What happens when carbon capture tax credits expire?

The federal Inflation Reduction Act includes generous tax credits for carbon capture and storage (CCS) technology – a process of pumping carbon dioxide and other emissions deep underground. Petrochemical industry leaders – along with state and national politicians – are touting CCS technology as an industry-friendly way to reduce greenhouse gas emissions. But environmental and renewable energy advocates say the technology poses serious risks to surrounding areas and question whether it will actually reduce emissions. Floodlight’s Terry L. Jones examines what could happen when the federal incentives eventually go away. 

Critics of CCS point to projects including Chevron’s mega project in Australia, which failed to capture the percentage of CO2 the gas company initially claimed. If the same happens here, [Institute for Energy Economics and Financial Analysis policy analyst Suzanne]Mattei doubts taxpayers will tolerate the federal government dishing out huge incentives for carbon capture projects. And when those incentives dry up, fossil fuel companies will likely abandon CCS projects and return to business as usual, she said. “With any tax credit programs, you need transparency and accountability for the public, and I’d advise clawback provisions so that if the terms aren’t met, taxpayers are protected,” said Steven Procopio, policy director for the Public Affairs Research Council of Louisiana, a private nonprofit government watchdog group.

Tax cuts primarily responsible for nation’s increasing debt
Congressional Republicans have insisted on reducing the federal deficit without cuts to Medicare, Social Security, defense spending or any new tax increases as a condition of lifting the federal debt ceiling. This leaves massive spending cuts as the only alternative. But as the Center for American Progress’ Bobby Kogan explains, federal revenues would be on track to keep pace with spending indefinitely, and the government’s debt ratio would be declining, if not for the massive tax cuts signed by presidents George W. Bush and Donald Trump. 

Instead, these tax cuts have added $10 trillion to the debt since their enactment and are responsible for 57 percent of the increase in the debt ratio since 2001, and more than 90 percent of the increase in the debt ratio if the one-time costs of bills responding to COVID-19 and the Great Recession are excluded. Eventually, the tax cuts are projected to grow to more than 100 percent of the increase. … Despite the rhetoric of runaway spending, projections of long-term primary spending have decreased, but projections of long-term revenues have decreased vastly more. The United States does not have a high-spending problem; it has a low-tax problem.

Women needed for manufacturing push
The Bipartisan Infrastructure Law and the CHIPS Act include more than $100 billion to boost semiconductor production and expand high-speed internet. These projects alone will create as many as 200,000 jobs. But there aren’t currently enough trained tradespeople to fill them. Stateline’s Casey Quinlan explains how the Biden administration wants to hire a million female workers over the next decade to fill those jobs and others in America’s massive infrastructure and semiconductor chip production push. 

Women were slowly but surely entering more male-dominated occupations before the pandemic, said Betsey Stevenson, an economist and professor of public policy and economics at the University of Michigan who did the analysis with Benny Docter, a senior data and policy analyst at the university. Women lost jobs in education and in the service industry during the pandemic and as they returned to work many shifted to new occupations that reflect changing market conditions, according to their analysis. “I think that the important takeaway is that women can be an important source of labor for the construction industry,” Stevenson said in an email. “

Making most of massive federal funds
Three pieces of recent federal legislation – the Infrastructure Investment and Jobs Act (IIJA), the Inflation Reduction Act (IRA) and the Creating Helpful Incentives to Produce Semiconductors (CHIPS) and Science Act – include trillions of dollars for state and local governments. Now, policymakers are facing challenges of scale, complexity and accountability as they try to implement these funds to improve their communities. Governing’s William D. Eggers and John O’Leary examine their new report on how leaders should meet these challenges. 

Maintain a holistic view of related initiatives: To maximize the impact of federal funding in their communities, state and local agencies must identify links between different investment opportunities and funding streams. Consider, again, the EV market. The IIJA provides $5 billion for EV charging infrastructure, while the IRA offers tax credits for consumers to purchase EVs. If EV chargers aren’t built where EV purchasing demand and adoption is high, or if EV owners lack access to EV chargers in their communities, the combined IIJA and IRA investments may fail to create their intended maximum impact.

Number of the Day
$10 trillion – Amount of money the Bush and Trump-era tax cuts have added to the federal deficit since their enactment. These two tax-cut packages are responsible for 57% of the increase in the nation’s debt ratio since 2001. (Source: Center for American Progress)