The US energy and climate policy landscape shifted dramatically in July 2025 with the passage of the One Big Beautiful Bill Act (OBBBA). For business leaders considering investments in carbon dioxide removal (CDR) technologies, this legislation reshapes the financial incentives that underpin projects ranging from carbon capture at industrial sites to large-scale direct air capture (DAC).
Key Changes to Section 45Q Tax Credits
A significant update comes in the form of expanded Section 45Q tax credits, the federal subsidy that rewards companies for capturing and storing carbon dioxide:
- Parity Between Uses: Previously, credits favored permanent geologic storage over enhanced oil recovery (EOR) or commercial uses of carbon dioxide. OBBBA equalizes this, setting the credit at $85/ton for both pathways.
- Boost for DAC: Direct Air Capture now earns a much higher incentive. $180/ton, up from about $130/ton.
- Extended Timeline: Projects must begin construction before January 1, 2033, to qualify, giving businesses nearly a decade to act.
- Inflation Indexing: Starting in 2027, credits will automatically adjust for inflation, improving long-term planning.
Why This Matters for Business
For business owners, especially those in energy-intensive industries, agriculture, manufacturing, or data centers, these expanded tax credits present both opportunity and risk. With higher incentives, investments in carbon capture infrastructure may now generate more substantial returns and open up new revenue streams (e.g, selling captured carbon offsets). However, equalizing credits between geologic storage and EOR may increase scrutiny. Critics argue that this favors fossil fuel producers, which could lead to future political or regulatory uncertainty.
Why the Trump Administration Embraces Carbon Management
Incentives in the GOP's bill align with political, economic, and energy-security goals.
Support for Fossil Fuel Industry
Equalizing credits between EOR and storage is a significant win for oil and gas producers. It subsidizes carbon capture tied to continued drilling, effectively lowering the costs of domestic production.
Energy Independence Messaging
By boosting US-based carbon management, the administration can argue it is advancing energy dominance, while still checking a climate box.
Industrial and Jobs Narrative
CDR projects involve construction, engineering, and infrastructure, all of which create jobs in energy and manufacturing-heavy states. This dovetails with a pro-jobs, pro-industry message.
Attracting Corporate Buy-In
Major corporations (Microsoft, Occidental, ExxonMobil) are investing in CDR. Supporting the tax credits builds goodwill with influential business allies while avoiding being seen as "anti-innovation".
The Bottom Line
CDR tax credits are better for businesses post-OBBBA because they are larger and more favorable to a wide range of carbon uses. The administration's incentive is less about climate goals and more about supporting fossil fuels, jobs, and corporate investment.
While OBBBA creates more substantial incentives to pursue CDR projects, executives should carefully weigh market conditions, financing strategies, and reputational factors. For businesses positioned to leverage carbon capture, the recent change may be incentivizing; however, the changes also highlight the need for a thoughtful strategy in navigating both the financial upside and the evolving political and social landscape surrounding carbon removal.