What is Carbon Capture, Utilization and Storage?

CCUS involves the capture of COfrom industrial processes or fuel combustion, the transport of this CO2 via pipeline, and its use as a resource to create valuable products or services (such as in the enhanced oil recovery (EOR) process) or its permanent sequestration in geological formations. 

CCUS – both through CO2 EOR or permanent sequestration – is a proven technology with the potential for safe, long-term, deep underground containment of billions of tons of industrial-sourced CO2.



A Growing Market Aimed at Reducing Atmospheric CO2

Widespread CCUS deployment is broadly seen as essential to addressing the challenge of providing affordable, reliable energy while tackling the risks of climate change.  CCUS is recognized as being second only to wind and solar in its capacity to mitigate carbon emissions.  CCUS utilizes technology that exists today.  It can be massively scaled, and it is particularly important for mitigating industrial emissions.  Recent International Energy Agency (IEA) Net Zero projections show that CCUS needs to increase nearly 200-fold by 2050 to meet global emissions reduction targets.

Source: International Energy Agency: https://www.iea.org/reports/ccus-in-clean-energy-transitions/ccus-in-the-transition-to-net-zero-emissions 

CCUS policy has broad political support

CCUS has been embraced both in the U.S. and internationally under the Paris Agreement.  Strong governmental and regulatory support for CCUS helps to provide the economic and legal framework to incentivize CCUS development projects. 

The U.S. federal government provides tax credits to taxpayers that capture and store, or use carbon dioxide and carbon oxide in qualified processes such as EOR, in accordance with rules laid out in Section 45Q of the Internal Revenue Code.  The 45Q tax credit has been expanded a number of times since it was initially established in 2008, with the primary purpose to incentivize investment in CCUS projects.  The Bipartisan Budget Act of 2018 instituted a number of significant changes to Section 45Q, including increasing the value of the credits. In 2020 and early 2021, the U.S. Treasury Department and the IRS published guidance that addressed several open questions about how the credit works, providing additional confidence for investment in CCUS.

45Q Basics 

  • A yearly increasing tax credit until its 2026 levels of $35/ton for CO2 used in EOR operations and $50/ton for COdirectly stored in geologic formations. 
  • The tax credit is earned by the owner of the capture equipment, who must physically or contractually secure storage or utilization of the CO2 and may elect to transfer the credit to another party that stores or puts the CO2 to beneficial use.
  • The tax credit is available for a 12-year period beginning with the date the capture equipment is placed in service.
  • Applies to capture equipment placed in service after February 8, 2018 and to capture equipment under construction before January 1, 2026.

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