Bipartisan senate bill would make enhance CCUS tax credits

A bipartisan bill introduced by Sen. Tina Smith (D-MN) would make tax credits that encourage carbon capture and storage (CCUS) projects more accessible and easier to use.

The Carbon Capture Utilization and Storage Tax Credit Amendments Act (S. 986) seeks to ensure that 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,” Smith said. “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.”

Specifically, it would extend “commence construction” by five years, making them available to projects that begin by the end of 2030. Also, it would allow for direct payment of the carbon capture credits. This is key for project developers who otherwise lack sufficient taxable income to fully utilize the credits.

In addition, it would increase support for direct air capture of CO2 from the atmosphere, reducing greenhouse gases. Further, it would allow the 45Q credit to offset tax obligations due to the Base Erosion Avoidance Tax. In other words, it 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. Finally, it would revise 48A credit to make it work for CCUS retrofits.

“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,” Sen. Shelley Moore Capito, one of the bill’s cosponsors, 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.”

The bipartisan bill is also cosponsored by Sens. Sheldon Whitehouse (D-RI), Kevin Cramer (R-ND), Brian Schatz (D-HI), John Hoeven (R-ND), Joe Manchin (D-WV), John Barrasso (R-WY), Chris Coons (D-DE), Chuck Grassley (R-IA), Ben Ray Luján (D-NM) and Joni Ernst (R-IA).

“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 degrees C threshold, but we need to accelerate the pace of innovation to get there,” Whitehouse said.

The bill also has the support of major labor unions, environmental groups, think tanks, trade groups & non-governmental organizations.

“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,” Tom Conway, International President of United Steelworkers, said.

Dave Kovaleski

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