Capture the Carbon, Capture the Message!

By: Dawn Lima, Vice President of Renewable Energy & Sustainable Technology, Foss & Company


I recently attended the Carbon Capture, Utilization and Sequestration (CCUS) Summit in League City, TX, and the Carbon Capture Coalition’s Annual Meeting in Denver, CO. These events were very successful as well as insightful and I left feeling energized and motivated. It’s always enjoyable to be surrounded by like-minded professionals while making many new connections. I wanted to share some key takeaways from both events.

Capture the CO2: CCUS Summit

I was very impressed with the active participation from stakeholders across the CCUS industry. There is incredible excitement around CCUS right now, fueled in part by the passing of the Inflation Reduction Act (IRA) in 2022, but mainly due to a motivation to decarbonize our energy sector and achieve climate goals.

During the CCUS Summit, we had participants join all the way from Canada, Asia, Europe and South America. The US’ carrot versus stick approach to incentivizing investments through tax credits has certainly captured the attention of other nations and companies. This is evident as we have seen an increase in investment in US-based projects to capitalize on the US tax credit incentives. What was clear during this event is that innovation and collaboration is critical to reaching our climate and net-zero goals.

What Are My Thoughts?

As we sat down with industry leaders, during our discussions there were some interesting questions that had come up, include:

  • Is the CCUS industry innovating equally in both important areas?
  • Does the 45Q tax credit incentivize both sequestration and utilization equally?
  • Are we – as a CCUS industry – working on CCU projects as well as CCS projects?

The short answer? No. In its current form, the 45Q tax credit does not incentivize CCU equally compared to enhanced oil recovery (EOR) or geological sequestration. But we have motivated companies and individuals focused on expanding the 45Q tax credit qualifications to include CCU applications.

Innovation and disruption in utilization is possible and economically achievable! Currently, sequestration technology and knowledge are readily available, and we certainly see a greater number of sequestration projects being stood up in the US. In order to achieve decarbonization scale, it will require all of us to work together and tackle both utilization and sequestration.  Every ton of carbon captured counts towards achieving our overall goal!

Capture the CO2: Carbon Capture Coalition

It was clear during the Carbon Capture Coalition meeting that we are a passionate and motivated sector, dedicated to accelerating the decarbonization of industrial sectors and meeting our nation’s net-zero goals. The attendees of this meeting consisted of industry, academia, government, labor and non-profits all with a passion and commitment to fighting climate change and moving decarbonization projects forward.

In 2023, the Carbon Capture Coalition published six permitting principles for carbon management projects. Since the passing of the IRA, 35 new projects have been announced, a clear indication that tax credit programs work as a social engineering tool and incentivize investments. We were honored with an opening video address by Senator Hickenlooper (D-CO) and he reinforced that fighting climate change is the biggest challenge of our time.

Currently, the EPA has 196 active Class VI injection well permits. We already have the technical skills to accelerate the pace of energy transition, but we also need supportive regulatory solutions for faster permitting of injection wells and additional pipelines to support growth in the CCUS sector. Additionally, we need investment support for utilization applications and innovative carbon removal technologies. In 2024, the Coalition will be working on a Class VI injection well permitting reform at the Federal level and working towards a bipartisan, supported by the IRA, permitting overhaul.

What Are My Thoughts?

In the CCUS sector, policy and regulation drives value. CCUS projects are very capital intensive, and the capital investment is front-loaded. Permitting and implementation uncertainty creates investment risk and makes it more difficult for CCUS project developers to secure capital. So, what does this mean for the 45Q tax credit? The tax credit is critical to the financial model of CCUS projects. The 45Q Parity Act will be a welcome improvement for utilization applications and is endorsed by the Coalition.

Although sequestration projects have dominated current CCUS development projects, there is a lot of innovation occurring for economic Utilization applications. Utilization needs equal support and financial incentives.

CCUS Developers have two revenue streams because of their projects:

  1. 45Q Tax Credits
  2. Voluntary Carbon Offset Credits

CCUS Developers have three options to monetize their 45Q tax credits:

  1. Tax Equity Syndication
  2. Transferability
  3. Direct Pay

In this time of high inflation, monetization of 45Q tax credits is critical to both project financing and working capital. The IRA offers several options to developers to monetize their 45Q tax credits and navigating these options can seem overwhelming.

We at Foss & Company have specialized in monetizing tax credits for over 40 years and in our history have not had a tax credit recapture event. The 45Q tax credit is a key piece to the financial model of CCUS projects and tax credits can seem complicated. We are happy to be a resource and help navigate the monetization process to maximize these revenue streams.

To learn how you can get involved in CCUS projects or to monetize your 45Q tax credits, contacts us today.