Carbon Capture's $77 Billion Surge Faces a Crossroads: Will the U.S. Lead or Fall Behind?

Federal policy shifts fuel momentum for CCS investments

Carbon capture and storage (CCS) is having a moment, and it's no coincidence. Backed by landmark U.S. legislation and evolving market pressure for low-carbon goods, a growing number of companies are accelerating CCS deployment across the country. With over 270 projects now publicly announced and $77.5 billion in committed capital, the industry’s long game is starting to look like a winning one.

A coalition of players - from policy to project sites

Thanks to sustained bipartisan support for the Infrastructure Investment and Jobs Act (IIJA) and enhancements to the 45Q tax credit, companies large and small are moving fast. Industrial sectors like cement, steel, chemicals, and energy are responding to market demand for decarbonization. Major CCS developers, such as Calpine, Heidelberg Materials, and ExxonMobil, are among the firms stepping into this moment with large-scale projects and multi-million-dollar capital investments.

Even states are getting involved. Legislatures in Louisiana, Texas, and West Virginia have passed enabling laws and streamlined permitting processes. The combination of state leadership and federal incentives is transforming CCS from a promising technology into a growing industry.

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Federal budget proposals trigger alarm bells

Despite this progress, recent developments out of the U.S. Department of Energy (DOE) have caused concern across the sector. The DOE announced the termination of ten carbon capture and utilization projects, halting billions in public-private partnerships. Projects cut include cement plants, gas and coal power retrofits, and industrial demonstration pilots.

The DOE also proposed over $7 billion in cuts to key programs in its FY2026 budget, including the Carbon Capture Demonstration Program and Regional Direct Air Capture Hubs. While some projects will move forward, many developers and industry leaders worry these cuts could stall momentum and reduce U.S. competitiveness.

What’s at stake? Innovation, investment, and jobs

According to the DOE, each dollar of CCS investment generates up to four dollars in economic activity. That’s a 400% return through job creation, construction, regional manufacturing, and services. Canceling these carbon capture projects means more than missed climate goals; it means missed economic opportunity.

Projects like the Baytown Carbon Capture and Storage Project by Calpine and the Mitchell Cement Plant Decarbonization Project in Indiana were not just about emissions. They were about long-term jobs, high-quality construction contracts, and creating a domestic supply chain for decarbonization.

"The economic ripple effect of these cancellations will be felt across regions that have long depended on industrial jobs," said John Thompson, Director at Clean Air Task Force (Clean Air Task Force).

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The 45Q tax credit: an essential tool in flux

Central to the growth of CCS is the 45Q tax credit, which incentivizes carbon capture projects with up to $85/ton for saline storage. While competitive for ethanol and natural gas, this rate falls short for cement and steel sectors, where abatement costs routinely exceed $100/ton.

Project Type	Estimated Cost per Ton (USD)	45Q Credit Value (USD)
Power Generation	60	85
Cement	130	85
Steel	140	85
Natural Gas	85	85
Direct Air Capture	250	180
Bioenergy	100	85

Industry leaders and analysts are calling for the credit to be raised to $120/ton and adjusted for inflation immediately. Without these changes, hard-to-abate sectors may never reach commercial scale. The Carbon Capture Coalition reports that raising the credit could close critical funding gaps and attract new capital.

Preserving transferability: a deal-breaker for startups

One of the most effective tools in the CCS finance toolkit is transferability, which allows developers to sell their 45Q credits for upfront cash. This feature supports smaller companies that lack large tax liabilities and reduces reliance on costly tax equity markets.

Removing transferability, as proposed in recent budget talks, would raise financing costs by up to 30 cents per dollar, according to a Carbon Capture Coalition fact sheet. Maintaining it is essential for ensuring a level playing field and unlocking innovation.

Regulatory clarity is key to infrastructure buildout

Even with financing in place, CCS developers need regulatory clarity to move ahead. That’s why many are urging the Pipeline and Hazardous Materials Safety Administration (PHMSA) to finalize updated rules for CO₂ transport pipelines. States like California have imposed moratoria in anticipation of these federal changes, delaying projects despite strong public-private support.

The federal government must also support the EPA’s Greenhouse Gas Reporting Program (GHGRP) and accelerate Class VI well permitting for CO₂ storage. States like Texas, Arizona, and West Virginia are making real progress toward primacy, but the EPA needs resources to review and process new applications quickly.

A global race that’s closer than it seems

While the U.S. debates, other countries are moving fast. In April, China announced seven major industrial and power sector CCUS projects, directly competing for the same capital and technology leadership. The longer Congress delays funding or weakens tax credits, the harder it will be for U.S. companies to stay ahead.

"CCS is a cornerstone of our industrial strategy," said Sam Bowers, Policy Analyst at Clean Air Task Force. “Walking away from these tools now would be like handing global leadership over to our competitors.”

What needs to happen next

To keep U.S. carbon capture leadership on track, Congress and the DOE need to act. That means:

• Restoring canceled demonstration and pilot projects
• Increasing the 45Q credit to $120/ton and indexing it to inflation
• Protecting the transferability provision
• Finalizing PHMSA pipeline rules
• Fully funding the EPA’s Class VI well permitting process

Most of all, the U.S. needs to send a clear, long-term signal to private markets that CCS is here to stay. The opportunity is huge, the technology is proven, and the policy tools already exist. What’s needed now is follow-through.

As the world accelerates its climate goals, the U.S. must decide if it wants to lead or follow. The time to commit to carbon management innovation is now.