Legal & Regulatory

Carbon Management Tax Policies Are Required to Achieve Net-Zero by 2050

President 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.

Madelyn Morrison

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 saline 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 13-fold 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 economy-wide 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.

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