The newly passed Inflation Reduction Act of 2022 (IRA) is poised to transform the carbon capture utilization and storage (CCUS) industry through significant tax credits and benefits, including through enhancements to Section 45Q of the Internal Revenue Code. The IRA encourages additional capital investment in CCUS projects by developers and sponsors through at least the following:
- Tax Credit Increase: The new Section 45Q base credit amounts (i.e., either $17/metric ton for sequestered qualified carbon oxide (QCO) or $12/metric ton for used QCO) under the IRS are substantially less than the most recent pre-IRS credit amounts. However, the IRA, significantly increases the Section 45Q tax credit value per ton to $85/metric ton for captured QCO stored in geologic formations, $60/metric ton for the use of captured carbon emissions, and $60/metric ton for QCO stored in oil and gas fields if certain wage and apprenticeship requirements are met. This increase in tax credit further incentivizes incorporating CCUS into industrial facility projects with a specific focus on meeting the wage and apprenticeship requirements.
