45Q Tax Credit

The Inflation Reduction Act (IRA), signed into law by President Biden on August 16, 2022, will greatly incentivize CCS/CCUS projects:

(1) IRA will substantially increase 45Q tax credit values for CO₂capture projects:

(1a) For Point Source Capture (PSC) of CO₂

$85 per ton for saline storage of CO₂ (used to be $50 per ton)
$60 per ton for EOR and utilization of CO₂ (used to be $35 per ton)

(1b) For Direct Air Capture (DAC) of CO₂

$180 per ton for saline storage of CO₂ (used to be $50 per ton)

$130 per ton for EOR and utilization of CO₂ (used to be $35 per ton)

(2) IRA will make it easier for CCS/CCUS projects to qualify for 45Q tax credit.

The minimum size of a qualifying CCS/CCUS plant reduces by half to 12,500 mtpa (used to be 25,000 mtpa)

(3) IRA will provide significant new avenues for monitizing 45Q tax credit.

Direct Pay for Credits: Direct pay will make it easier for companies to claim tax credits and to transfer them in a non-taxable cash sale.

(4) IRA will extend the deadline to begin construction on 45Q tax credit-eligible projects from 2026 to 2033.

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The recent policies, particularly 45Q Tax Credit in the US, is incentivizing new CO₂ EOR / CCUS / Carbon Management project activities.

If your company is involved in the CO₂ EOR / CCUS / Carbon Management projects then contact us to discuss how Avasthi & Associates, Inc. (A&A) Consulting Team of seasoned CO₂ EOR and CO₂ geosequestration consultants can help your company take full advantage of the 45Q tax credit.

In 2018, the US enacted legislation that expanded and extended the 45Q tax credit - a US tax credit program originally enacted in 2008 - in a move that, according to the International Energy Agency (IEA), could trigger new capital investments of $1 billion for CCUS over the next 6 years, for an additional 10 to 30 million metric tons of CO₂ capture capacity.

The key provisions of the 2018 45Q Tax Credit are that it:

Increases the credit value incrementally over ten years from $10 to $35 per metric ton of CO₂ stored geologically through enhanced oil recovery (EOR) and from $20 to $50 per ton for saline and other forms of geologic storage.
Provides $35 per ton for CO₂ captured and put to beneficial uses beyond EOR that reduce lifecycle emissions.
Authorizes the program for carbon capture projects that commence construction within 7 years from enactment, and projects meeting that timeframe can claim the credit for 12 years after being placed in service.
Reduces the minimum eligibility threshold for qualified facilities from 500,000 metric tons of CO₂ captured annually to 100,000 tons for industrial facilities and 25,000 tons for CO₂ captured and put to beneficial uses other than EOR. Retains the 500,000-ton eligibility threshold for electric generating units.
Awards the credit to the owner of the carbon capture equipment and allows transfer of the credit to other entities responsible for managing the CO₂ to provide greater flexibility for companies with different business models to utilize the tax credit effectively, including cooperatives and municipal utilities.
Allows projects that involve carbon monoxide capture and direct air capture to qualify for the credit as well.

To put the high-level and seasoned consultants, subject matter experts (SME), of A&A Consulting Team to work on your company's 45Q Tax Credit related projects, please contact us.