and sequestration (CCUS) is one of the most critical technologies to combat climate change globally. As we transition to a cleaner energy future, increased investment in CCUS and carbon removal technologies will reduce emissions, keep our energy affordable and reliable, and ensure our continued climate leadership. Enhancing the 45Q and 48A tax credits will encourage increased commercialization of CCUS and Direct Air Capture technologies across the nation while supporting clean energy, infrastructure, and manufacturing jobs across the country, including in traditional energy producing communities like those in West Virginia. I look forward to working with my colleagues on both sides of the aisle to ensure this legislation becomes law,” said Sen. Manchin, Chairman of the Energy and Natural Resources Committee. 

“The best way to make American energy as clean as we can, as fast as we can, is through innovation, not government regulation or taxation,” said Sen. Barrasso. “Our bipartisan bill will do just that without raising costs for Americans. Carbon capture and storage technology will help reduce carbon emissions and create new jobs in Wyoming at the same time. It will also promote the long term use of Wyoming’s traditional energy resources, while helping America remain the world’s energy leader.”

“It’s clear that accelerated deployment of carbon capture, utilization, and storage is crucial for reaching mid-century climate goals and would create thousands of jobs and help maintain American competitiveness in the process,” said Sen. Coons. “I’m proud to join Senators Smith and Capito in introducing the Carbon Capture Utilization and Storage Tax Credit Amendments Act that would make important reforms to the 45Q and 48A tax credits, enhancing the ability of these federal incentives to spur development of new CCUS projects. Together with the bipartisan SCALE Act I authored, this bill will further drive the adoption of CCUS in the United States.”

“Caring for our environment and preserving American jobs and energy sources doesn’t have to be mutually exclusive. This bipartisan bill helps to encourage innovation that can support American manufacturing and energy production while helping to reduce greenhouse gas emissions,” Sen. Grassley said.

“Carbon capture, utilization, and storage will play an important role in our efforts to combat climate change. This legislation will empower Americans to innovate and employ the latest technologies to protect our planet while creating good-paying, American jobs. I’ll continue working with my colleagues on both sides of the aisle to pass commonsense climate legislation,” said Sen. Luján. 

“Through commonsense incentives and innovation, we can work together to protect our environment and promote clean energy without heavy-handed government mandates. This bipartisan bill will help reduce carbon dioxide emissions while creating good-paying jobs for Iowans, and all Americans,” said Sen. Ernst.

What Labor Unions, Environmental Groups, Think Tanks, Trade Groups & Non-Governmental Organizations Say About the Bipartisan Legislation:

“Carbon capture and direct air capture technologies are critical for protecting and creating good manufacturing jobs as the nation and the globe work to reduce greenhouse gas emissions. The Carbon Capture, Utilization, and Storage Tax Credit Amendments Act includes increased credit values for direct air capture projects and an extended commence construction deadline. This will enable the large-scale deployment of carbon management technologies, which, particularly in industrial facilities, will help retain and create high-wage jobs,” said Tom Conway, International President of United Steelworkers.

“The 45Q tax credit furthers carbon capture deployment at a critical moment when there’s strong, bi-partisan leadership advocating this technology and a swell of public support for policies that lower emissions while preserving and creating jobs and economic benefits. We are hopeful this legislation is one of many measures we can rely on in the near-term to create and sustain family-supporting jobs as we achieve net-zero emissions,” said James Slevin, President of the Utility Workers Union of America.

“We are at an exciting moment where we can meet the challenge of climate change by creating a future with cleaner air and better energy choices. And we can do it while bringing new jobs to the table. The 45Q tax credit is an important tool that will support the deployment of technologies that capture and safely and securely store carbon. We applaud the bipartisan commitment to creating the right incentives to support the transition to a clean economy,” said Jason Albritton, Director of Climate and Energy Policy at The Nature Conservancy.

“Carbon capture is critical to tackling climate change, and 45Q is the most important carbon capture incentive in the world. This extremely important legislation optimizes 45Q it by extending the commence construction deadline and allowing compatibility with the 48A incentive -- providing direct pay option for both. By introducing new 45Q values for direct air capture, it also reflects the importance of tailoring 45Q to different applications of carbon capture, removal, and storage technologies, as not all of them are at the same stage of deployment, and their costs vary as well. Together with the SCALE Act, this legislation forms a must-pass policy package for the large-scale deployment of carbon capture, removal, and storage for a net-zero US,” said Lee Beck, CCUS Policy Innovation Director at Clean Air Task Force.

“The 45Q Carbon Capture, Utilization and Storage Tax Credit Amendments Act provides smart, targeted legislative updates in support of technologies that will be crucial to meeting our climate goals. The economic challenges created by the pandemic make extending the 45Q tax credit and making direct cash payments available to project developers vital steps to advancing these technologies. These steps, along with an expansion of the Direct Air Capture credit, will boost the long-term competitiveness of domestic industries and enable those industries and the communities they operate in to thrive in a low-carbon future,” said Bob Perciasepe, President of C2ES.

“BPC Action supports the Carbon Capture, Utilization and Storage Tax Credit Amendments Act introduced by Sens. Smith (D-MN) and Capito (R-WV),” said Michele Stockwell, Executive Director of BPC Action. “The legislation is an important update to the 45Q tax credit which is critical for financing carbon capture technologies, including direct air capture, and will support American industries to create important new clean energy jobs. Leveraging American innovation in carbon capture and removal will be an important element of the economic recovery while reducing emissions.”

“As our nation moves to decarbonize the transportation sector and achieve clean energy and climate goals, real-world data continue to prove the important role that biofuels play,” said Growth Energy CEO Emily Skor. “Not only do biofuels like ethanol significantly reduce greenhouse gas emissions in the transportation sector, but more and more ethanol producers are looking towards capturing CO2 from the production process and storing it underground or using it for other commercial applications, including dry ice production for COVID-19 vaccination storage.  

“To achieve the full potential of carbon capture to support domestic energy and industrial production, protect and create jobs that pay family-sustaining wages, and achieve net-zero emissions by midcentury, we need a suite of federal policies that enhance and build on the federal Section 45Q tax credit. The Carbon Capture, Utilization, and Storage Tax Credit Amendments Act helps meet this urgent need,” said Carbon Capture Coalition Director Brad Crabtree.

“CURC congratulates Senators Tina Smith (D-MN), Shelley Moore Capito (R-WV), and their Senate colleagues on the introduction of the 45Q Carbon Capture Utilization and Storage Tax Credit Amendments Act,” said CURC Executive Director Shannon Angielski. “To aid ongoing economic recovery efforts, the U.S. needs to invest in the energy system and infrastructure of the future. Carbon capture, utilization, and storage (CCUS) technologies have a critical role to play in that future, contributing to the decarbonization of the electric power and industrial sectors while maintaining affordable, dispatchable power generation and creating good-paying jobs. Enhancing the Section 45Q and 48A tax credits are critical to stimulate the deployment of CCUS technologies. CURC commends Senators Smith and Capito for their leadership to bolster these tax credits to allow project developers and private investors to access their benefits, an effort that has bipartisan and bicameral support.”

“America’s electric cooperatives thank Senator Smith and Senator Capito for leading a bipartisan effort to provide new approaches to financing technology at coal power plants that ensure they produce reliable, affordable power while further protecting the environment,” said NRECA CEO Jim Matheson. “By combining these important tax incentives and adopting a direct payment model for cooperatives, Congress can support innovative carbon capture and storage projects that will be a necessary option for low-carbon energy.”

“Congress took a major step forward on climate in 2018 by establishing a federal tax incentive for carbon capture, use, and storage, but we need to do more to help get these critical projects off the ground to address the climate crisis,” said Shannon Heyck-Williams, director of climate and energy policy at the National Wildlife Federation. “The bipartisan 45Q Carbon Capture Utilization and Storage Tax Credit Amendments Act—like its House counterpart, the ACCESS 45Q Act—would extend the life and value of this credit and make it more flexible so its benefits can be realized and this climate-critical technology can be deployed in industries across the country.”

“The Carbon Capture, Utilization, and Storage Tax Credit Amendments Act provides long-needed improvements to the existing 45Q and 48A tax credits to provide for much needed decarbonization incentives, while supporting workers across the country. Members of Congress in both parties recognize that achieving U.S. climate goals requires steep reductions in atmospheric CO2. That entails capturing emissions from point sources like biorefineries and cement kilns before they are emitted, along with COmolecules already in the atmosphere. Studies show that even partial deployment of the carbon capture and storage plants required to meet our climate goals could create over 61,000 American jobs through 2035,” said Christina DeConcini, Director of Government Affairs, World Resources Institute.

The CCUS Tax Credit Amendments Act would:

1) Extend “commence construction” by five years. The credits would be available to projects that begin by the end of 2030.

2) Allow for direct payment of the carbon capture credits. This is urgently needed for the majority of project developers who otherwise lack sufficient taxable income to fully utilize the credits.

3) Increase support for direct air capture (DAC) of CO2 from the atmosphere. This is key to the decarbonization of the heavy industry and manufacturing sectors and also allows us to pull carbon dioxide out of the atmosphere after it has been released.

4) Allow the 45Q credit to offset tax obligations due to the Base Erosion Avoidance Tax (BEAT). This bill will grant the same tax treatment to carbon capture, direct air capture and carbon utilization projects as is currently offered to wind and solar projects.

5) Revise 48A credit to make it work for CCUS retrofits. This bill includes modifications to the 48A tax credit aligned with the recent Carbon Capture Modernization Act.

You can access a summary of the bill here and full text of the bill here.

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