Expanding Subsidies for CO2-Enhanced Oil Recovery: A Net Loss for Communities, Taxpayers, and the Climate Click to download the analysis
October 2017
Legislation recently introduced in the U.S. House and Senate proposes to extend and expand the Section 45Q tax credit for carbon capture and sequestration (CCS) and carbon dioxide (CO2)-enhanced oil recovery (EOR).
Generally speaking, this tax credit benefits coal- and gas-fired power plants (and industrial facilities) that capture waste CO2 before it is emitted. The value of the tax credit that facilities receive depends on whether they decide to directly sequester the CO2 underground (CCS) or sell it to oil companies that will pump the gas into wells to recover hard-to-get oil (EOR). If the proposed bills become law, the expansion of the existing 45Q tax credit could be the largest subsidy given to the fossil fuel industry by the United States government.
The key findings of the analysis include:
- The proposed laws would result in at least an additional 400 thousand barrels per day (kbpd) of CO2-enhanced oil production in the United States in 2035 – and possibly far more.
- This additional production of oil would directly lead to as much as 50.7 million metric tons of net CO2 emissions annually that would otherwise not be emitted – and arguably more. That’s equal to the annual emissions from 12 and a half coal-fired power plants.
- The portion of the bill that benefits the oil industry alone could cost American taxpayers as much as $2.8 billion every year.
- The years of additional oil production and coal- and gas-fired power generation (using CCS technology) enabled by the expansion of the 45Q tax credit pose serious risks to the health of local communities and ecosystems.
- Subsidizing and expanding the fossil fuel industry is not – and will never be – a solution to the climate crisis.