Congress repeals federal carbon capture tax credit, eliminating climate incentive

What it does

This bill repeals Section 45Q of the Internal Revenue Code, which currently provides a federal tax credit for companies that capture and sequester carbon dioxide (CO2). The credit—worth up to $180 per metric ton depending on the storage method—has incentivized investment in carbon capture technology and geological storage. Repealing it eliminates this financial incentive effective January 1, 2026, removing a major federal subsidy for carbon capture projects while making conforming changes to related tax provisions that reference the credit.

Why we flagged it

The bill's sole operative function is to eliminate a tax credit designed to incentivize carbon capture and sequestration. It is a straightforward repeal of climate-mitigation policy, not a hidden rider or complex restructuring.

What the text implies

• Repeal eliminates a key federal lever for private carbon capture investment; projects currently relying on 45Q economics may become unviable, potentially stranding capital and slowing deployment of capture technology.
• The bill preserves the definition of 'qualified carbon oxide' by reference to the pre-repeal version of 45Q (in sections 45Y, 142, and 6417), suggesting some carbon capture provisions remain in the tax code but without the credit incentive—creating a regulatory framework with no financial driver.
• Effective date of January 1, 2026 gives projects ~10 months' notice; companies may accelerate project timelines or abandon plans, creating market volatility in the carbon capture sector.
• Repeal may reduce U.S. competitiveness in carbon capture technology development relative to other nations (e.g., EU, Canada) that maintain or expand similar incentives.

Section numbers refer to the bill text the analysis read — linked under Primary records below.

Who it affects

Repealing the 45Q credit removes a policy tool designed to reduce atmospheric CO2 and incentivize private investment in climate mitigation technology. While the credit's effectiveness is debated, its elimination reduces federal support for carbon capture—a technology many climate scientists view as necessary for meeting net-zero targets. Citizens bear the cost through reduced climate action and foregone private investment that the credit was leveraging.

Named in the bill

Internal Revenue Service, Environmental Protection Agency, Department of Energy, Department of Interior, Carbon capture companies, Oil and gas operators (secondary beneficiaries of reduced capture requirements)

Where it stands

2 cosponsors: 1 Democrats, 1 Republicans.

• Mar 6, 2025 — Introduced · Congress.gov: “Introduced in House”
• Mar 6, 2025 — Referred to House Committee on Ways and Means · Congress.gov: “Referred to the House Committee on Ways and Means”

Dates and quoted wording are Congress.gov's action record; the timeline shows status changes, not every procedural step.