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Carbon Capture Projects Wait for Tax Guidance

January 21, 2020

Carbon Capture

Tax equity investors require a high level of certainty on the availability of tax credits when they invest. This reality has run into a delay regarding carbon capture and storage (CCS) projects. In 2018, the U.S. Congress added tax credits related to CCS with a promise of specific tax guidance before 2020. Projects must begin before January 2024 to be eligible, but some developers are waiting to see the tax incentive details.  

The law removes the 75 million metric ton cap on new CCS projects and increases the tax credit for captured carbon used in enhanced oil recovery from $10 to $35 per metric ton and the tax credit for other CCS projects from $20 to $50 per metric ton. The uncertainty threatens more than 20 CCS projects.

According to the IEA's Sustainable Development Scenario, 14% of cumulative emissions reductions are expected to come from CCS. This will require 1,000 to 3,000 CCS facilities by 2040.

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