Global climate policy is undergoing significant recalibration, with major legislative and regulatory shifts impacting the trajectory of key decarbonization technologies. While carbon capture, utilization, and storage (CCUS) stands to benefit from enhanced incentives, the renewable energy sector, particularly wind and solar, faces new challenges in the United States.
The recently passed "One Big Beautiful Bill" (OBBB) signed into law on July 4, 2025 in the US marks a pivotal moment for CCUS. This legislation significantly enhances tax credits for carbon management projects, bringing financial parity between storing CO2 underground and utilizing it in products or enhanced oil recovery (EOR). Point-source capture for storage holds steady at $85/ton, while utilization and EOR jump to $85/ton, a 42% increase. For Direct Air Capture (DAC), credits for storage remain at $180/ton, with DAC for utilization or EOR rising 38% to the same value. The OBBB also introduces tax credit transferability and Master Limited Partnership (MLP) eligibility, opening new financing avenues for CCUS projects. However, projects with significant ties to “Foreign Entities of Concern” will lose access to these credits from 2026.
Across the Atlantic, the European Union is mirroring this focus on negative emissions. Updates to its Emissions Trading System (EU ETS) under the "Fit for 55" package, which reformed the system to reduce emissions by 62% by 2030 as compared to 2005 levels, could soon integrate negative emissions technologies like DAC and Bioenergy with Carbon Capture and Storage (BECCS), allowing them to carry out tradable credits. This move aims to reward permanent carbon removals and support the EU's intense climate targets.
Despite these policy tailwinds, the practical deployment of CCUS has lagged. To date, 27 DAC plants have been commissioned worldwide, most operating on a small scale, collectively capturing less than 0.01 Mt CO2/year. The primary bottlenecks aren't in capture technologies themselves but in downstream challenges: economics, infrastructure, and permitting. The enhanced 45Q credits aim to tip the scales, particularly for EOR, where vertically integrated oil and gas players may find the economics more compelling due to existing infrastructure. However, a significant concern remains: EOR often re-releases a substantial portion of the captured CO2 back into the atmosphere. Studies and reports highlight the "false promise" of CO2 EOR as a climate mitigation tool due to incentivizing continued oil extraction and potential re-emission.
Renewables Face Uncertainty in the US
In contrast to the support for CCUS, the US renewable energy sector is facing new hurdles. A recent executive order signed by President Trump on July 7, 2025 aims to end subsidies for "foreign-controlled" wind and solar. This order directs the Treasury Department to expedite the phase-out of wind and solar tax credits which were already subject to accelerated phaseout provisions under the OBBB within 45 days. This move risks new projects, particularly those that haven't commenced construction by mid-2026, as they would be subject to a strict "placed in service" deadline of end 2027 to qualify for credits. While tax credits for storage and next-generation clean energy technologies were largely preserved, the uncertainty around wind and solar eligibility is expected to impact capital investment.
These policy developments show a dynamic and evolving global energy transition landscape, where strategic investments, regulatory frameworks, and geopolitical considerations continue to shape the future of climate technologies.
