Carbon Capture and the Inflation Reduction Act

The Inflation Reduction Act (IRA) of 2022 significantly increases the 45Q tax credit, raising incentives to $85/tonne for industrial and power generation facilities and $180/tonne for direct air capture (DAC) when stored in saline geologic formations. These updates lower the capture thresholds for credit eligibility—reducing the industrial requirement from 100,000 to 12,500 tonnes of CO2 per year and the DAC requirement to 1,000 tonnes per year—while extending the construction window to January 1, 2033. The document argues that these incentives make carbon capture more accessible for hard-to-abate sectors like steel, cement, and refineries. Additionally, it recommends that Germany develop a National Carbon Management Strategy, financial incentives such as carbon contracts for difference (CCfD), and a business case for negative emission technologies to ensure industrial decarbonization and global competitiveness.

• The Inflation Reduction Act (IRA) increases the 45Q tax credit to $85/tonne for CO2 captured from industrial and power generation facilities and $180/tonne for direct air capture (DAC), provided the CO2 is stored in saline geologic formations.
• The IRA lowers the annual CO2 capture thresholds required to qualify for credits, reducing the limit for industrial emitters from 100,000 tonnes to 12,500 tonnes and for DAC facilities from 100,000 tonnes to 1,000 tonnes.
• The 45Q credit is available for 12 years after equipment is placed in service, with inflation adjustments starting in 2027 (indexed to 2025), and projects must begin physical work by January 1, 2033, to qualify.
• Full realization of the increased IRA credit values is contingent upon meeting worker requirements, including a mandatory minimum wage.
• To achieve industrial decarbonization and maintain global competitiveness, Germany is advised to establish a National Carbon Management Strategy, implement financial supports like carbon contracts for difference (CCfD), and create a business case for negative emission technologies.

APA

Clean Air Task Force (n.d.). Carbon Capture and the Inflation Reduction Act. https://cdn.catf.us/wp-content/uploads/2023/01/26094050/CATF_IRAFactsheet_English_01.25.2347.pdf

Chicago

Clean Air Task Force. Carbon Capture and the Inflation Reduction Act. n.d. https://cdn.catf.us/wp-content/uploads/2023/01/26094050/CATF_IRAFactsheet_English_01.25.2347.pdf.

Wikipedia

{{cite report |author=Clean Air Task Force |title=Carbon Capture and the Inflation Reduction Act |url=https://cdn.catf.us/wp-content/uploads/2023/01/26094050/CATF_IRAFactsheet_English_01.25.2347.pdf |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{cleanairtaskforcendcarbon, author = {{Clean Air Task Force}}, title = {{Carbon Capture and the Inflation Reduction Act}}, institution = {Clean Air Task Force}, url = {https://cdn.catf.us/wp-content/uploads/2023/01/26094050/CATF_IRAFactsheet_English_01.25.2347.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }