The International CCS Knowledge Centre has expressed its strong support for the landmark incentives adopted by the United States government to promote large-scale carbon capture and storage (CCS) projects in the U.S.
The Knowledge Centre responded to the Internal Revenue Service’s Notice 2022-57, “Request for Comments on the Credit for Carbon Oxide Sequestration” on December 2, 2022. In our letter to the IRS, we stated that the amendments to the federal Section 45Q tax credit that were made law in August 2022 will help ensure vital CCS projects are developed, supporting the government’s goal of reaching net zero greenhouse gas emissions by 2050.
In particular, we conveyed our support for the following six amendments to Section 45Q:
- The increase in value of the credits to $60-85/tonne for CO2 capture from industrial and power facilities and $130-180/tonne for direct air capture. These values for production credits are leading, globally, and will ensure a significant increase in the development of carbon capture projects in the U.S.
- The change to minimum size thresholds for power facilities (18,750 tonnes), industrial facilities (12,500 tonnes) and direct air capture (1,000 tonnes). These lowered thresholds will enable smaller facilities and initial pilot projects to generate important revenues. CO2 utilization projects also often have lower values for tonnes sequestered but are important contributors. The lower thresholds will support the development of additional CCUS projects.
- Extending the construction start date time requirements to 2033. Large scale projects, on average take six years from inception to operation and could take longer to obtain the necessary permitting. The amendment in start date will ensure there is adequate time to develop projects.
- Indexing credit value with inflation. Across the years of credit eligibility, inflation may erode considerable value. Indexing ensures the value is retained.
- Ability to transfer credit value to third-party tax-paying entities. For proponents with low tax obligations, this ensures the majority of value can still be realized.
- Support for Enhanced Oil Recovery (EOR) projects. EOR projects deliver net GHG reductions and sequester CO2 that otherwise would have been emitted to the atmosphere. It is appropriate, in the U.S., that the sequestration qualify for tax credit along with other geologic sequestration projects. EOR provides an important revenue stream for captured CO2 that has helped to improve the economics and get many of the first generation of projects built.
“These amendments have signaled leadership in the CCS space, and will continue to deliver a marked increase in a number of carbon capture projects across the U.S. Other nations will be encouraged to duplicate many of the 45Q provisions for carbon capture and to provide similar levels of support,” wrote our President and CEO James Millar.
“This commendable leadership from the U.S. can further catalyze deployment of carbon capture technology. The International CCS Knowledge Centre looks forward to working with projects from inception through to operations thanks to the amendments.”
For more information about the Knowledge Centre’s work to incentivize large-scale CCS projects around the world, visit our Incentivizing Large-Scale CCS webpage.
Also see our CEO’s opinion article from Sept. 23, 2022: U.S. climate action a roadmap for Canada to support carbon capture and storage