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Saturday, August 8, 2020

What Is the (RECOUPS) Act by Congressman Bergman and Congresswoman Fletcher? Balancing CO2 Reduction and Energy Need Growth

Carbon Emissions and the cost to the economy will likely become increasingly important in the future as populations rise and the need for energy increases. We have a responsibility as a nation to protect our environment through good policy.  As consumption of energy increases, specifically a reemergence of American manufacturing, we will have increases in CO2 emissions that will have an impact on our environment. However, with adjustments such as RECOUPS we can create flexibility in legislation and in turn encourage new CO2 scrubbing and biomass technologies that can balance growth and environmental concerns.This legislation is a start on the path to energy abundance and a clean environment.

Does an increase in energy needs mean we will automatically have more carbon emissions?

Not at all but that is dependent on our ability to innovate industry and green initiatives for cost effective solutions. A study in 2010 helped show that increases in efficiency helped limit the damaging effects of CO2 in the U.S. The research of states indicated, "...that for the past 15 years gains in the efficiency of energy use in the economy, the lowering share of fossil fuels in total energy consumption and lowering of emissions intensity of fuels all contributed to offsetting the effect of Gross Domestic Product (GDP) per capita and the population growth in carbon emission across the US." (Vinuya, DiFurio, & Sandoval, 2020, para 1).

Can Investing Lead to Improved Innovation?

Innovation occurs when intelligent researchers and entrepreneurs discover and implement new technologies that have a market need. I have been working on a theory of cluster innovation and one component is research (R&D) and entrepreneurship through creative destruction can speed up innovation when the environment is advantageous to connecting different economic elements. Part of the process of speeding up the innovative complements is through infusion of cash (i.e. units of labor power) to create new opportunities for market mastery.

Thus, investments are a vital part of pushing green initiatives and creating efficient and cost effective technologies. We cant expect government to pay for everything so we have some responsibility to balance out investment portfolios with green technology initiatives that could potentially have an ROI. Without more investments resources being infused in CleanTech companies that are developing emerging technologies the pace of innovation may be slow. One could suspect that investors from a wide swath of the investment community could consider placing a certain percentage of their portfolio into emerging green technologies (i.e 2-5%) to thwart larger environmental costs and disaster. If you are interested in such investments see a list of firms at Crunch Base.

How Does RECOUPS Work?

By providing a direct pay option for the section 45Q tax credits, the RECOUPS Act would help support domestic energy production while also reducing carbon emissions. Developers that choose to use this option would receive 90% of the tax credit's value.

Creating policies that help develop different and new technologies through flexibility are helpful.

The Tax Credit for Carbon Sequestration (Section 45Q)

Carbon capture and sequestration technologies can reduce greenhouse gas (GHG) emissions from coal- and natural gas-fired power plants, as well as other large industrial sources. The tax credit for carbon oxide sequestration (Internal Revenue Code [IRC] Section 45Q) is intended to promote investment in carbon capture and sequestration. HERE

The Carbon Capture and Storage Coalition

Carbon Capture and Storage technologies remove 90% of CO2 from the atmosphere and place it within underground geological natural vaults for long term storage.
HERE

Read the Carbon Capture Coalition's Cheat Sheet

HERE

Congresswoman Lizzie Fletcher has some more information on the subject HERE.

You can also learn more about congressman Jack Bergman HERE.
Bergman, Fletcher Introduce Carbon Capture Bill
Washington - Representatives Jack Bergman and Lizzie Fletcher (TX-07) introduced H.R. 7896, the Redeeming Effectiveness to Carbon Oxide Utilization Plus Sequestration (RECOUPS) Act of 2020. This legislation would provide a direct pay option for Section 45Q tax credits for carbon capture and sequestration - improving the efficiency and effectiveness of the credit while continuing our work to support domestic energy production and reduce carbon emissions.

Rep. Bergman stated"In the midst of COVID-19, direct pay has become more important than ever to help developers finance carbon capture projects without relying on inefficient and costly methods to monetize tax credits. The RECOUPS Act will help accelerate the development and construction of carbon capture projects currently in progress and encourage the development and deployment of additional projects to help meet mid-century climate goals, create and retain jobs, and support economic growth."

“Investing in carbon capture technology is critical to our energy future and to addressing our most pressing environmental challenges,” said Rep. Lizzie Fletcher.  “I’m glad to partner with Representative Bergman to introduce this bipartisan bill that will help companies take advantage of the 45Q tax credit and help jump start these carbon capture projects.”   

Carbon capture projects often rely on 45Q Carbon Capture and Sequestration tax credits to provide financial incentives and security. These credits have received bipartisan support and were most recently expanded in the Bipartisan Budget Act of 2018. Unfortunately, many businesses are unable to capture the full benefit of the credit depending on their tax liability – forcing developers to pursue more costly and inefficient mechanisms to monetize the credit, for instance by forming partnerships with financial institutions

This legislation would provide a direct pay option for the federal Section 45Q tax credit for geologic storage and beneficial use of carbon captured at industrial facilities, power plants and through direct air capture. Developers that choose to use this option would only receive 90% of the tax credit's value. This will promote efficiency while saving taxpayer dollars.

The RECOUPS Act has received support from the Carbon Capture Coalition, which is composed of nearly 80 businesses and organizations dedicated to reducing carbon emissions, fostering domestic energy and industrial production, and supporting a high-wage jobs base.


(Vinuya, DiFurio, & Sandoval, 2020)

Vinuya, Ferdinand; DiFurio, Ferdinand; Sandoval, Erica; Applied Economics Letters, July-August 2010, v. 17, iss. 10-12, pp. 925-31, Database: EconLit with Full Text

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