CCUS deployment under the U.S. 45Q tax credit and adaptation by other North American Governments: MARKAL modeling results

Abstract

In 2018, U.S. Congress passed the Bipartisan Budget Act, known as 45Q [H.R. 3761], expanding the corporate income tax credit for carbon capture utilization and storage (CCUS). 45Q provides a performance-based tax credit for carbon capture projects of $30/ton of carbon dioxide (CO2) (tCO2) for anthropogenic CO2 going to enhanced oil recovery (EOR), and $50/tCO2 if going to straight storage. There are several conditions; for example, there is a 12-year time limit on tax credits for a new plant that commences construction before 2024 [H.R. 3761].This study aims to test the incremental impact of the 45Q tax credits on CCUS deployment, CO2-EOR, and power generation technological changes for North American (the United States, Canada, and Mexico) long-term energy system development. The scenario results show that offering a 12-year CO2 storage subsidy provides the motivation needed for CCUS investment during the 12-year subsidy period, and the benefits of such investment can be sustained over the 40-year lifetime under CO2 taxation. The modeling results show that carbon capture generation replaces uncontrolled fossil-fueled power, not new or existing renewables, so power generation and corresponding emission reductions from renewables remain unaffected by the availability of 45Q in the United States. Our scenario with CCUS technological learning indicates that CCUS could play a very important role under stringent environmental constraints. Thus, accelerated support and funding for the large-scale CCUS demonstrations is important for the execution of both short- and long-term climate mitigation goals.Given the significant role of the United States, Canada, and Mexico on the world energy system, our results represent an important contribution to the study of global energy trends.