The Economic and Environmental Case for 45Q: Why Congress Must Preserve This Vital Tax Credit

On January 28, 2025, a diverse coalition of business leaders and stakeholders in the carbon management industry addressed an open letter to Congress, emphasizing their unwavering support for the federal Section 45Q tax credit.

This letter, directed to key congressional leaders, underscores the critical role of the 45Q tax credit in promoting carbon management technologies and maintaining the United States' leadership in energy, industrial, and manufacturing sectors.

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Economic Significance of the 45Q Tax Credit

The letter highlights how the 45Q tax credit has become a powerful economic driver in the U.S. By incentivizing carbon management technologies, it encourages innovation, job creation, and attracts investment in new technologies.

The deployment of these technologies across various industries preserves and expands high-wage jobs in key sectors nationwide. The letter states, "Thanks to bipartisan congressional leadership, carbon management technologies have emerged as a powerful economic driver in the U.S."

Companies such as ADM, Baker Hughes, and Calpine Corporation have publicly announced projects spanning the carbon management value chain, signaling that good policy translates into real-world projects. These initiatives not only contribute to emissions reductions but also foster broad, bipartisan support for carbon management technologies, which is unprecedented in U.S. energy policy.

Maintaining Global Energy Leadership

The open letter emphasizes that carbon management technologies are essential for preserving America's economic strength and global competitiveness by ensuring that domestic energy remains abundant and affordable.

As international markets shift toward cleaner, more efficient energy, these technologies help sustain American industries without sacrificing economic growth. The letter notes, "By proactively managing emissions, the U.S. can increase efficiency and attract investments, all while safeguarding and expanding U.S. energy production, manufacturing, and industrial sectors."

Companies like Occidental Petroleum are leading the charge in developing large-scale direct air capture facilities, aiming to remove significant amounts of CO₂ from the atmosphere. Vicki Hollub, CEO of Occidental Petroleum, stated, "The Inflation Reduction Act has enabled us to expand our operations in carbon capture, bringing us closer to our sustainability goals."

Broad Industry Support

The letter has garnered support from a wide array of organizations, including the American Chemistry Council, National Wildlife Federation, and United Steelworkers. This coalition represents the full diversity of sectors involved in the carbon management industry, highlighting the widespread recognition of the 45Q tax credit's importance. The letter urges Congress to maintain critical bipartisan support for the 45Q tax credit and oppose any efforts to weaken its utility to American businesses.

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Challenges and Criticisms

Despite its benefits, the 45Q tax credit has faced criticism. Some environmental groups argue that it enables continued fossil fuel extraction under the guise of sustainability. For example, ExxonMobil has been accused of using carbon capture projects to justify ongoing oil drilling activities. Critics contend that such practices may undermine the environmental goals the credit aims to achieve.

Additionally, there are concerns about the actual effectiveness of some carbon capture and storage (CCS) projects. Investigations have revealed instances where the captured carbon was not adequately stored, leading to questions about the oversight and regulation of these initiatives. Ensuring the integrity of carbon storage is crucial for the credibility of the 45Q tax credit program.

Future Outlook

The open letter underscores the necessity of the 45Q tax credit in ensuring that carbon management technologies can maintain domestic energy supplies, support a robust and diverse U.S. industrial and manufacturing base, protect and create family-sustaining jobs, and maintain America's leadership in clean energy innovation. The coalition respectfully urges Congress to protect the widely supported, bipartisan investments in the 45Q tax credit.

Further expansion of the 45Q tax credit could enhance its impact, making it more accessible to smaller companies and industries that have historically struggled to implement carbon management solutions.

This would not only accelerate decarbonization across more sectors but also increase participation in a rapidly growing global carbon management market. Analysts predict that strengthening 45Q provisions could create thousands of additional jobs and attract billions in new investments, positioning the U.S. as a global leader in carbon capture technology.

Additionally, regulatory improvements could address some of the criticisms of the program. Stricter monitoring, reporting, and verification of captured carbon would enhance transparency and ensure the tax credit is used for genuine emissions reductions rather than greenwashing. Policymakers may also consider expanding support for complementary technologies, such as carbon utilization and storage, to maximize the effectiveness of 45Q investments.

In conclusion, the open letter to Congress serves as a compelling testament to the economic and environmental imperatives of the 45Q tax credit. By fostering innovation, job creation, and emissions reductions, the credit plays a pivotal role in the United States' strategy to combat climate change while maintaining economic growth. The broad coalition of supporters underscores the widespread recognition of the credit's importance across various sectors of the economy.

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Note: This article is based on information available as of February 5, 2025.