Significant Tax Credit Increase Available for CO2 Capture

Expansion of 45Q Tax Credit Could Fuel Ethanol Industry Innovations in Carbon Dioxide

In February 2018, Congress approved the most significant pro-carbon capture and storage (CCS) national policy in a decade: a tax credit expansion for CO₂ storage. Referred to as 45Q (for its section number in the U.S. tax code), the nearly tripled tax credit will provide substantial incentive for what the ethanol industry does with its CO₂.

Many ethanol plants capture carbon dioxide and sell it to manufacturers or other users (enhanced oil recovery, carbonated beverages, medical uses, etc.).  The new law is widely expected to stimulate the development of new CCS projects.

The three changes in the new law:

1. NO STORAGE CAP – It includes no cap on storage available for the credit, providing more certainty for projects that may take years to plan and develop.
2. STORAGE VALUES INCREASE – Over time the law increases values for geological storage to $50 per ton, and for utilization such as enhanced oil recovery to $35 per ton.
3. ELIGIBILITY THRESHOLD LOWERED – It lowers the eligibility threshold from 500,000 to 100,000 tons of CO₂ stored on an annual basis.

45Q provides a credit for CO₂ sequestration and is available to taxpayers that capture qualified CO₂ at a qualified facility and dispose of the CO₂ in secure geological storage.

Find out if you produce qualifying CO₂ and dispose of it in the approved ways: 

K·Coe Isom and our contacts can help assess the value of this opportunity, and make a determination of 45Q’s applicability on your business. Contact our ethanol business advisory team today – funk@kcoe.com.