Carbon management’s crucial 45Q tax credit remains intact and is not part of broader cuts to the Inflation Reduction Act, according to a draft released by the House Ways & Means Committee yesterday.
This would mean projects in carbon management will continue benefiting from credits ranging from $60 (for captured and utilized CO2) to $180 per ton (for CO2 removed from the atmosphere).
Several changes did make their way into the draft. The first is aimed at limiting those claiming both 45Q and 45V credits from the same facility, while the other prevents the transferability of credits to any “foreign-influenced entity”.
Sustainable aviation fuel also received a boost with the 45Z credit largely preserved but needing to adapt to stricter IRS rules on emission thresholds and reporting.
Relief and Confidence
The release of the draft will be seen as a positive sign for both carbon capture and removal in the U.S. With the support of the Inflation Reduction Act (IRA) both approaches have seen substantial growth in the last several years, usually enjoying broad bipartisan support but also seeing unlikely alliances form against them.
In March, Representative Scott Perry, a Republican from Pennsylvania, teamed up with Democrat Ro Khanna of California to introduce the 45Q Repeal Act, with the goal of removing support to carbon capture, utilization, and storage (CCUS).
Despite opposition the industry’s growth has provided a foundation for thinking big, attracting capital and commiting to investments in the 2022-24 period but enthusiasm was dampened in 2025 with concerns about the level of support (or lack thereof) under the Trump administration.
The presence of an almost entirely intact 45Q in this draft does hint at the strength of its supporters. Similar to many of the renewable energy projects supported by the IRA, most of the funds directed towards carbon management have landed in red states. Texas, Louisiana and Wyoming are leading the charge with the latter’s governor placing carbon management at the forefront of his agenda.
Relevant: Coalition Urges Congress To Protect 45Q Tax Credit
CCUS also counts energy companies among its backers, with carbon management seen as a potential growth area with enhanced oil recovery and CO2 storage and utilization seen as vectors for development of new revenue streams.
The emerging carbon removal industry will also be relieved by this draft but everyone in the sector will continue paying attention to how the bill progresses through the next stages. The bigger picture defined by the drive for energy independence, tax cuts and tariffs could shift the next versions in different directions before it reaches a final vote.
Renewables Hit Hardest
The draft bill does deal a significant blow to almost all other areas the IRA has promoted growth in. Clean energy, electrical vehicles and home efficiency are among those set for a phaseout of subsidies by 2031.
It’s unclear how that will sit with the 21 House Republicans—representing districts that have seen substantial benefits from the IRA—who penned an open letter saying they will not support efforts to undo the signature Biden climate act.
The repeal would generate approximately $6.5 billion that will go towards supporting President Trump’s tax reduction agenda and follows cuts proposed by the Transportation, Energy and Commerce and Natural Resources committees in previous weeks. The IRA previously commanded $369 billion of clean energy and climate incentives across ten years but payments for a number of its programs were paused on the first day of Trump’s second term.
Read more: Can Carbon Capture Clean Up Natural Gas For The Data Center Boom?
