On July 27, 2022, Senator Joe Manchin of West Virginia, a key vote in the United States Senate, announced that he would support legislation providing $369 billion for climate and clean energy action in what could be the most ambitious climate bill ever passed by Congress.
The bill aims to provide billions of dollars in tax incentives to expand renewable energy production in the United States over the next decade, including in the areas of wind, solar, geothermal, battery and other clean energy industries. Companies would receive up to $30 billion in tax credits to expand the production of solar panels, wind turbines and batteries as well as incentives to keep nuclear power plants open. Individual Americans would also receive tax credits that incentivizes the purchase of electric vehicles and making their homes more energy efficient.
Also included in the bill is a hydrogen production tax credit that is structured as a 10-year production tax credit based on the kilograms of “qualified clean hydrogen” produced at qualifying facilities. The base tax credit amount is set at $.60 per kilogram of clean hydrogen but increases to $3.00 per kilogram if prevailing wage and hour requirements are met at the production facility. Additionally, producers may elect to receive direct payments rather than a tax credit.
The bill would also amend Section 45Q of the Internal Revenue Code to include the construction of carbon capture facilities. Under the bill’s provisions, any carbon capture, direct air capture or carbon utilization project that begins construction prior to January 1, 2033 would qualify for the Section 45Q tax credit. The bill increases the Section 45Q tax credit for carbon capture by industrial facilities and power plants to $85 per metric ton for CO2 stored in geologic formations, $60 per ton for the beneficial utilization of captured carbon emissions, and $60 per ton for CO2 stored in oil and gas fields.
The long-term impact of the bill is expected to support emerging energy technologies like carbon capture for manufacturing plants, a new generation of nuclear reactors, and hydrogen fuel capabilities. It is unclear if the bill will pass Congress. If the bill becomes law, however, it will be one of the biggest investments in renewable energy in United States history and a major step towards reducing the country’s greenhouse gas emissions.