Two weeks ago, President Trump signed a budget bill that included a $50/ton tax credit for CO2 that is captured and stored underground. While we heartily approve of putting a robust price on carbon (and $50/ton is a fine start), this tax credit provision continues the federal government’s hallowed tradition of ducking the hard issues.
As we previously pointed out, the first major problem with carbon capture and storage (CCS) is the lack of a market price on carbon. Instead, what we have here is the government paying $50/ton, rather than the people who continue to happily shove their externalities off onto everybody else. If Congress thinks it is worth $50/ton to keep that CO2 out of the atmosphere, then Congress should enact a $50/ton carbon tax. But in Washington it is always easier to hand out money to rent seekers than to actually address a problem, no matter how serious it is.
The second major problem remains the lack of any regulatory system ensuring that the CO2 stays where it is put. None. While technically, Treasury requires credit recipients to pay back the credit for any amount of CO2 that escapes, there is no corresponding requirement that the recipients monitor the sequestered CO2 to make sure that has not happened. So if anybody were to ever ask, with a straight face they can say, “There is no data or other indication that it’s anywhere but where we put it.”
Congress told Treasury back in 2008 to develop “regulations for determining adequate security measures for the geological storage of carbon dioxide”, but Treasury has failed to do so. Not surprisingly: Those regulations would have to define how long the CO2 would have to remain sequestered, and the last thing the federal government wants to do is mandate that the CO2 has to remain there for, say, three hundred years. Since no tax credit recipient will be around in 2318, this means that Congress would have to create a new federal agency responsible for the storage of CO2. Good luck with that.
So, in lieu of any sort of answer, even a partial one, to the problem of CO2 emissions, Congress has instead opted to just throw more millions more into the CCS subsidy rathole. Is anyone really surprised by this?