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A Closer Look at the New Federal Tax Credit on Carbon Capture & Storage

As we work to reduce our greenhouse gas emissions in order to respond to climate change, green technologies are becoming more available and affordable.  

One such technology that mostly flies under the radar is carbon capture and storage, which captures carbon dioxide as it is released into the atmosphere and then stores it in a safe manner.  Energy companies could either store the carbon underground or sell it to fossil fuel companies to use for energy extraction.

Capturing and storing carbon has become more and more of priority for energy companies, especially since a federal tax credit was implemented to incentivize the practice.

Under the federal budget deal passed earlier this year, this tax credit has been expanded to include a larger incentive to sell carbon than in previous years.

While capturing carbon can play an important role in reducing the amount of carbon in the atmosphere, some experts have pointed out that the new structure of the tax credit will cause large energy companies to choose to sell their carbon rather than storing it.  This, in turn, will incentivize oil and gas extraction and negate the environmental benefits that had been achieved by capturing the carbon.

Although a tax credit for carbon capture would help reduce some amount of carbon in the atmosphere, the new federal tax credit as structured could end up bringing more benefits to large fossil fuel energy companies than to our environment.