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US Climate Bill’s Subsidy Bonanza Gives New Allure to Carbon Capture

Startups building small-scale plants could also qualify for subsidies under the Inflation Reduction Act passed this month.

A cooling tower at a coal and gas power plant

A cooling tower at a coal and gas power plant

Photographer: Ben Kilb/Bloomberg

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US companies that cut carbon emissions could qualify for subsidies on even the smallest projects under new climate legislation, unleashing a potentially unprecedented wave of investment in green technologies. 

The Inflation Reduction Act passed by Congress this month will boost a host of clean technologies. Among them will be startups developing more efficient ways to capture and store carbon, which is going to be crucial to meeting global climate goals.

The technology either involves collecting carbon dioxide emitted by a factory, a method that’s been around for decades, or taking it directly from the air and then storing it underground. One of its biggest drawbacks has been the cost. And while the US already had a tax credit to support carbon capture, it was too paltry to attract much interest from industry and only available to larger operators.

Under the new regime, the US government will offer a tax credit of $85 for every metric ton of carbon emissions captured from a smokestack and stored — up 70% from current levels. Industrial projects like factories that produce steel or cement, need to capture 12,500 tons or more of CO2 a year to qualify, down from 100,000 tons a year under the previous system. Direct air capture qualifies for tax credits worth as much as $180 per ton for projects that trap as little as 1,000 tons of CO2 per year. And the credits will be paid directly to the operator, providing a clear source of revenue even for relatively small installations. 

With all that new support, American companies could be capturing around 100 million tons of carbon dioxide a year within a decade, more than 10 times the amount currently sequestered for tackling climate change each year, according to Boston-based environmental organization Clean Air Task Force.