The Economic Impacts of CCUS Tax Credits

By Roger H. Bezdek, Ph.D., Management Information Services, Inc. (MISI)

Carbon capture, utilization and sequestration (CCUS) may be a technology whose time has come and gone, and come back again. Analysts and policy-makers have belatedly realized that any ambitious decarbonization goals are simply not feasible without CCUS. Even advocates of the “Green New Deal” have (grudgingly) accepted the need for CCUS as a necessarily large part of the program.

 

Here we assess the likely economic impacts of the 45Q CCUS tax credits enacted in 2018 and compare these with the impacts of those proposed in 2017. The enacted 45Q tax credits (ETC) provided less incentives than those proposed in 2017 (PTC) – primarily because they contain “sunset” provisions requiring that facilities begin construction by Jan. 1, 2024 to be eligible for the tax credit. The salient question is thus: “How do the likely economic and job impacts of the 2018 enacted 45Q tax credits compare to those proposed in 2017?”

 

Analysis

 

We estimated the impacts of CCUS, 2020-50 in the coal power sector using the “NETL CTUS-NEMS” version of EIA’s National Energy Modeling System (NEMS).1 We estimated the impact on coal-related jobs under the Reference Case and 13 alternative scenarios.2 Job estimates were developed for coal mining, coal power plant construction, coal power plant O&M, Enhanced Oil Recovery  (EOR), saline sequestration and CO2 pipelines. Employment metrics were calculated using multipliers applied to the deployment levels of CCUS technologies. These multipliers are based on economic analyses of the direct and indirect impacts of investment in capital projects.

 

The employment concept used is a full-time equivalent (FTE) job in the U.S. Total jobs were estimated:

  • Direct jobs are those created in the specific activity or process.
  • Indirect jobs are those created throughout the required inter-industry supply chain and in supporting activities.
  • Total jobs are the sum of all of the jobs created.

 

We simulated the economic and job impacts of the scenarios involving assumptions about economic growth, technologies, tax credits and R&D. Here we focus on several subsets of the scenarios to assess the differential impacts of the proposed and the enacted CCUS tax credits:

  • The AEO 2017 “No Clean Power Plan” Reference Case.
  • 2.6 percent annual U.S. GDP growth, high oil and gas prices, and ETC – with and without the DOE CCUS R&D program.4
  • 2.6 percent annual U.S. GDP growth, high oil and gas prices, and PTC – with and without the DOE R&D program.