Ethanol Producers Can Claim Tax Credit for Capturing Emissions

Carbon capture and storage (CCS) is a promising approach to reducing carbon emissions. And changes to Section 45Q of the U.S. tax code have made it easier for ethanol producers to take advantage of tax credits for implementing CCUS. 

What is CCS? 

CCS encompasses a range of technologies that are used to capture carbon dioxide (CO2) emissions at their source. Once the CO2 has been captured and compressed, it can be injected into a secure geologic reservoir for storage or used for other purposes, such as Enhanced Oil Recovery (EOR). The goal is to keep excess carbon emissions out of the atmosphere and store the carbon safely underground.

Learn more about CCS with our Carbon Capture and Storage FAQs page.

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What 45Q Means for Ethanol Producers

45Q is a section of the tax code that provides incentives, in the form of tax credits, to encourage companies to invest in carbon capture and storage solutions that reduce carbon emissions to the atmosphere.

The 45Q program was initially implemented in 2008, but the Bipartisan Budget Act of 2018 made important amendments to the tax code that make the credits more valuable for ethanol producers.

Among other changes, the amendments to Section 45Q: 

  • Increase the value of the tax credit from $20 to $50 per metric ton for secure geologic storage projects and from $10 to $35 for CO2-EOR projects

  • Reduce the annual capture requirement from 500,000 metric tons to 100,000 metric tons for ethanol plants and industrial facilities other than electric generating units

  • Allow the capturer of the CO2 to transfer the credit to other entities, enabling flexible business models

These changes make the economics of carbon capture and storage more attractive for ethanol producers, whether they choose to store their carbon emissions themselves or sell it for CO2-EOR or other utilization projects. 

To take advantage of the credits, construction on new CCS projects must begin before January 1, 2024. But first, ethanol producers must evaluate both the economic impact and technical feasibility of CCUS for their operations. 


Battelle is a global leader in carbon management solutions for oil & gas and other industries, including geologic storage assessment, well design and construction, and operations. We are currently applying that expertise to help ethanol producers take advantage of the 45Q tax credits. 

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December 03, 2020
Battelle Insider
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