Extended 45Q Tax Credit in Trump’s One Big Beautiful Bill – what does it mean for CCUS?
Commentary on extended 45Q Tax Credit in President Trump’s One Big Beautiful Bill and its implication for Carbon Capture, Utilisation and Storage (CCUS)
The recent proposal1 to extend the US 45Q tax credit — increasing the value of CO₂ used in Enhanced Oil Recovery (EOR) to parity with geological storage — marks a focusing of the approach in the USA to make use of revenues from oil production to scale up carbon capture and storage (CCS) technologies. This places the USA alongside China in making oil production central to the development of infrastructure for CCS, and in contrast to Europe, including the UK, where programmes are focused on developing CO2 storage without associated oil or gas recovery.
Under the proposed changes, CO₂ injected for EOR could earn a tax credit of $85 per tonne, up from the previous $60. This aligns it with the incentive for permanent storage and effectively removes the policy penalty that EOR projects had faced. At the same time, the definition of “beneficial use” continues to evolve, broadening eligibility to include other commercial applications where CO₂ is chemically transformed or durably embedded in products like fuels, chemicals, or concrete.
This strengthens the investment case for carbon capture by broadening the range of viable business models, particularly for industrial emitters like cement, steel, and power. On the other hand, it carries risk of further dividing public opinion along familiar fault lines of the association between CCS and oil production. Contributing to this are outstanding technical uncertainties around the extent to which CO2 storage combined with enhanced oil recovery can be considered a climate benefit.
While this expansion may help slow the rate of atmospheric CO₂ accumulation, and establish an industry providing gigatonnes of CO2 mitigation in future decades, it is not, in itself, a near term pathway to net zero. However, it broadly reflects a growing policy consensus: that accelerating the rollout of CCS is essential to meet medium-term climate targets — especially for sectors where direct electrification or substitution is infeasible.
EOR and Carbon Utilisation (CCU): Useful, but Not Permanent
Let’s be clear: carbon dioxide used for EOR is only permanently stored if it remains trapped underground after the oil is produced. Moreover, emissions associated with the combustion of the extracted oil exceed the stored CO2 under standard industry practice. Climate benefits will arise if the amount of CO2 stored per barrel of oil significantly increases, and storage continues long after oil production has fully ceased, both possible outcomes of the strengthened incentive. Thus it is essential that the robust permitting, accounting, and reporting frameworks currently established under the Environmental Protection Agency, including the Underground Injection Control and Greenhouse Gas Reporting Programmes, are maintained and strengthened alongside these incentives.
Similarly, many “beneficial use” pathways (CCU) — such as synthetic fuels — involve short-to-medium term carbon storage or displacement, rather than actual removal from the carbon cycle. These uses can lower net emissions relative to the status quo, but they do not result in durable atmospheric drawdown.
That doesn’t mean they don’t have value. In fact, they can serve as critical bridge technologies. By creating commercial pull for CO₂ capture, they enable infrastructure buildout, derisk early investment, and support cost reductions via learning-by-doing. This is especially important in hard-to-abate sectors, where cost and scale remain significant barriers.
Climate Credibility of EOR and CCU Hinges on Accounting and Intent
The climate credibility of EOR and other CO₂ utilisation projects depends on two things:
- Robust accounting: Lifecycle emissions must be transparently measured and verified. If CO₂ is re-emitted (as in the case of fuels), this should be accounted for in net emissions, not treated as a permanent offset. Similarly, clear frameworks to address legacy emissions from oil production are essential to prevent misleading narratives about the climate impact of CO2-EOR and to ensure accountability in meeting climate targets.
- Policy clarity: These projects should be seen as transitional, not terminal. They can help create the conditions for deeper decarbonisation, but they are not substitutes for the kind of geological removal (e.g. DAC+storage or BECCS) that will ultimately be required to balance residual emissions and reach net zero.
Not a Silver Bullet
What the 45Q expansion represents is a maturing of carbon management policy in the USA. By strengthening the support for different CO₂ uses it seeks to leverage the financial benefit of revenue from saleable products to support the disposal of the CO2 and to develop the infrastructure for a gigatonne scale industry. It recognises the spectrum from ‘less bad but temporary’ to ‘permanent’ solutions and acknowledges that no single pathway will get us to climate stability. However, this comes at the risk of eroding support from the public for CCS as an environmental technology, and the potential misuse by firms through greenwashing.
So we need a portfolio approach:
- Near-term deployment of CO₂ capture tied to utilisation or EOR to scale the ecosystem.
- Ongoing investment in permanent removal and long-term storage options.
- Clear guardrails to prevent greenwashing and ensure real climate benefit.
Bottom Line
The expanded 45Q credit is a welcome boost for carbon capture. It will make it easier to finance, deploy, and scale projects that would otherwise struggle to get off the ground. If the potential downsides can be mitigated through robust permitting, monitoring, and reporting, and a transparent accounting of the greenhouse gas mitigation benefits, it may indeed mark an important stage in the scaleup of CCUS technology.
Thus it is also a reminder that climate ambition and carbon accounting must go hand in hand. If reduced emissions intensity is mistaken for net carbon removal, we risk drifting off course. Our goal is not just to emit less CO2 – it is to stop adding it to the atmosphere completely. This change to the 45Q credit will help build the bridge – but we still have to cross it.
Professor Martin Blunt, Professor of Flow in Porous Media
Professor Paul Fennell, Professor of Clean Energy
Professor Sam Krevor, Professor of Subsurface Carbon Storage
Professor Niall Mac Dowell, Professor of Energy Systems Engineering
Professor Geoffrey Maitland, Professor of Energy Engineering
Professor Ronny Pini, Professor of Multiphase Systems
Professor Nilay Shah, Professor of Process Systems Engineering
Professor Martin Trusler, Professor of Thermophysics
Imperial College London, Transition to Net Zero Group
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