For clean coal advocates, the energy bill passed in the House Wednesday reflects the tough reality of getting a comprehensive bill passed by the end of the current session.  Speaker Pelosi indicated last week that the House Bill would incorporate the $10 billion funding mechanism for accelerating investment in carbon capture and sequestration (CCS).  On Tuesday when Democrats introduced the bill, the CCS funding provision was gone.  Instead it included modest changes to existing tax credits targeting integrated gasification combined cycle (IGCC) systems, carbon sequestration and other clean coal technologies.  Such changes include:

• Providing an additional $950 million in additional tax credits (based on a credit of 30 percent of the investment) for certain qualified advanced coal projects, and requiring that companies seeking such tax credits provide for capture and storage of at least 65 percent of its carbon emissions (Sec. 811);
• Providing an additional $150 million in additional tax credits (based on a credit of 30 percent of the investment) for qualifying coal gasification projects that include equipment to separate and sequester at least 75 percent of the project’s total carbon emissions (Sec. 812);

These provisions are well meaning, but if the U.S. intends to rely on CCS from coal-fired power plants as central to long-term greenhouse gas mitigation strategy, it will take much more than a limited tax credit to fuel U.S. research and investment in commercial-scale CCS technology.  The uncertainties surrounding commercial-scale CCS implementation remain vast.  In the absence of a cap-and-trade system to mandate carbon reductions, and clear rules on how CCS fits into that system, investors will have little incentive to make the significant investments in CCS that are necessary to move beyond small pilot-level projects.

For further information about this topic, please contact Akin Gump.