CCU Parity Act gains chemical industry support

US support for products that use or chemically convert carbon dioxide would get a big boost from a bill working its way through Congress. The CCU Parity Act of 2023—CCU stands for carbon capture and utilization—would increase the tax credits companies can earn for capturing CO₂ and making it into products so that they match credits given for injecting the greenhouse gas into permanent underground storage.

In a letter sent this week to congressional leaders, a group of 55 chemical companies, industrial gas firms, environmental groups, energy companies, and labor organizations urged lawmakers to “ prioritize a targeted suite of small-scale adjustments ” to Section 45Q of the US tax code. One of the signers was BASF, the world’s largest chemical company.

In the current wording of Section 45Q, tax credits for underground sequestration are worth about 40% more than those offered for utilization. Backers of the CCU Parity Act say the disparity pulls CO₂ out of the existing industrial market, where supplies have been short since mid-2020, and creates an economic hurdle for start-ups and other firms trying to commercialize new processes that upgrade CO₂ into chemicals, fuels, and materials.

A fix is needed, the letter says, to “ensure these technologies can scale at the rate necessary to provide tangible emissions reductions and climate benefits.”

The legislation, S.542 and H.R.1262, would work by defining two categories of CO₂ use. One includes most chemical and biological conversion of CO₂ as well as industrial uses such as beverage carbonation and refrigeration, a group the bills define as utilization. The other category is the injection of CO₂ into spent oil and gas fields to extract petroleum that is otherwise unrecoverable, a practice known as enhanced oil recovery (EOR).

The CCU Parity Act would keep EOR at its current, lower tax credit tier and bump utilization up to the same level as sequestration, according Xan Fishman, director of energy policy and carbon management at the nonprofit Bipartisan Policy Center. EOR is controversial because it unearths petroleum even as it consumes CO₂. Critics of subsidies for EOR also argue that the technology and market are mature and therefore not in need of government support.

Chuck McConnell, executive director of the University of Houston’s Center for Carbon Management, argues that lower credits for EOR are a mistake because the technique is ready today to consume large volumes of CO₂. Historically, 85% of EOR has been done using mined CO₂, but exclusively using captured CO₂ would yield “the lowest-carbon-intensity oil produced anywhere in the world,” he says. “There’s a market demand for oil. You want to meet it with the most effective and lowest carbon intensity means that you possibly can.”