Tax rule for industry rewards carbon capture
When it comes to encouraging manufacturers to reduce their carbon dioxide (CO2) emissions, a carrot might be more effective than a stick. That's the approach taken by a recent U.S. tax code rule that offers credits to companies that capture and then store or use CO2. The rule will likely spur innovations in carbon capture technology, according to an article in Chemical & Engineering News (C&EN), the weekly newsmagazine of the American Chemical Society.
The rule, enacted in February 2018, expands a tax credit, called 45Q. Under the rule, industrial manufacturers can earn a tax credit of $50 per metric ton of CO2 captured and stored permanently in geologic formations, or $35 per metric ton of CO2 captured and used, such as for enhanced oil recovery (EOR). A previous version capped the credit at 75 million metric tons of captured CO2, and paid only $20 per metric ton of the captured gas. Companies with emission-intensive operations, such as those in the cement, steel and power industries, are busy modeling whether their facilities can take advantage of the credit, Senior Business Editor Melody Bomgardner writes.
The corn ethanol industry, which produces as much as 40 million metric tons per year of CO2, already captures about 20% of the gas to sell to soda bottlers or for dry ice. The tax credit could spur investment in pipelines to transport CO2 from ethanol plants to use for EOR and other purposes. The cement maker LafargeHolcim has partnered with Svante, a provider of CO2 capture technology, to study whether the credit makes it profitable to capture and permanently store underground CO2 emissions from a cement plant in Colorado. And Net Power, with partner Toshiba Energy Systems & Solutions, have demonstrated a gas-fired power plant that uses captured CO2 to power a turbine before recycling or reuse. Because 45Q mandates that companies start constructing carbon-capture facilities within seven years, most companies benefiting from the rule will rely on mature carbon-capture technologies, but these projects will drive demand for next-generation technologies, experts say.