Companies involved in carbon removal are some of the biggest winners in sweeping new US legislation that would provide hundreds of billions of dollars in incentives and other provisions to accelerate clean energy projects and reduce emissions. The Democrat-led Inflation Reduction Act (IRA), which narrowly passed the Senate last weekend and is expected to clear the House of Representatives this week, has won high praise from industry groups and quiet optimism from public companies with substantial exposure to direct air capture (DAC) and carbon capture and storage (CCS) technologies.
More broadly, the legislation is a signal that the US government sees carbon removal as a key tool in fighting climate change across industrial sectors. Although CCS and DAC both have many hurdles to overcome, on everything from transportation to scale, those most optimistic about the legislation say it could spark a fresh wave of projects and investors globally and help knock down some of the roadblocks. “We cannot overemphasize the transformative effect that the [IRA] will have on the deployment of carbon capture technologies,” Matt Bright, policy manager for carbon capture at the Clean Air Task Force, said in a statement. He expects the bill to have “a profound ripple effect on the rest of the globe,” as incentive schemes make it easier to slash emissions from even some of the hardest-to-abate sectors. “Demonstrating that a carbon capture and removal industry is viable here in the US will likely mean that other countries can seize the opportunity to decarbonize their cement and steel industries, which collectively account for 12% of global emissions,” he says.
Wish List
The legislation reads almost like a wish list from the carbon removal industry: significantly higher tax credits for CCS and DAC under a section of past legislation known as 45Q, including for enhanced oil recovery (EOR); a “direct pay” and credit monetization option for companies with smaller tax burdens; lower capture thresholds to qualify for the 45Q credits; and an extended deadline to break ground on qualifying projects. Researchers at Princeton University expect policies in the bill to increase the use of carbon capture 13-fold by 2030