Exclusive: White House and Top Democrats Agree to Enhance Carbon Capture Credit in Budget Bill – Sources By Reuters

By Jarrett Renshaw and Timothy Gardner

WASHINGTON – The White House and key Democratic lawmakers have reached a consensus to increase a tax credit for industrial carbon capture projects, a move that could strengthen support for President Joe Biden’s budget reconciliation bill. This information comes from two sources familiar with the discussions.

The agreement, facilitated by White House officials and lawmakers including Senators Ron Wyden and Sheldon Whitehouse, proposes raising the 45-Q tax credit for carbon capture initiatives in industries such as cement and steel from $50 to $85 per metric ton.

Officials from the White House and Senator Whitehouse did not respond to requests for comments, while a representative for Wyden noted that discussions are still ongoing.

If implemented, these incentives could advance Biden’s climate objectives by encouraging industrial plants to invest in technology that captures carbon dioxide (CO2) emissions for permanent underground storage, thereby preventing further release of greenhouse gases.

Additionally, the agreement would eliminate "capture rate" requirements that mandate a certain percentage of carbon to be stored for plants to qualify for credits. This may enable more facilities to earn credits for initial investments in carbon capture technology.

However, some environmental advocates express skepticism about the commercial viability of this technique due to high costs related to construction, certification, and operation. Notably, several projects, including Petra Nova in Texas, have ceased operations in recent years.

Democratic Representative Cheri Bustos, who has sponsored carbon capture legislation, welcomed the deal. She stated that increasing the credit could significantly boost carbon capture capacity by 2035 and generate tens of thousands of jobs, particularly in rural areas with ethanol and manufacturing plants.

Under current regulations, the 45-Q tax credits permit polluting facilities to claim $50 for each ton of CO2 sequestered and $35 for projects that capture carbon for enhanced extraction from declining oilfields.

The agreement currently does not extend to the power sector, which, including coal and natural gas power plants, contributes approximately one-third of U.S. CO2 emissions. Senator Joe Manchin, a Democrat from coal-heavy West Virginia, has urged Senate Majority Leader Chuck Schumer to include incentives for carbon capture in the reconciliation bill for both coal and natural gas plants.

Talks are reportedly underway to enhance the carbon capture credit for power plants, which could secure Manchin’s vote. His support is crucial for the passage of the reconciliation bill in the evenly divided Senate, as he has expressed concerns about the original $3.5 trillion proposal being too expensive.

Manchin’s office did not immediately provide a comment on the situation.

Biden and fellow Democrats aim to push the reconciliation bill through a party-line vote in both houses of Congress, alongside a smaller bipartisan infrastructure bill.