Greenwashing in the Inflation Reduction Act

With the average surface temperature on Earth up two degrees Fahrenheit–or one degree Celsius–from early nineteenth-century levels, researchers at the National Aeronautics and Space Administration (NASA) deem the scientific evidence of climate change “unequivocal” (NASA 2023). [1] Such rapid warming of the climate and oceans is directly tied to the rampant anthropogenic production of carbon dioxide, methane, and other greenhouse gasses. Consequently, 74% of American adults approve of the United States’ contribution to international climate change reduction efforts. Moreover, 67% of American adults prioritize green energy efforts, particularly solar, hydrogen, and wind power. [2]

On August 16, 2022, President Joe Biden’s administration passed the $891 billion Inflation Reduction Act, marking the “most ambitious investment in combating the climate crisis in world history.” [3] The pillars of the act include investments in clean energy production, renewable energy tax credits, and excess industrial methane production fees. By August 2023, the Inflation Reduction Act had created 170,000 jobs in the clean energy sector and rolled out funding packages of $562 million to The National Oceanic and Atmospheric Administration (NOAA) and $250 million to The U.S. Forest Services (USFS). [4]

Section 45Q of the Inflation Reduction Act focuses on granting tax credits for carbon monoxide and carbon dioxide capture and sequestration. [5] Specifically, for industry and power projects, Section 45Q offers $85 per metric ton of carbon storage in saline and geologic formations, $60 per metric ton for carbon conversion to fuels, chemicals, and other reuse products, and $60 per metric ton for secure carbon storage in oil and gas fields. If the carbon is obtained through direct air capture projects, Section 45Q grants $180, $130, and $130 per metric ton for each carbon sequestration method, respectively. [6] To qualify for the Section 45Q tax credits, a facility must reach the minimum of 100,000 metric tons of captured carbon dioxide per year or 1,000 metric tons if employing direct air capture.

The carbon capture tax credits of Section 45Q of the Inflation Reduction Act aim to promote atmospheric carbon oxide removal and the prevention of its emission. However, ineffective storage practices and the lack of proper monitoring systems weaken Section 45Q's climate impacts, creating loopholes for companies to exploit tax benefits without reducing their carbon footprint.

For example, enhanced oil recovery is a common form of carbon sequestration that results in little to no carbon reduction. Carbon-enhanced oil recovery describes a process in which anthropogenic carbon dioxide is injected into existing oil fields to increase pressure and drive oil toward the surface. [7] The carbon dioxide pushes oil out of micropores in the reservoir rock, swapping places with the oil to become “trapped” in the reservoir rock pores. This process, effectively capturing carbon dioxide, would earn tax credits under the Inflation Reduction Act. However, Section 45Q fails to address the subsequent extraction of that recovered oil. A company benefiting from the carbon sequestration tax credit could then extract and burn the newly accessible oil, potentially releasing more carbon dioxide than originally stored, defeating the purpose of the legislation. [8]

Section 45Q emphasizes that tax credits apply to qualified carbon oxide, which would otherwise be released into the atmosphere as industrial emission. Qualified carbon oxide is measured at the disposal stage, not the capture stage. [9] However, such a definition presents the issue of longevity. Facilities may capture and store carbon oxide semi-permanently with a plan for more permanent storage, earning the tax credit. Yet as ownership changes, companies evolve, and other transitions occur, the responsibility of monitoring and handling this stored carbon oxide becomes ambiguous: companies cannot indeed guarantee permanent carbon storage. Experts point to the issue of carbon leakage in semi-permanent storage practices as a further fault of carbon capture. [10] Poor sealing practices, geological changes, and pipeline ruptures are just a few ways “captured” carbon re-enters the atmosphere. [11] Section 45Q does not directly account for these occurrences.

Lawmakers must revise the Inflation Reduction Act to improve the effectiveness of carbon reduction and removal efforts. As a substantive policy meant to meaningfully address climate change and direct the United States towards a future of renewable energy and carbon neutrality (or ideally carbon-negativity), the Inflation Reduction Act creates loopholes that allow corporations to continue carbon oxide production under the guise of ineffectual “capture” methods. Inaccurate capture measurements create a false notion among the public that carbon oxide levels are lowering, allowing companies to greenwash or advertise a deceitful image of environmentalism. Successful carbon capture will be vital to the energy transition and climate change reversal. [12] Thus, subsequent laws must not remove carbon capture incentives but strengthen carbon capture monitoring and regulation to reinforce the efficacy of the Section 45Q tax credit. By revisiting vague language in the original legislation, policymakers can eliminate the corporate loopholes that have allowed carbon capture efforts to go primarily circumvented. 

Edited by Sophia Berg

Endnotes

[1]  NASA. 2023. "Evidence." Accessed October 9, 2024. https://science.nasa.gov/climate-change/evidence/.

[2] Pew Research Center. 2023. "Majorities of Americans Prioritize Renewable Energy, Back Steps to Address Climate Change." June 28, 2023.

[3] The White House. 2023. "Fact Sheet: One Year In, President Biden’s Inflation Reduction Act is Driving Historic Climate Action and Investing in America to Create Good-Paying Jobs and Reduce Costs." August 16, 2023. https://www.whitehouse.gov/briefing-room/statements-releases/2023/08/16/fact-sheet-one-year-in-president-bidens-inflation-reduction-act-is-driving-historic-climate-action-and-investing-in-america-to-create-good-paying-jobs-and-reduce-costs/.

[4] Ibid.

[5] U.S. Department of Energy. 2023. "IRA and Carbon Management Opportunities in Tribal Nations." Accessed October 9, 2024. https://www.energy.gov/sites/default/files/2023-03/IRA-and-Carbon-Management-Opportunities-in-Tribal-Nations.pdf.

[6] Carbon Capture Coalition. 2023. "45Q Primer." Accessed October 9, 2024. 

[7] U.S. Department of Energy. 2022. "Chapter 8: Carbon Capture, Utilization, and Storage." Accessed October 9, 2024. https://www.energy.gov/sites/default/files/2022-10/CCUS-Chap_8-030521.pdf.

[8] U.S. Department of Energy, National Energy Technology Laboratory. 2024. "Enhanced Oil Recovery." Accessed October 9, 2024. https://netl.doe.gov/research/coal/energy-systems/gasification/gasifipedia/eor.

[9] Baker, Judy. 2023. "Carbon Capture: A Primer." Congressional Research Service, IF11455. Accessed October 9, 2024. https://crsreports.congress.gov/product/pdf/IF/I

[10] Ibid.

[11]  Drax. “How Do You Store CO2 and What Happens to It When You Do?” Drax, accessed October 21, 2024. https://www.drax.com/carbon-capture/how-do-you-store-co2-and-what-happens-to-it-when-you-do/#:~:text=Put%20simply%2C%20the%20most%20straightforward,underground%20for%20millions%20of%20years.&text=Over%20time%2C%20the%20CO2,stored%20for%20over%2010%2C000%20years.

[12] National Center for Atmospheric Research. 2024. "Carbon Capture and Storage." Accessed October 9, 2024. https://scied.ucar.edu/learning-zone/climate-solutions/carbon-capture-storage.