The Section 45Q tax credit for carbon dioxide utilisation has been increased to match the $85 per tonne rate for sequestration, creating a level playing field in the merchant market.
Under the previous law, the tax credit favoured CO₂ sequestration at $85 per tonne, while CO₂ utilisation, which supports critical markets such as food, beverage, and medical, was only eligible for $60 per tonne.
However, the law was changed when President Trump signed the One Big Beautiful Bill Act on 4 July.
The CO2 Solutions Coalition, a CO2-focused lobbying arm of the Compressed Gas Association (CGA), had been lobbying for credit parity since its launch in January 2024.
Rich Gottwald, President and CEO of the CGA, described the news as a landmark win for CO2 users across the US economy.
“CO₂ is vital to countless industries and everyday products, and this legislation finally recognises the critical role these companies play in keeping supply chains running and products on shelves,” he said.
The new law also includes enhanced oil recovery as a valid use of CO2, making it eligible for the tax credit.
“Parity in 45Q is more than a policy fix – it’s a signal that Washington understands how essential CO2 is to the US economy,” added Gottwald.
Speaking in a recent gasworld webinar, Bruce Woerner of Woerner CO2 Consulting warned that incentives like the previous 45Q tax credit have encouraged producers, especially in ethanol, to divert CO₂ away from traditional markets toward sequestration or other uses like sustainable aviation fuel.
“We have already seen companies cancelling contracts or letting them expire, holding back CO2 that would previously have gone to the industrial gas sector,” he said in March.
The 45Q change forms part of the broader One Big Beautiful Bill Act, a sweeping budget law that also raises the semiconductor manufacturing tax credit to 35%, but imposes a 2028 cutoff for the hydrogen production tax credit (45V), among other energy and industrial provisions.
