Energy Financial Incentives for CCS

Many states encourage the development of projects to capture carbon from point sources such as coal and gas fired power plants and ethanol plants. Once captured, the carbon dioxide (CO2) may be transported via pipeline for geologic storage in a suitable underground rock formation. Injecting CO2 underground prevents its emission to the atmosphere and mitigates climate-change impacts. Carbon dioxide enhanced oil recovery (CO2-EOR) is a form of enhanced oil recovery in which captured man-made CO2 may be injected into existing oil fields to produce additional oil. CO2-EOR may help offset the costs of carbon capture technology and infrastructure. CO2-EOR using man-made CO2 can have a net benefit for the climate by storing more CO2 than is produced, including emissions from the use of the oil. State incentives encourage investments in carbon capture projects. This map is intended to demonstrate the range of policy options, although some of these policies have expired or have been repealed. Policy options include:

Direct Financial Assistance: States often structure direct financial assistance to CCS projects and CO2 pipelines as grants or loans.

Off-Take Agreements: States may require utilities to enter into off-take agreements with power plants with carbon capture technology. This requirement provides a guaranteed buyer for the electricity.

Utility Cost Recovery Mechanism: States may authorize utilities to pass on the costs of carbon capture technology to ratepayers. This provides timely reimbursement of costs incurred during construction and operation through favorable rates of return for regulated utilities’ investments.

Clean Energy Standard: When a state declares carbon capture technology eligible toward state electricity generation portfolio standards or voluntary goals, utilities can earn saleable compliance credits by generating electricity at power plants with carbon capture technology. Inclusion of carbon capture in portfolio standards or goals may also facilitate approval of utility cost recovery for carbon capture technology, which may be critical for financing projects in states with regulated electricity markets.

State Assumption of Long-Term Liability: When states assume long-term liability related to geologic storage of CO2, it may reduce the long-term costs for private project developers.

Tax Incentives: States may provide tax credits for CO2-EOR and geologic storage. They may reduce corporate income taxes, provide exemptions from property and sales taxes on CO2-EOR and geologic storage machinery and equipment, and may reduce severance taxes on oil produced through CO2-EOR using man-made CO2.

Last updated May 2017