Bennet bill would create tax credit for carbon dioxide removal efforts

U.S. Sen. Michael Bennett speaks during the Colorado Democratic Party’s watch party at Number 38 in Denver on Nov. 5, 2024. (Andrew Fraieli for Colorado Newsline)

U.S. Sen. Michael Bennet will introduce a bipartisan bill Thursday that would establish a new tax credit intended to jumpstart the carbon dioxide removal industry. 

The tax credit would support carbon dioxide removal operations already in place as well as pathways still under development. Qualifying carbon dioxide removal projects would earn tax credits based on the volume in metric tons of net carbon dioxide removed from the atmosphere. 

Carbon dioxide removal can be achieved through nature-based strategies such as soil-based storage, wildland conservation and restoration, and forest management, or through technology-based strategies such as direct air capture.

Bennet, a Democrat, plans to introduce the Carbon Dioxide Removal Investment Act on Thursday alongside U.S. Sen. Lisa Murkowski, an Alaska Republican. The tax credit would be a “technology-neutral” production tax credit, which means the credit will be available to a wide range of carbon dioxide removal methods. The bill establishes criteria that must be met for an approach to qualify, but doesn’t outline specific types.

“Due to climate change, Coloradans are facing rising temperatures, increasingly destructive wildfires, and historic drought. In order to meet our climate goals, we need to significantly cut greenhouse gas emissions — and scale up technologies to capture and remove carbon dioxide in our atmosphere,” Bennet said in a statement. “The Carbon Dioxide Removal Investment Act puts American innovation at the heart of our fight against climate change.”

An existing tax credit for carbon management, under a provision known as Section 45Q, is more structured than the tax credit the bill proposes, so many methods of carbon dioxide removal aren’t eligible.

A 2023 Colorado law directed the Colorado Energy Office to develop a “carbon management roadmap” to guide the state’s carbon reduction goals, with a final version of the plan expected in early 2025. Part of that strategy includes carbon dioxide removal. 

“Colorado is moving rapidly to reduce carbon pollution and expand clean energy, but we know that carbon dioxide removal will also be needed to achieve our climate goals,” Will Toor, executive director of the Colorado Energy Office, said in a statement. “While we have taken important steps at the state level to enable carbon removal, and are developing a comprehensive state carbon management roadmap, we know that federal policy support is essential.”

Patrick Barham, a spokesperson for Bennet, said Colorado is “well-positioned to be a leader” on carbon dioxide removal “given its good geography for underground carbon storage, its world-leading infrastructure for innovation and emerging technologies, and its proven record of policy leadership on climate and clean energy.”

Colorado Gov. Jared Polis has tweaked his greenhouse gas emissions goals as projections show the state is likely fall short of its 2019 goal of reducing greenhouse gas emissions by 26% below 2005 levels by 2025.