Tax Credits and Carbon Capture: How Ethanol Plants Offset Costs

Ethanol plants are exploring carbon capture technologies to reduce their carbon intensity (CI) scores and qualify for tax credits. Paul Neiffer, via his Farm CPA Report, says the two main methods are point source capture and carbon capture and storage (CCS). The Inflation Reduction Act (IRA) has increased tax credits for carbon capture under Section 45Q and reduced eligibility requirements. Ethanol plants utilizing point source capture can qualify for tax credits of up to $85 per metric ton, while those using CCS may indirectly benefit through reduced CI scores. Lower thresholds for carbon capture eligibility present new opportunities for ethanol plants, he notes. However, Neiffer says the Section 45Z credit, which provides benefits to ethanol plants, is only scheduled until 2027 and may need extension for continued benefits. Ethanol plants may also benefit from Department of Energy funding. Overall, he says plants with carbon capture technology may have an economic advantage over those without it.

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