FINANCIAL INCENTIVES FOR CCS

Many states have laws and regulations providing direct financial incentives for the demonstration and deployment of carbon capture and storage (CCS) technology. CCS uses a combination of technologies to capture carbon dioxide (CO₂), transport it to a suitable storage location, and store (or sequester) the CO₂ (typically by injecting it into deep underground rock formations) where it cannot enter the atmosphere and, thus, does not contribute to climate change (more information about CCS technology can be found here). CCS can be used in conjunction with a variety of facilities that emit CO₂ and holds particular promise for reducing CO₂ emissions from large coal-fueled power plants.Policies to support the demonstration and deployment of CCS are important since “first-mover” CCS projects require substantial incentives to be economic and these first-mover projects are essential for successfully demonstrating the technology and improving its cost and performance. The policies shown on this map include:

• Financing Incentives, which include state bonds to fund the construction of CCS facilities.
• Tax Incentives, which include qualification for income tax credits, or reductions in income tax liability, and exemptions, including a waiver on property tax or sales tax on equipment and building materials for electric generators that invests in CCS.
• Grants for Building CCS Facilities, which provide state money to pay for a portion of the demonstration and deployment of CCS plants.
• Grants for Studies, which providefinancing for studies of carbon sequestration potential, and financing for front-end engineering design costs.
• Utility Cost Recovery Mechanisms, which include timely reimbursement of costs incurred during construction and operation, or favorable rates of return for regulated utilities’ investments in CCS.

The policies highlighted here contain only direct financial incentives for CCS. There are numerous other policies affecting CCS technology, including indirect financial incentives, such as allowing CCS to count toward meeting Alternative Energy Portfolio Standards requirements, and state regulations related to the geological sequestration of CO₂. A map including these other policies can be found here.

Notes: Integrated Gasification Combined Cycle (IGCC), listed often within CCS policy options, while not itself a technology for CO₂ capture, is a technology that has the potential to be the least costly option for coupling CCS with coal-fueled electricity generation at new power plants.