On Feb. 28, the Captured Carbon Utilization Parity Act (CCU Parity Act) was introduced by Sen. Sheldon Whitehouse, D-R.I., and Sen. Bill Cassidy, R-La. The CCU Parity Act would increase the tax credit available for carbon capture and utilization to match the tax credit available for carbon capture and sequestration for both the direct air capture and the power and industrial sectors.
In August 2022, President Joe Biden signed into law the Inflation Reduction Act of 2022 (IRA), which dramatically increased 45Q tax credit values across the board. However, under the IRA, the tax credit available for carbon capture and sequestration projects is substantially greater than the tax credit available for carbon capture and utilization projects. Those disparate levels under the IRA are demonstrated in the below chart.
Inflation Reduction Act of 2022 – the 45Q Tax Credit
|
Power Plants and Industrial Facilities |
Direct Air Capture |
| For dedicated secure geologic storage of CO2 in saline or other geologic formations |
$85/ton |
$180/ton |
| For carbon utilization projects to convert CO or CO2 into products |
$60/ton |
$130/ton |
The CCU Parity Act would increase the tax credit for carbon utilization projects to match the incentives for storage projects by providing the following credit levels under the 45Q tax credit:
- $85 per metric ton for industrial and power-generation facilities seeking to reuse captured carbon in the manufacturing of low- and zero-carbon products, including fuels, chemicals, building products, advanced materials and other products of economic value.
- $180 per metric ton for direct air capture projects beneficially reusing captured carbon to manufacture low- and zero-carbon fuels, chemicals, building products, advanced materials and other products of economic value.
If passed, the CCU Parity Act would further incentivize the development and deployment of carbon capture technology while reducing global emissions and supporting the further development of a circular economy. Furthermore, the increased tax incentive for carbon utilization would give stakeholders in carbon capture projects greater flexibility in developing economically feasible CCUS projects.
To read the bill summary, click here.
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