Could taxpayer 45Q subsidies surge to $2 trillion by 2050?
Carbon capture and sequestration (CCS) technologies are intended to reduce carbon dioxide (CO2) emissions from fossil fuel-fired power plants, as well as other large industrial sources. The tax credit for carbon sequestration— often referred to using its Internal Revenue Code (IRC) section, Section 45Q—is intended to incentivize investment in carbon capture and sequestration. These incentives are paid for by U.S. taxpayers.
Until August of 2022, the tax incentive for capturing and permanently storing CO2 was $50 per ton of CO2 sequestered, and $30 per ton of CO2 used for enhanced oil recovery, a process that uses CO2 to push more oil out of the ground. But the Biden Administration's Inflation Reduction Act increased the tax incentive for permanent storage to $85 a ton of CO2 stored under ground, a 70% increase. EOR was increased from $30 to $60 a ton of CO2 permanently sequestered, a 50% increase.
Congress is currently considering increasing 45Q incentives again. The Institute for Financial, Energy, and Economic Analysis has studied how much CO2 will cost us with the existing tax incentives, along with scenarios that increase both the subsidies and the timeline they are available. Their conclusion? Unless checked, taxpayer-subsidized 45Q, which funds CCS, could increase to nearly $3 trillion by 2050. These dollars could be better spent on social programs and technologies we know can reduce our emissions, such as energy efficiency; building decarbonization; electrification of our transportation system; and biological sequestration, including protecting and restoring our carbon sinks (oceans, wetlands, grasslands, prairie); and regenerative agriculture.
Does CCS work?
A growing number of economists and scientists say carbon capture and storage remains an unproven and underperforming technology. Out of 13 "flagship" projects worldwide, most have been used for enhanced oil recovery, which creates more green emissions when oil is burned. Failed or underperforming projects outnumbered the successful ones. And one of the successful projects considered was ADM's Decatur sequestration project, which has stored about half of what was promised, and leaked twice last year.
Also, carbon capture and sequestration keeps us reliant on fossil fuels; increases our energy demand, releasing more health-harming pollutants into the atmosphere; increases water consumption, potentially polluting water with health-harming chemicals; and diverts us from solving the climate crisis with technologies we know will work. Take a look a CCS projects' performance below, and read IEEFA's detailed report on these 13 carbon capture and sequestration project.
