THACKER: The Truth About Carbon Capture and the 45Q Credit

The Truth About Carbon Capture and the 45Q Credit: Smart Investing for the Future

By Meghan Thacker

There’s a lot of confusion about carbon capture and storage and the 45Q tax credit in Louisiana, where industry plays a central role in our economy.

Let’s make it as simple to understand as possible: If companies are going to be able to keep their operations viable in a future where carbon emissions are increasingly regulated, taxed, or scrutinized, carbon capture is a must. And it is a capital-intensive infrastructure investment that must be made now if we want to be ready for our future.

The Numbers Tell the Tale

It’s easy to point a finger and say, oh, tax credits are easy money. But the actual math shows that’s not the case at all. Let’s also remember that a lot of the major advances in the U.S. over our history got a government assist to get off the ground, and then private industry took over. Think of the railroads to the Pacific or the Internet.

Even with the tax relief, most companies investing in carbon capture are seeing modest returns of 10-15%, while their cost of capital sits around 9%. That means they’re effectively investing $100 to make $113—hardly a windfall, but a necessary investment to ensure their businesses remain competitive in an evolving energy landscape.

Under 45Q, which is the IRS designation for the CCS credit, an emitter that captures its emissions and permanently stores them in Class VI wells receives $85 per ton in tax relief. A moderately-sized project will have the capacity to store about 100 million tons of CO2 over its lifetime. Here’s what it really takes to get these projects off the ground.

·       The first capital for a facility emitting a half-million tons a year amounts to about $100 million for the capture, dehydration, and compression facilities.

·       Add in annual operating costs of:

o   $7M/year on electricity, salaries, maintenance, and property taxes.

o   $8M/year on transportation (to pay for a $150M pipeline).

o   $12M/year on carbon capture injection and monitoring.

·       Then subtract $42.5 million in tax relief annually for 12 years.

Why This Matters for Louisiana

CCS isn’t about handouts—it’s about securing Louisiana’s industrial future. Without investment in emissions reduction, manufacturers in oil and gas, petrochemicals, and refining could face increasing regulatory pressure or carbon penalties that make them globally uncompetitive. Carbon capture and storage ensures our local industries can continue competing on a global scale.

The debate over 45Q shouldn’t be about whether businesses "deserve" tax credits. It should be about whether Louisiana wants to attract billions in private investment, create thousands of skilled jobs, and remain an energy leader—or whether we’re comfortable watching that economic opportunity go elsewhere. The answer should be clear.

Meghan Thacker is a Senior Advisor for the Consumer Energy Alliance. The Consumer Energy Alliance (CEA) is the trusted voice advocating for affordable, reliable, and cleaner energy solutions that benefit all Americans.