U.S. tax incentives expected to drive growth of CO₂ capture, sequestration projects

A small provision in legislation that passed last month to increase U.S. government spending limits is predicted to trigger an explosion of new spending for carbon capture and sequestration (CCS) projects.

The provision creates a tax credit based on tonnage of carbon dioxide captured and sequestered underground or used in some way and kept out of the atmosphere. For those who claim the credit, this benefit will increase over time, topping out at $50 per metric ton in 2026.

Congress agreed to the provision with support from an unlikely combination of fossil-fuel advocates and lawmakers concerned about climate change. The policy is intended to drive down costs for capturing and sequestering the greenhouse gas emitted from power plants, refineries, and other industrial sources as well as for stripping CO₂ from ambient air.

At the national meeting of the Global CCS Institute on March 13, speakers predicted these tax incentives would mirror those that were offered for solar and wind energy and that helped lead to the profound economic expansion experienced by renewable energy developers.

The International Energy Agency ­predicts that most of the captured CO₂ will be used to enhance oil recovery. Companies already use this technology to inject pressurized CO₂ into nearly depleted oil fields and force remaining petroleum to production wells. For sequestration purposes, enhanced oil recovery must take place in fields where there is no chance of pressurized CO₂ returning to the surface.

However, using the waste of fossil-fuel combustion (CO₂) to increase production of a fossil fuel (oil) is a contradiction not lost on many in the environmental movement. Several environmental groups actively opposed the CCS tax provisions.

Others are at best lukewarm. The Natural Resources Defense Council “has long supported carbon capture and storage as an important way to cut dangerous carbon pollution that’s driving global climate change,” says Ana Unruh Cohen, the organization’s director of government affairs. “However, we don’t support fossil-fuel subsidies, including subsidies for enhanced oil recovery, which would conflict with the need to reduce our dependence on those fuels.”