Carbon Capture, Utilization and Storage tax credits and tax equity project financing in the USA: an assessment under bilateral tax treaties and BEPS actions.

This article focuses on Carbon Capture, Utilization and Storage (CCUS) technology and the role of U.S. federal tax credits under Section 45Q of the Internal Revenue Code in incentivizing CCUS deployment. CCUS captures man-made CO₂ emissions for either permanent underground storage or conversion into commercial products, aiming to reduce carbon emissions in line with the Paris Agreement’s climate goals. The U.S. tax credits provide production-based incentives for carbon oxide captured and sequestered or utilized, and recent reforms have enhanced their attractiveness by allowing tax equity financing structures, which enable passive investors to benefit from these credits. The article analyzes how these U.S. CCUS tax credits interact with international tax treaties, World Trade Organization (WTO) rules, and the OECD/G20 Base Erosion and Profit Shifting (BEPS) Project, concluding that the credits align well with these frameworks and do not encourage abusive tax planning or unfair tax competition. It also contrasts the U.S. and European Union approaches to CCUS regulation and incentives, highlighting the absence of a unified global strategy and the need for government support to overcome economic and technological challenges in scaling CCUS projects.