Prepared by the University of Houston’s Center for Carbon Management in Energy

Overview

Carbon Capture, Utilization, and Storage (CCUS) is a critical tool to advancing U.S. energy security and requires the continued support of Congress to ensure that the Trump Administration’s policies of American Energy Dominance and Economic Growth are realized, while ensuring American companies remain competitive in the global marketplace.

The IRS Section 45Q tax credit is the lynchpin to this mission. This incentive is critical to realizing broad deployment of CCUS technologies, which are rapidly scaling as a result of bipartisan support and policy stability. CCUS requires significant private investment from industry. These companies serve customers or markets in ways that generate enough revenue or profit to justify those investments. The IRS Section 45Q tax credit is production-based, which means it is only earned by demonstrating successful operations that meet IRS guidelines. Commercialization will ultimately be determined by the private sector, but consistent policy support is key to achieving that milestone.

CCUS is a foundational technology that ensures:

• Energy security and affordability;
• Reliability and resilience of the U.S. electrical grid;
• Domestic economic benefits from U.S. fossil fuel resources, such as coal, natural gas, and oil; and
• U.S. leadership in global technology innovation while boosting export-driven economic value.

Energy Security and Affordability

Fossil fuels (coal, natural gas, and oil) will continue to play a key role in our future energy mix. Major industry sectors, such as chemicals, oil and gas, transportation fuels, cement, and the generation of electricity, require fossil fuels.  Capturing the carbon dioxide (CO₂) emitted by these sectors through CCUS provides an opportunity to  strengthen U.S. energy security through the continued use of our affordable and abundant domestic resources and support investment strategies to produce lower carbon intensity products. For example, using CO₂ for enhanced oil recovery (EOR) provides the benefit of increasing domestic oil production (up to 15%) while extending the production lifespan of mature oil fields. EOR using naturally occurring CO₂ has been practiced in the United States since the 1970s, making it a well-established technology. Prior research has also found that EOR yields a 37% reduction in CO₂ emitted per barrel of oil produced.^[1] By implementing this strategy, the U.S. would produce more domestic oil with a lower carbon intensity.

A key benefit of CCUS is that it enables the advancement of America’s strategic energy advantages rather than seeking to replace them.  Abundant and affordable fossil fuels are central to these U.S. advantages.

There is growing investment opportunity to use captured anthropogenic CO₂ from CCUS projects to expand this technique. By integrating CO₂ from industrial sources, the U.S. can boost domestic oil production while reducing crude oil imports and domestic carbon emissions. This approach has strong potential for expansion in states such as Alabama, Louisiana, Michigan, Mississippi, North Dakota, Texas, and Wyoming, as well as in other geologically suitable regions across the country. Beyond the immediate potential of CO₂-EOR, CO₂ captured from industrial facilities may also be utilized to produce alternative fuels such as SAF or methanol. While not currently at cost parity with other methods of generating these fuels, continued innovation and scaling are expected to improve their global competitiveness. As these novel pathways mature the ongoing support of 45Q is essential to enhance American energy diversity, resilience, and long-term energy security.

Grid Stability and Reliability

U.S. electricity demand is projected to increase by 50-150% over the next 25 years. This is driven by sustained population growth, economic expansion, and the rapid rise of energy-intensive sectors such as artificial intelligence and data centers.

The need for baseload, dispatchable electricity supply is irrefutable, and all forms of generation, including fossil fuels, are required to meet this growing demand. Whether it is coal or natural gas, there is growing private sector interest in incorporating CCUS on facilities near suitable geology. These plants would operate in baseload mode to maximize both dispatchable electricity output and the efficient use of CCUS infrastructure. Captured CO₂ can support EOR or be stored permanently in geologic reservoirs. Investors will drive the pathways to commercialization and will require the continued policy support of 45Q to  advance U.S. leadership for a technology that will be in demand globally for years to come.

From a regulatory and public confidence standpoint, it is important to note that CO₂ has been safely injected and stored in subsurface formations for more than 70 years. These formations are well-characterized and have long been used by the oil and gas industry, offering a proven, secure pathway for large-scale CCUS deployment.

As electricity demand rises sharply, grids across the U.S. will likely face capacity shortfalls. In many regions, this will require extending the operation of coal plants currently slated for retirement. Coal remains a critical part of the energy mix, especially for providing reliable, around-the-clock power in areas where other dispatchable resources are limited.

Initiatives like Project Tundra in North Dakota represent early, actionable models for integrating CCUS at scale. These projects are essential not just for emissions reduction, but for establishing technical and economic frameworks that can be replicated across the country. Importantly, they are being developed in markets where state-level support and regulatory clarity can help bridge the financial gap beyond federal 45Q incentives.

Natural gas-fired combined cycle plants will also be key in meeting growing demand, offering high-efficiency, dispatchable generation that reduces exposure to intermittent resources. Integrating CCUS to these and other facilities would insulate them from current and future policies (state and federal) that put limits on greenhouse gas emissions. This is yet another example of how CCUS allows us to work within our existing energy infrastructure to address the twin goals of economic growth and lower emissions – rather than seeking to completely transform or replace it.

Economic Viability

The economic viability of CCUS hinges on two key factors: the presence of customers—such as data centers or industrial users—who are both willing and able to support cost structures beyond government incentives, and the location-specific attributes of a project, such as suitable geology, infrastructure, and CO₂ utilization pathways. CCUS should not be viewed as a universal solution, but rather as a targeted tool deployed where it delivers a compelling value proposition. This is particularly relevant as AI and data centers drive demand for low-carbon electricity, both in the U.S. and globally. These industries are already making long-term investment decisions, and the U.S. has a strategic opportunity to lead by offering dispatchable, low-carbon power through CCUS—something intermittent renewables paired with costly backup systems cannot match.

Where CCUS enables utilization of captured CO₂, such as through enhanced oil recovery or permanent storage, the economics become far more competitive. Beyond power, the model is already proving itself in industrial applications such as ExxonMobil’s Baytown low-carbon hydrogen and ammonia project, where 35% of the capital is backed by ADNOC. Low-carbon ammonia will be exported to Japan – much of which will be used to co-fire in Japan’s coal-fired boilers meeting international strategic investment requirements. There is undeniable, strong international interest in U.S.-based CCUS projects. In fact, international companies have invested in CCUS in the United States because of the supportive policy environment, specifically the 45Q tax credit. For the U.S. to remain competitive and secure its position as a global leader in both energy and emerging technologies, policy must focus on enabling CCUS where market conditions and strategic advantages align—through supportive regulation, infrastructure investment, and public-private collaboration.

Figure 1. Figures from the 2024 Global CCS Institute Global Status Report.

Technology and Innovation

This is not a matter of “science for science’s sake”—CCUS is a proven technology with demonstrated success, and the U.S. is uniquely positioned to scale and export this capability to global markets. The know-how and infrastructure already in place can create long-term innovation value, not only through domestic decarbonization but also by meeting the growing international demand for low-carbon solutions. Across the world, there are numerous countries and regions actively seeking to reduce emissions and willing to invest in the technologies that can help them get there. The potential for U.S. leadership and global export value in CCUS is significant.

Rather than pursuing costly and often inefficient alternatives with unclear long-term benefits, CCUS offers a capital-efficient, technically sound path to emissions reduction—especially in sectors where electrification or intermittent renewables fall short. This approach positions the U.S. to lead not just in technology deployment, but in setting the global standard for how to decarbonize heavy industry, power generation, and beyond. With the right policy support, the U.S. can deliver real-world, scalable climate solutions that also strengthen our economic and geopolitical standing.  

Transferability

Transferability bolsters access to capital by allowing entities to transfer or sell some or all of the tax credits to other entities that have the ability to monetize the tax credits. In so doing, it mobilizes private capital at scale to finance these projects. Transferability increases investment and accelerates project development to maximize economic growth, job creation, and innovation. Without transferability or if it is limited, project developers would face higher financing and project development costs from the use of tax equity partnerships.  As a result, removing transferability could lead to project delays, higher electricity costs, greater reliance on foreign adversaries, and losing the global artificial intelligence race. 

Summary

In short, 45Q is essential to America’s continued energy leadership and dominance. It drives private investment, fuels job creation, contributes to GDP growth, and positions U.S.-made products to remain competitive in a global market that increasingly values low-carbon solutions. Critically, 45Q is at the core of the growth strategies of leading U.S. energy companies that are actively investing in CCUS to meet rising demand for reliable, low-carbon energy. This is not about prolonging the fossil fuel status quo—it’s about using every available tool to strengthen energy security, meet climate goals, and secure America’s place as a global leader in clean energy innovation. CCUS is a vital enabler of that future, and policies like 45Q ensure we can scale it in time to meet both domestic needs and international opportunity.

Inquiries Regarding Content

For further information, please contact Hon. Charles McConnell at cmcconnell@uh.edu.

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[1] Clean Air Task Force, “CO2 EOR Yields a 37% Reduction in CO2 Emitted Per Barrel of Oil Produced,” June 7, 2019: https://www.catf.us/resource/co2-eor-emission-reduction/