The Inflation Reduction Act Includes Significant Benefits for the Carbon Capture Industry

By: Gibson Dunn (August 16, 2022)

The Inflation Reduction Act of 2022 (IRA) provides substantial support for the U.S. Carbon Capture, Utilization, and Sequestration (CCUS) industry. Key features include an increase in federal income tax credits (45Q credits) for CCUS projects, a streamlined qualification process, and new avenues for monetizing these credits. Also, the IRA extends the deadline for eligible projects until 2033, which is expected to prompt a surge in the number of CCUS initiatives.

The Act enhances the availability of 45Q credits for facilities capturing carbon oxides for different uses, subject to new wage and apprenticeship requirements. It also lowers annual thresholds for credit eligibility, making it easier for projects to receive funding. Additionally, it allows owners to sell credits or seek direct treasury payments, potentially expanding the investor base for CCUS projects. These measures are expected to significantly boost the role of CCUS in U.S. decarbonization efforts.