Carbon Capture Tax Credit

U.S. tax credits for decarbonizing energy systems, like those for carbon capture and hydrogen, can have unintended consequences. For example, the 45Q tax credit incentivizes increased CO2 production to capture and store more CO2, potentially encouraging more fossil fuel use. Similarly, large tax incentives for hydrogen might favor renewable natural gas, which may not reduce emissions as effectively as other methods. These design issues highlight challenges in balancing decarbonization goals with environmental justice and effective policy implementation.