Section 45Q Tax Credit Update: Parity Between CO₂ Sequestration and Utilization
For years, the U.S. tax code incentivized companies to capture and permanently store carbon dioxide (CO₂), but it undervalued technologies that put captured CO₂ to use. That imbalance is finally over.
With the latest update to Section 45Q, the federal tax credit for carbon management now offers equal credit value for both:
- Sequestration – permanently storing CO₂ deep underground.
- Utilization – using captured CO₂ in industrial processes like enhanced oil recovery (EOR), fuel production, cement curing, or manufacturing low-carbon products.
This long-overdue parity is a major step forward for businesses, consumers, and the broader push toward sustainability.
Why the Change Matters
Level Playing Field for Innovation
Previously, CO₂ utilization earned significantly less per ton than sequestration. This discouraged investment in technologies that could turn carbon into valuable products. By aligning the credit values, companies can now choose the best technology for their operations without being penalized for how they put CO₂ to use.
Faster Deployment of Carbon Projects
Sequestration projects often require long timelines, heavy permitting, and specialized Class VI wells. Utilization projects, by contrast, can get up and running quickly. Equalizing the tax credit encourages faster deployment of carbon capture projects across industries.
Reduced Reliance on Natural CO₂ Sources
Industries such as food, beverage, and energy have traditionally depended on naturally sourced CO₂. With utilization now incentivized at the same rate as sequestration, more companies are likely to turn to captured CO₂—reducing emissions while stabilizing industrial supply chains.
Stronger Economics for Heavy Industry
Cement, steel, power generation, ethanol, hydrogen, and other sectors that face tough decarbonization challenges now have greater financial incentive to implement carbon capture with either storage or utilization. This helps keep U.S. industries competitive while advancing climate goals.
Consumer Benefits Through Sustainable Products
As more companies adopt carbon utilization technologies, consumers will see the benefits in the form of cleaner fuels, greener building materials, and more sustainable everyday goods. The ripple effect is a stronger circular carbon economy.
What Businesses Should Do Next
Evaluate Utilization Pathways
Explore whether captured CO₂ can be turned into a revenue stream rather than simply stored.
Leverage Parity for Investment
With equal credits, utilization projects now offer the same financial returns as sequestration.
Communicate Sustainability Gains
Businesses that adopt CO₂ utilization can position themselves as leaders in both climate responsibility and innovation.
The update to Section 45Q is more than just a tax credit change—it’s a signal that every ton of CO₂ captured has equal value, whether stored underground or used productively. By giving utilization the same weight as sequestration, the policy empowers businesses to innovate, consumers to benefit from greener products, and the U.S. to take another important step toward a sustainable, low-carbon future.
Carbon Dioxide Suppliers in the Rocky Mountain Region
Carbon dioxide is a commodity for an array of applications. RMA offers several customizable solutions for your carbon dioxide needs including liquid CO2, high pressure CO2, and bulk tanks. Our experts are available to assess your usage needs and design efficient delivery options. Contact your local RMA branch in any one of our five states to discuss your carbon dioxide application needs, or to begin a partnership with us today. We look forward to serving you with flawless dependability!
