Carbon Capture Tax Credit a Bust — So Far
Carbon capture equipment at a plant near Houston Photo: Michael Stravato for The New York Times
Congress in 2018 gave a lucrative tax credit to the nascent and controversial carbon capture industry, but so far, according to The New York Times, the Internal Revenue Service has yet to promulgate the regulations that would allow businesses that qualify to get the tax benefit. Republicans in Congress yesterday outlined their three-part plan for carbon capture and sequestration legislation — their one contribution to combatting the climate crisis — they propose to pass a series of measures that would encourage planting trees, incentivize carbon capture and sequestration through a tax credit, and also provide funding to research and development of carbon capture and utilization technology.
Why This Matters: The Republicans’ big plans on carbon capture and sequestration won’t mean bupkis if the Trump Administration won’t implement them. And there was no love for the Republican proposal from the Club For Growth Political Action Committee, which immediately issued a statement saying, “Besides hurting our economy, these measures will not make a single environmentalist vote for a Republican and only alienate conservatives across the country,” and that they would not support any candidate who endorses “the liberal environmental policies being pushed by Leader McCarthy.” So the Republican proposal appears DOA, and the President is unlikely to do anything to implement any policy to address climate change no matter how “Republican” it is. Now it is on the Democrats to make sure the majority of the country takes that into consideration when they go to the polls this year.
IRS Rule Hold Up
When asked about what was holding up the tax credit rules, the I.R.S.’ spokesperson pledged that the agency would issue some guidance “within the next few weeks,” including clarity on how project developers can partner with investors, but the rules are still in the development phase — which means there will be an opportunity for public comment before they become final. This could take a while given the extensive challenges on the issues raised by a broad spectrum of stakeholders. And yet, if it does not come out soon, the tax credit will not be much of a benefit because it is set to expire in 2023. And The Times estimated that a dozen projects representing billions of dollars in investments are awaiting the tax credit rules.
Republican Climate Proposal
The Republicans are really between a rock and a hard place. The public support for government action on climate change keeps increasing, and Democrats have a broad spectrum of proposals to address the issue. The proposals would take care of the tax credit expiration problem — the Republicans propose to extend and increase the current tax credit for businesses that capture carbon during production. But none of that matters if the legislation is blocked by Republicans and the Trump Administration fails to implement what is currently on the books.