As Congress works through a budget resolution, lawmakers face key decisions about how to secure America’s energy future and help enact the president’s goal of unleashing American energy dominance. Energy tax credits continue to be front and center, standing out as strong tools to strengthen domestic production, support innovation, and keep America competitive on the global stage. One important provision is the 45Q tax credit for carbon sequestration, but it could be in the hot seat.
Carbon capture is a critical tool for making the United States’ energy system more reliable, affordable, and clean. The 45Q credit encourages the private sector to invest in these technologies, helping producers do more with the resources we already have. First established in 2008, 45Q tax credit has helped make carbon capture economically viable, giving American oil and gas a way to thrive in a lower-carbon economy.
Carbon capture describes a number of technologies that either prevent the release of carbon dioxide from industrial activities or pull carbon dioxide directly from the atmosphere. Carbon dioxide is a greenhouse gas that contributes to climate change; however, it can also have some useful economic applications.
The technology effectively allows the energy industry to repurpose a waste product, turning captured carbon dioxide into a valuable asset rather than a liability. For example, in enhanced oil recovery (EOR), carbon dioxide is injected into aging oil fields to increase production, extending the life of existing wells while reducing the need for new drilling. Additionally, captured carbon dioxide can be used in industrial applications such as concrete production, fertilizers, and gas production, strengthening materials while permanently sequestering emissions.
The 45Q tax credit helps encourage this circular economy, creating a financial incentive for oil and gas companies to invest in carbon capture and making it easier for them to use EOR. Instead of letting carbon dioxide go to waste, it gets repurposed in a way that helps extract more resources from existing sites, reducing the overall footprint. This keeps oil fields productive longer and strengthens domestic energy security by making the most of what’s already there. With the 45Q credit helping to offset costs, more companies have a reason to invest in this technology, keeping American oil flowing while putting carbon dioxide to practical use.
45Q isn’t just about carbon capture—it’s about securing the long-term viability of American energy by making oil and gas more sustainable, innovative, and competitive. At a time when global competitors like China are investing heavily in energy technologies, pulling back on 45Q would mean giving up ground. If we want to remain the world’s energy leader, we should be building our strengths—not walking away from them. Congress should protect 45Q to support continued innovation, spur private investment, and unlock the full potential of American energy.