The IRS late Thursday provided guidance for expanding a tax credit that encourages the use of still-developing technology to remove carbon from the atmosphere.
The long-awaited update to the regulations for carbon capture tax credits follows a 2018 budget bill directing the IRS to offer the credits.
Treasury Secretary Steven Mnuchin said in a statement that the credit “incentivizes American businesses to invest in carbon capture technology and promotes safe and environmentally conscious storage for carbon oxides that would otherwise be emitted to the atmosphere.”
“These proposed regulations provide detailed guidance to implement this important incentive,” he added.
In 2018, Congress passed legislation to expand the tax credit, though companies looking to build carbon capture utilization and storage projects have been waiting on an IRS guidance for its implementation.
Brad Crabtree, the director of the Carbon Capture Coalition, which advocates for use of the technology, told The Hill in an interview Friday that the two years it took for the agency to issue the guidance could make it harder for companies to start construction on their projects by the deadline at the end of 2023 to take advantage of the credit.
“With less than four years to go, some projects will be challenged to meet that beginning construction deadline,” he said, adding that the delay and current economic downturn are “putting projects at risk for cancellation.”
He said, however, that he was pleased with many provisions in the proposal, which include certain monitoring and reporting requirements for the geologic storage of carbon; guidance for how to recapture credits if companies do not actually store the carbon; and the ability for companies to transfer tax credits to another investor.
“We think that there’s a lot of helpful clarity on all these things,” Crabtree said.
“We had urged Treasury and the IRS to maintain robust requirements for monitoring, reporting and verification of the CO2 that’s stored…with the goal of maintaining the confidence and support from members of Congress and the public for the program.”
The proposed guidance follows a recent watchdog report that said under prior guidelines, the vast majority of money claimed through the credit was by companies that did not properly follow environmental requirements.
The new guidance was well received by some industry groups.
The Carbon Capture Coalition, which advocates for use of the technology, said the proposed guidance gives businesses “critical information they need to continue moving forward” on about 30 commercial projects.
“Importantly, the IRS explicitly rejected recommendations from some parties that would have relaxed existing robust monitoring, reporting and verification (MRV) requirements for demonstrating geologic storage and risked undermining policymaker and public faith in the … program,” the group said in a statement Friday.
Lawmakers have expressed bipartisan support for the use of carbon capture technology, though environmentalists are split about the process due to its use in oil recovery.
Senators from both sides of the aisle praised the guidance on Friday.
Environment and Public Works Committee Chairman John Barrasso (R-Wyo.) said in a statement that the long-anticipated rule “provides much needed certainty to carbon capture innovators and investors.”
“I look forward to continuing to work with the Trump administration to strengthen and finalize the rule,” he added.
Sen. Sheldon Whitehouse (D-R.I.), called it “long overdue.”
“These new rules free up stalled investments in important carbon capture projects,” he said in a statement. “We pledge our oversight to ensure the long-term monitoring and storage rules are followed, and I’m grateful for the bipartisan effort that got us here.”
Environmentalists have shared mixed opinions about carbon capture, because it removes the pollutant from the atmosphere, but is sometimes used for oil recovery.
Kurt Waltzer, the managing director of the Clean Air Task Force issued a statement on Friday in support of the guidance and credits, citing the Intergovernmental Panel on Climate Change, which uses carbon dioxide removal from the atmosphere in its models for how to limit climate change.
“With it, [carbon capture and storage] developers can move ahead on projects with certainty as to how the credits will be administered,” he said of the new guidance. “As the IPCC has noted, large scale deployment of CCS is necessary to limit global warming.”
However, others have been more skeptical of the technology.
“There’s a lot of new creative thinking about [carbon capture and storage], but the thing we’re not looking at is the fact that you extract the fossil fuels itself is a decision point of emitting significant amounts of methane,” Gina McCarthy, who led the Environmental Protection Agency under former President Obama, said earlier this year.
“These are challenges for communities both from a health perspective and a climate perspective,” she added.
Crabtree, of the Carbon Capture Coalition, told The Hill that his group has identified about 30 new projects that could be incentivized through the credit and that a little more than one-third of them involve oil production.
–Updated at 4:12 p.m.