- The Inflation Reduction Act (IRA) is U.S. history’s most significant climate legislation.
- The IRA offers lucrative incentives for point-source carbon capture projects.
- CoBank said the IRA could be a game-changer for scalable emission control systems.
- A Princeton University analysis estimates a 13-fold increase in the use of carbon capture by 2030 due to the IRA.
- The legislation could reduce U.S. emissions by 43-48% by 2035, compared to 27-35% without it.
The Inflation Reduction Act (IRA), hailed as the most significant climate legislation in U.S. history, is poised to accelerate the transition from fossil fuels to clean energy, particularly in high-emitting industries. According to a new report from CoBank’s Knowledge Exchange, the IRA’s incentives for point-source carbon capture projects are in the lucrative range, making them more economically viable.
The IRA offers tax credits that allow projects to earn $85 per ton for CO2 permanently stored and $60 per ton for utilization. These incentives are designed to make carbon capture, utilization, and storage (CCUS) projects more economically viable. “By increasing carbon capture tax incentives and making important new funding opportunities available for clean fuel substitutes, the IRA could usher in a dramatic new chapter for scalable emission control systems,” said Teri Viswanath, lead power, energy, and water economist for CoBank.
Impact on Emissions
A recent analysis from Princeton University estimates that the IRA would increase the use of carbon capture 13-fold by 2030. Additionally, the legislation could reduce economy-wide emissions in the U.S. by 43-48% by 2035, compared to just 27-35% without the IRA stimulus.
While the power and transportation sectors are already transitioning to cleaner energy, the IRA’s incentives are expected to have the most transformative impact on high-emitting industries. These sectors have been the hardest to decarbonize and would see little progress without significant government support.
According to PwC, more than a quarter of all venture capital funding is now focused on climate technology. “2022 turned out to be a watershed year for new project announcements, leaving little doubt that these incentives have firmly captured the investment community’s attention,” added Viswanath.
Lessons from the Past
While initial investments in CCUS in the 2000s were largely unsuccessful, the lessons learned from that period now provide greater opportunities for success in this second chapter of public and private investing in CCUS.
Read the rest of the report here.