U.S. Treasury unveils rules for carbon capture tax credits
FILE PHOTO: A woman runs on a nearly empty street in the coronavirus outbreak near the Treasury Department in Washington, U.S. March 30, 2020. REUTERS/Jonathan Ernst
WASHINGTON (Reuters) – The U.S. Treasury Department has released rules guiding how companies use a federal tax credit designed to spur investment in carbon capture and sequestration projects.
The rules, released on Thursday evening, aim to give investors and developers clearer guidelines for the so-called 45Q tax credit program and ensure that projects are capturing and burying the amount of carbon they are supposed to before they embark on the costly projects.
Congress expanded the tax credit in 2018, aiming to lower the cost and risk to private capital of investing in deployment of carbon capture technology in industries ranging from electric generation to fertilizer production.
The Intergovernmental Panel on Climate Change said in 2018 that the world needs negative emissions technologies such as CCS and direct air capture to meet goals of the Paris Agreement.
The credits are $50 per metric ton of CO2 for projects that sequester carbon and $35 per ton for projects where carbon is captured and then used for recovering oil underground.
Among the new measures in the proposed rule are monitoring requirements for projects to demonstrate durable geologic storage of CO2 injected underground, standards for measuring utilization of carbon and rules for credit recapture.
“With the release of this proposed rule, developers and investors now have the remaining critical information they need to continue moving forward on roughly 30 identified commercial carbon capture projects already under development nationwide in response to the revamped 45Q credit,” said Brad Crabtree, director of the Carbon Capture Coalition, which represents project developers and backers.
The Treasury Department said while more transparency is needed in annual reporting of carbon storage, it does not have “statutory authority” to issue requirements.
Last year, the Treasury Inspector General found that 10 companies improperly claimed almost $1.1 billion in 45Q credits over the last few years. Only three of them had monitoring and reporting measures in place.
Reporting by Valerie Volcovici; Editing by David Gregorio