Crude oil producers that have claimed more than $1 billion in tax credits for burying carbon dioxide underground (carbon sequestration) received a windfall from Congress when that incentive was included in the government spending bill signed into law last Friday.
The move is a result of a six-year lobbying effort that saw environmental groups, oil companies, equipment manufacturers and coal miners work together because they see the credit as essential to drive investment in technology to capture carbon dioxide, Bloomberg reported.
By broadening the tax credit, Congress is unleashing private sector spending on carbon capture operations that are vital to combat climate change, said Kurt Waltzer, managing director of environmental group Clean Air Task Force.
“If we don’t have carbon capture and storage at large scale, we’re not going to limit global warming — so we need it,” Waltzer told Bloomberg. “This policy is a big step forward in getting that technology on the ground much faster.”
The credit for captured carbon dioxide previously was worth as much as $20 per ton and was set to disappear after 75 million tons were claimed. More than 52 million tons had been claimed, Kallanish Energy finds.
Companies now will have 12 years to claim a $50 credit for every ton of carbon dioxide buried, and $35 for every ton pumped into crude oil reservoirs to extract more oil.
To qualify, companies must start building carbon capture projects within seven years, and there’s no cap on the number of available credits.
The limited number of existing credits has discouraged wider investment, but the expansion will spur other companies to deploy existing, already demonstrated carbon capture technology, Brad Crabtree, vice president, Fossil Energy, with the Great Plains Institute, a think tank that focuses on environmentally and economically sustainable energy, told Bloomberg.
“That’s enough financial certainty you can actually put that in the pro forma of a project and take it to the bank, literally and figuratively,” Crabtree said.