Subsidizing Carbon Capture Utilization and Storage: Issues with 45Q

In early 2018, Congress passed a budget bill that also contained revisions to a tax credit for carbon oxide capture, utilization and storage, increasing the incentives for these activities. The next step for implementing this legislation is for the IRS to write regulations. Over a year later, the IRS asked for comments on how these regulations should be written, in its Request for Comments on Credit for Carbon Oxide Sequestration, Notice 2019-32. The comments below are a more readable version of what we sent to the IRS.The 45Q tax credit has the potential to stimulate innovation and the use of carbon capture, utilization, transmission, and storage technologies to address the threat of climate change. In order to be effective in their goals, the regulations should be informed by economic research and consistent with financial practices. We limited our comments to what the IRS could potentially achieve in its regulations and did not comment on flaws in the legislation. For instance, we believe that the 2023 deadline for beginning construction is too near, given the long lead times in development, but this is dictated by the legislation. With this limitation, we have made suggestions for regulatory language and ideas that we think would improve the efficiency and usefulness of the 45Q legislation as written.