Incentives for CO2 Avoided: Comparison of Renewables Production Tax Credit and Proposed 45Q Legislation

The document analyzes the financial incentives for reducing carbon emissions in the US, comparing the implicit price of CO2 avoided via the Section 45 production tax credit (PTC) for renewables against the explicit credits proposed in the FUTURE Act and Carbon Capture Act for carbon capture and storage (CCS). Using NREL data, it calculates that the renewable PTC provides an implicit incentive of $48.76 per tonne of CO2 avoided, while the proposed 45Q credits for saline storage and enhanced oil recovery (EOR) would provide lower incentives of $45 and $31.5 per tonne, respectively, assuming a 90% capture rate.

• The proposed extensions to Section 45Q tax credits via the FUTURE Act (S 1353) and the Carbon Capture Act (HR 3761) aim to reduce the cost of carbon capture and storage, similar to how the Section 45 production tax credits (PTC) reduced the levelized cost of wind power by nearly two-thirds since 1992.
• The Section 45 PTC for renewables creates an implicit price on CO2 that varies based on the fossil fuel displaced: displacing natural gas (0.4 tonnes CO2/MWh) requires 2.8 MWh of renewable energy per tonne of CO2 saved, while displacing coal (approx. 0.91 tonnes CO2/MWh) requires only 1.1 MWh.
• Based on a National Renewable Energy Laboratory (NREL) base case assuming a displacement mix of 80% gas and 20% coal, the implicit avoided cost of CO2 provided by the $23/MWh renewable PTC is $48.76 per tonne.
• The FUTURE Act proposes credits of $50/tonne for saline storage and $35/tonne for storage through utilization (including enhanced oil recovery); assuming a 90% capture rate, these result in avoided CO2 costs of $45 and $31.5 per tonne, respectively, both of which are lower than the support provided by the renewables PTC.

APA

Clean Air Task Force (n.d.). Incentives for CO2 Avoided: Comparison of Renewables Production Tax Credit and Proposed 45Q Legislation. https://cdn.catf.us/wp-content/uploads/2017/12/21094411/CATF_FactSheet_Cost_of_CO2_Avoided.pdf

Chicago

Clean Air Task Force. Incentives for CO2 Avoided: Comparison of Renewables Production Tax Credit and Proposed 45Q Legislation. n.d. https://cdn.catf.us/wp-content/uploads/2017/12/21094411/CATF_FactSheet_Cost_of_CO2_Avoided.pdf.

Wikipedia

{{cite report |author=Clean Air Task Force |title=Incentives for CO2 Avoided: Comparison of Renewables Production Tax Credit and Proposed 45Q Legislation |url=https://cdn.catf.us/wp-content/uploads/2017/12/21094411/CATF_FactSheet_Cost_of_CO2_Avoided.pdf |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{cleanairtaskforcendincentives, author = {{Clean Air Task Force}}, title = {{Incentives for CO2 Avoided: Comparison of Renewables Production Tax Credit and Proposed 45Q Legislation}}, institution = {Clean Air Task Force}, url = {https://cdn.catf.us/wp-content/uploads/2017/12/21094411/CATF_FactSheet_Cost_of_CO2_Avoided.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }