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 incentives 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. In July of 2022, the Inflation Reduction Act was approved by Congress and signed by the President, which increased the 45Q incentive levels to target enhanced carbon capture, transportation and storage projects.

45Q Basics 

  • A tax incentive of credit $60/ton for CO2 used in EOR operations and $85/ton for COdirectly stored in geologic formations. 
  • The tax incentive 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 incentive to another party that stores or puts the CO2 to beneficial use.
  • The tax incentive is available for a 12-year period beginning with the date the capture equipment is placed in service. The first five years of the 12-year period is "direct pay" for "for profit" companies, with the remaining seven years being a tax credit against taxes payable.
  • Applies to capture equipment placed in service before January 1, 2033.

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