Carbon Dioxide Removal Investment Act

Bill: 118-s-5369
Sponsor: full_name: Sen. Bennet, Michael F. [D-CO]
Introduced: 2024-11-21
Policy area: Taxation
Latest action: action_date: 2024-11-21
text: Read twice and referred to the Committee on Finance.

Summaries:

tv_txt: II 118th CONGRESS 2d Session S. 5369 IN THE SENATE OF THE UNITED STATES November 21, 2024 Mr. Bennet (for himself and Ms. Murkowski ) introduced the following bill; which was read twice and referred to the Committee on Finance A BILL To amend the Internal Revenue Code of 1986 to establish a technology-neutral tax credit for increased investment in next-generation carbon dioxide removal technologies.

1. Short title This Act may be cited as the Carbon Dioxide Removal Investment Act . 2. Establishment of technology-neutral credit for carbon dioxide removal (a) In general Subpart D of part IV of subchapter A of chapter 1 of the Internal Revenue Code of 1986 is amended by inserting after section 45AA the following new section: 45BB. Technology-neutral credit for carbon dioxide removal (a) In general For purposes of section 38, the carbon dioxide removal credit for any taxable year is an amount equal to the applicable amount per metric tons of net carbon dioxide removal (as determined pursuant to subsection (e)) achieved by a qualifying carbon dioxide removal project during the 12-year period beginning on the date such project was originally placed in service. (b) Applicable amount (1) In general For purposes of subsection (a), the applicable amount shall be— (A) in the case of a qualifying carbon dioxide removal project which uses installed carbon capture equipment to capture point-source carbon dioxide originating from the combustion or processing of biomass feedstocks, $110, and (B) in the case of a qualifying carbon dioxide removal project which is not described in subparagraph (A), $250. (2) Inflation adjustment (A) In general In the case of any taxable year beginning in a calendar year after 2025, the dollar amounts in paragraph (1) shall each be adjusted by multiplying such amount by the inflation adjustment factor for the calendar year in which the carbon dioxide removal occurs. (B) Annual computation The Secretary shall, not later than April 1 of each calendar year, determine and publish in the Federal Register the inflation adjustment factor for such calendar year in accordance with this subsection. (C) Inflation adjustment factor The term inflation adjustment factor has the same meaning given such term under section 45Y(c)(3), except that such section shall be applied by substituting calendar year 2024 for calendar year 1992 . (D) Rounding rule If any amount as increased under subparagraph (A) is not a multiple of $1, such amount shall be rounded to the nearest multiple of $1. (c) Definitions In this section— (1) Carbon dioxide equivalent The term carbon dioxide equivalent means with respect to a greenhouse gas, the quantity of such gas that has a global warming potential equivalent to 1 metric ton of carbon dioxide. (2) Carbon dioxide removal The term carbon dioxide removal means the removal of carbon dioxide from the atmosphere through— (A) the capture of carbon dioxide from the ambient air or upper hydrosphere, and (B) the storage of such carbon dioxide. (3) Net carbon dioxide removal The term net carbon dioxide removal means carbon dioxide removal, net of any associated greenhouse gas emissions (as measured in metric tons of carbon dioxide equivalent on a lifecycle basis). (4) Qualifying carbon dioxide removal approach (A) In general The term qualifying carbon dioxide removal approach means, with respect to any qualifying carbon dioxide removal project, a set of similar technologies— (i) which achieve carbon dioxide removal through— (I) direct air capture and storage, (II) enhanced carbon mineralization and rock weathering, (III) terrestrial biomass-based carbon dioxide removal, (IV) marine-based carbon dioxide removal, or (V) any other means, and (ii) which satisfy each of the following criteria (as determined by the Secretary, in consultation with the Secretary of Energy and, as deemed necessary, the head of any other relevant Federal agency): (I) Expected to provide net carbon dioxide removal based on project-level lifecycle analysis, as described in subsection (e)(2). (II) Has a high likelihood, based on scientific understanding, of storing the captured carbon dioxide for at least 1,000 years, including through geologic storage, utilization, or other means. (III) Demonstrates the ability to quantify net carbon dioxide removal, within a range of plus or minus 20 percent with a 95 percent confidence interval based on public demonstrations and field trials. (B) Terrestrial biomass-based carbon dioxide removal (i) In general In the case of any approach which uses terrestrial biomass to capture carbon dioxide, such approach shall use eligible biomass feedstocks. (ii) Eligible biomass feedstock For purposes of this subparagraph, the term eligible biomass feedstock means a feedstock which is derived from— (I) agricultural wastes and residues from land actively cultivated before the date of enactment of this section, provided that— (aa) there is not less than a 50 percent retention of residues, or (bb) an alternate retention rate or best practice (as certified under clause (iii)(III)(aa)) is achieved, (II) non-invasive organic material grown on brownfield sites or abandoned mine sites, including organic material grown exclusively for purposes of being used by a qualifying carbon dioxide removal project, (III) algae or other aquatic photosynthesizing organisms, (IV) food waste, (V) removal of invasive plant species, (VI) other wastes and residues derived from— (aa) landscape or right-of-way trimming, (bb) biomass removed for wildfire hazard reduction within 200 feet of structures, (cc) wood and paper mill waste, or (dd) downed wood from extreme weather events, or (VII) any other source which is certified pursuant to clause (iii)(III)(bb). (iii) Study and certification (I) Study Not later than 1 year after the date of enactment of this section, the National Academies of Sciences, Engineering, and Medicine, in consultation with the Secretary of Energy and the Secretary of Agriculture, shall complete 2 separate studies with respect to the following: (aa) For purposes of clause (ii)(I)(bb), recommend adequate thresholds for residue retention rates and other best practices for various crops and environmental conditions, with the goal of maintaining soil organic carbon, soil health, and biodiversity. (bb) For purposes of clause (ii)(VII), evaluate the suitability as additional sources for eligible biomass feedstocks of— (AA) biomass grown on marginal lands that have been or are under intensive cultivation, and (BB) forest residues (such as small diameter thinning, limbs, and bark) related to wildfire hazard reduction or ecological forest management with no alternative options for valorization. (II) Feedstock study For purposes of the study described in subclause (I)(bb), such study shall— (aa) assess— (AA) the potential risk of the feedstocks described in such subclause displacing food crop production, decreasing food crop yield, displacing the use of forest residues for durable products, and other direct and indirect land-use impacts, (BB) the impact of use of such feedstocks on forest and agricultural soils, including impacts on erosion and carbon and nutrient cycling, and (CC) the impact of use of such feedstocks on biodiversity, and (bb) provide guidance for robust lifecycle assessment of such feedstocks. (III) Certification Following the completion of each study described in subclause (I), the Secretary of Energy, in consultation with the Secretary of Agriculture, shall, based on the recommendations or evaluations of such study, certify— (aa) for purposes of clause (ii)(I)(bb), any alternate retention rates or best practices, and (bb) for purposes of clause (ii)(VII), any additional sources for eligible biomass feedstocks. (C) Marine-based carbon dioxide removal (i) In general In the case of any approach which uses the physical, chemical, or biological properties of the ocean to achieve carbon dioxide removal, such approach shall use a certified marine carbon dioxide removal approach. (ii) Certified marine carbon dioxide removal approach For purposes of this subparagraph, the term certified marine carbon dioxide removal approach means an approach which— (I) meets the standards established under clause (iii), and (II) is certified under clause (iv). (iii) Standards (I) In general Not later than 1 year after the date of enactment of this section, the Administrator of the National Oceanic and Atmospheric Administration, in consultation with the Administrator of the Environmental Protection Agency and the Director of the Bureau of Ocean Energy Management, shall establish science-based environmental safety standards which apply to all qualifying carbon dioxide removal approaches which use the physical, chemical, or biological properties of the ocean to achieve carbon dioxide removal, with such standards as will ensure that an approach is not likely to have significant adverse environmental impact, which shall include accounting for— (aa) the positive and negative environmental impacts of such approach (including at-site deployment impacts and upstream and downstream impacts), (bb) the level of certainty with respect to the type and magnitude of such impacts, and (cc) the quantity and quality of the body of research related to such impacts. (II) Reversal of negative environmental impacts caused by climate change For purposes of subclause (I), positive environmental impacts of any qualifying carbon dioxide removal approach shall include any local reversal of negative environmental impacts caused by climate change. (III) Reevaluation Not later than 3 years after the establishment of the standards under subclause (I), and every 3 years thereafter, the Administrator of the National Oceanic and Atmospheric Administration, in consultation with the Administrator of the Environmental Protection Agency and the Director of the Bureau of Ocean Energy Management, shall review such standards and, pursuant to the requirements under such subclause, update such standards as necessary. (iv) Certification Not later than 1 year after the date of enactment of this section and every 2 years thereafter, the Administrator of the National Oceanic and Atmospheric Administration, in consultation with the Administrator of the Environmental Protection Agency and the Director of the Bureau of Ocean Energy Management, shall certify any approach which satisfies the standards established under clause (iii). (5) Qualifying carbon dioxide removal project The term qualifying carbon dioxide removal project means a project— (A) which— (i) is owned by the taxpayer, (ii) is engaged in carbon dioxide removal through use of a qualifying carbon dioxide removal approach, and (iii) is placed in service at an established location or set of locations, and (B) the construction of which begins before January 1, 2035. (d) Selection of qualifying carbon dioxide removal approaches (1) In general Not later than 1 year after date of enactment of this section, the Secretary, in consultation with the Secretary of Energy, shall establish a selection process to determine qualifying carbon dioxide removal approaches pursuant to the requirements in subsection (c)(4). (2) Initial list Not later than 18 months after date of enactment of this section, the Secretary, in consultation with the Secretary of Energy, shall, pursuant to the process described in paragraph (1), compile and publish an initial list of qualifying carbon dioxide removal approaches according to requirements in subsection (c)(4). (3) Update Not later than 1 year after the publication of the list described in paragraph (2) and annually thereafter, the Secretary, in consultation with the Secretary of Energy, shall, pursuant to the process described in paragraph (1), compile and publish any additional qualifying carbon dioxide removal approaches according to requirements in subsection (c)(4). (e) Determination of amount of net carbon dioxide removal (1) In general Not later than 1 year after date of enactment of this section, the Secretary, in consultation with the Secretary of Energy and the Administrator of the Environmental Protection Agency, shall establish a process for taxpayers to determine and publicly report net carbon dioxide removal through a qualifying carbon dioxide removal project, as determined based on— (A) project-level greenhouse gas lifecycle analysis, and (B) project-level monitoring, reporting, and verification. (2) Lifecycle analysis For purposes of paragraph (1)(A), the project-level greenhouse gas lifecycle analysis shall— (A) be based on protocols which are subject to such requirements as are determined by the Secretary, in consultation with the Secretary of Energy and Administrator of the Environmental Protection Agency, to be appropriate, (B) include all processes and activities associated with the capture and storage of carbon dioxide, including— (i) any mass and energy inputs and outputs from raw materials, including biomass feedstocks, manufacture, transport, storage, sale, use and disposal, (ii) land use change and other ecosystem perturbations, and (iii) long-term retention of carbon dioxide, (C) calculate net carbon dioxide removal, including accounting for uncertainty associated with the estimate of net carbon dioxide removal, and (D) only exclude any process from such analysis if such process does not significantly change the outcome of such analysis, with such exclusion to be noted and justified. (3) Monitoring, reporting, and verification For purposes of paragraph (1)(B), the project-level monitoring, reporting, and verification shall— (A) be based on protocols which are subject to such requirements as are determined by the Secretary, in consultation with the Secretary of Energy and the Administrator of the Environmental Protection Agency, to be appropriate, (B) include the use of independent third-party verifiers (as certified by the Secretary), and (C) quantify uncertainty associated with measurements and the resulting estimate of net carbon dioxide removal. (4) Goals The process established under paragraph (1) shall seek to— (A) to the greatest extent possible, identify best available tools, models, or default values for embodied emissions in order to facilitate consistency and comparability across qualified carbon dioxide removal approaches with respect to— (i) project-level greenhouse gas lifecycle analysis, (ii) project-level monitoring, reporting, and verification, and (iii) determination of net carbon dioxide removal, (B) include reporting requirements which facilitate transparency and evaluation of the net carbon dioxide removal claimed by the taxpayer, and (C) take into account best practices from other carbon dioxide removal accounting programs in order to minimize inefficiencies and conflicting procedures. (5) Review (A) In general Not later than 3 years after date of enactment of this section, and every 3 years thereafter, the Secretary, in consultation with the Secretary of Energy and the Administrator of the Environmental Protection Agency— (i) shall conduct an panel-based review by external experts (which may include representatives from government, academia, civil society, and the private sector) of the process established under paragraph (1) to improve the requirements for greenhouse gas lifecycle analysis and monitoring, reporting, and verification based on the best available science at the time of such review, and (ii) based on the review described in clause (i), may adjust any requirements applicable under this subsection. (B) Application of updated requirements Any adjustment under subparagraph (A)(ii) with respect to determination of net carbon dioxide removal shall only apply to taxable years beginning after the date of such adjustment. (f) Special rules (1) Only carbon dioxide removal within the United States taken into account The credit under this section shall apply only with respect to carbon dioxide removal which is within— (A) the United States (within the meaning of section 638(1)), (B) a possession of the United States (within the meaning of section 638(2)), or (C) any marine environment which is subject to regulation by the United States. (2) Ownership interests In the case of a qualifying carbon dioxide removal project in which more than 1 person has an ownership interest, except to the extent provided in regulations prescribed by the Secretary, net carbon dioxide removal achieved by such project shall be allocated among such persons in proportion to their respective ownership interests with respect to the gross net carbon dioxide removal from such project. (3) Coordination with other credits (A) Carbon oxide sequestration credit No credit shall be allowed under this section with respect to any qualifying carbon dioxide removal project for any taxable year for which a credit determined under section 45Q is allowed under section 38 for such taxable year. (B) Qualifying advanced energy project credit No credit shall be allowed under this section with respect to any qualifying carbon dioxide removal project for which a credit determined under section 48C is allowed under section 38 for the taxable year or any prior taxable year. (C) Special rule for qualified carbon dioxide removal projects integrated with clean energy generation (i) In general In the case of any qualifying carbon dioxide removal project which produces electricity, hydrogen, or fuel as an output of its qualifying carbon dioxide removal approach, no credit shall be allowed with respect to such electricity, hydrogen, or fuel under section 40B, 45, 45V, 45Y, or 45Z unless such electricity, hydrogen, or fuel is consumed by such qualifying carbon dioxide removal project. (ii) Energy credit and clean electricity investment credit In the case of any qualifying carbon dioxide removal project which includes— (I) any energy property (as defined in section 48(a)(3)) which produces electricity or hydrogen from the process of carbon dioxide removal, or (II) any qualified facility (as defined in section 48E(b)(3)) which produces electricity or hydrogen from the process of carbon dioxide removal, no credit shall be allowed under section 48 or 48E with respect to such energy property or qualified facility. . (b) Elective payment and transfer of credit (1) Elective payment Section 6417 of the Internal Revenue Code of 1986 is amended— (A) in subsection (b)— (i) by designating paragraphs (10) through (12) as paragraphs (11) through (13), respectively, and (ii) by inserting after paragraph (9) the following: (10) The carbon dioxide removal credit under section 45BB. , and (B) in subsection (d)(1)— (i) in subparagraph (E), by striking (C), or (D) each place it appears and inserting (C), (D), or (E) , (ii) by redesignating subparagraph (E) (as amended by clause (i)) as subparagraph (F), and (iii) by inserting after subparagraph (D) the following: (E) Election with respect to carbon dioxide removal credit (i) In general If a taxpayer other than an entity described in subparagraph (A) makes an election under this subparagraph with respect to any taxable year in which such taxpayer has, after December 31, 2024, placed in service any qualifying carbon dioxide removal project (as defined in section 45BB(c)), such taxpayer shall be treated as an applicable entity for purposes of this section for such taxable year, but only with respect to the credit described in subsection (b)(10). (ii) Limitation (I) In general Except as provided in subclause (II), if a taxpayer makes an election under this subparagraph with respect to any taxable year, such taxpayer shall be treated as having made such election for each of the 11 succeeding taxable years. (II) Exception A taxpayer may elect to revoke the application of the election made under this subparagraph to any taxable year described in subclause (I). Any such election, if made, shall apply to the applicable year specified in such election and each subsequent taxable year within the period described in subclause (I). Any election under this subclause may not be subsequently revoked. . (2) Transfer Section 6418(f)(1)(A) of the Internal Revenue Code of 1986 is amended by adding at the end the following: (xii) The carbon dioxide removal credit under section 45BB. . (c) Credit To be part of general business credit Section 38(b) of the Internal Revenue Code of 1986, as amended by sections 13105, 13701, and 13704 of Public Law 117–169 , is amended by striking plus at the end of paragraph (40), by striking the period at the end of paragraph (41) and inserting , plus , and by adding at the end the following new paragraph: (42) the carbon dioxide removal credit determined under section 45BB(a). . (d) Conforming amendment The table of sections for subpart D of part IV of subchapter A of chapter 1 of the Internal Revenue Code of 1986 is amended by inserting after the item relating to section 45AA the following new item: Sec. 45BB. Technology-neutral credit for carbon dioxide removal. . (e) Effective date The amendments made by this Act shall apply to property placed in service after December 31, 2024.