On July 4, President Trump signed the fiscal year 2025 budget reconciliation bill, famously dubbed the “Big Beautiful Bill.” This legislation has drawn scrutiny, particularly regarding its expansion of the carbon capture and storage (CCS) tax credit, officially called Section 45Q. Many lawmakers are scaling back certain energy tax credits initiated under the Inflation Reduction Act, while simultaneously bolstering one of the government’s costliest subsidies for what is perceived as an ineffective climate technology.
The expansion of Section 45Q raises significant concerns. Currently, verification of how much carbon is actually captured and how long it remains stored underground is nearly impossible. Taxpayers should rightfully question whether their financial contributions are yielding any real benefits in the fight against climate change. Section 45Q had already provided lucrative subsidies to power plants and industrial facilities for capturing carbon dioxide emissions, incentivizing them to either store it underground or repurpose it in industrial processes. The Inflation Reduction Act had already loosened the requirements for this credit, extending it through 2032 and increasing the maximum benefits significantly.
Now, with the “Big Beautiful Bill,” this trend of expanding tax credits continues. A notable increase is seen in the payout for enhanced oil recovery, which allows companies to inject captured carbon dioxide into depleted oil wells to extract more oil. The payout has now climbed to $180 per ton, matching the rate provided for permanent geological storage. This incentivization comes on the heels of extensive efforts by oil, gas, and ethanol companies who have already initiated numerous projects to capitalize on the previous subsidies. The Joint Committee on Taxation predicts this expansion will cost taxpayers an additional $14 billion over the next decade, which is just a fraction of the overall funding that Section 45Q demands. The true financial impact may be even greater because facilities can claim credits for years, with no operational deadline after construction begins before 2033.
Since fiscal year 2010, the federal government has invested more than $2.8 billion in CCS technology through the Department of Energy, with an additional $12.1 billion earmarked in the 2021 infrastructure package. The Trump administration rightly recognized the unviability of many CCS projects, canceling a considerable amount of that funding. The administration concluded these ventures did not fulfill the energy needs of Americans and were economically unfeasible.
Unfortunately, instead of cutting funding for CCS initiatives in the “Big Beautiful Bill,” Congress has opted for expansion. The projects that will benefit from the enhanced 45Q credit have proven to be just as unconvincing as the previously canceled initiatives. The expanded credit turns enhanced oil recovery into a profitable avenue for companies, allowing them to profit from both oil sales and tax credits. This creates a situation where taxpayers essentially fund companies’ windfall profits.
Critics label these subsidies as corporate welfare, funded by the hard-earned money of middle-class taxpayers who gain little in return. The concerns don’t just end there. The expanded credit lacks basic safeguards like emission benchmarks, independent verification, or sufficient taxpayer protections. From 2010 to 2019, the bulk of claims—around 90%—for 45Q credits, which totaled more than $890 million, were non-compliant with EPA reporting regulations. This raises alarming issues of transparency and potential misuse of taxpayer funds.
Beyond the substantial subsidies, this legislation offers tax advantages that allow CCS companies to shield themselves from corporate income taxes entirely. Given the scale, cost, and historic challenges facing these programs, lawmakers should reconsider their approach. The “Big Beautiful Bill’s” provisions simply do not warrant continuation—let alone an expansion—especially when so much taxpayer money hangs in the balance.
The increased payout for enhanced oil recovery and the lack of oversight indicate that lawmakers have handed an unchecked opportunity to the industry, leaving taxpayers responsible for the bill without adequate recipients. This situation exemplifies an ongoing challenge where government support fails to ensure accountability while enabling the capture of more taxpayer dollars by companies targeting profits through enhanced oil recovery.
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