Carbon Removal in the Bipartisan Infrastructure Law and Inflation Reduction Act

In the last year, the federal government has committed to spend more than $580 billion to combat climate change through the passage of the Bipartisan Infrastructure Law (BIL) and the Inflation Reduction Act (IRA). Within this $580 billion, there is significant funding supporting development and deployment of carbon dioxide removal (CDR) – approaches and technologies that can directly remove excess carbon dioxide from the atmosphere. For the U.S. to meet its goal of net-zero emissions by 2050 and contribute to meeting the global goal of keeping temperature rise to 1.5 degrees C (2.7 degrees F), emissions reductions are critical and a top priority, but CDR will also be needed. The investments in the BIL and IRA provide unprecedented levels of funding for CDR that can help transform the industry and increase the probability of meeting climate goals.

Bipartisan Infrastructure Law Provisions

The BIL was enacted in November 2021, and it includes over $12 billion of investments directly into engineered CDR efforts and the complementary infrastructure needed to support it, and an additional $2.7 billion into land management interventions that could protect and increase carbon sequestration on natural and working lands. These billions of dollars in investment cut across various carbon removal approaches, including direct air capture (DAC), forest restoration and sequestration of captured carbon dioxide. These investments include:

Technological CDR Investments

All funding streams are for five years (FY22-FY26), unless otherwise noted

• $3.5 billion for four regional DAC Hubs, which must each have the capacity to capture and sequester and/or utilize at least one million metric tons of CO₂ per year from one or multiple units.
• $115 million for FY22 for  the DAC Technology Prize Competition, with the funding divided among two pre-commercial prizes and one commercial prize.
• $2.5 billion for carbon storage validation and testing to fund new or expanded large-scale carbon sequestration facilities.
• $2.1 billion for transport of captured CO₂, via the CO₂ Infrastructure Finance and Innovation Act (CIFIA) Program.
• $310 million for CO₂ utilization, via the Carbon Utilization Program, which will support entities procuring products made with captured CO₂.
• $50 million for grants to states to help cover the costs of permitting and monitoring Class VI wells for geologic carbon sequestration.
• $25 million for EPA to advance the permitting process for Class VI wells for geologic carbon sequestration.

Natural CDR Investments

• $100 million for the USFS Collaborative Forest Landscape Restoration Program, which supports partnership-based projects on and adjacent to National Forest Lands, including tribal lands, to enhance forest and watershed health.
• Removes the cap on the Reforestation Trust Fund to unlock $528 million per year for reforestation on federal lands.
• $180 million for the Joint Chiefs Restoration Partnership Program, which allows NRCS and the Forest Service to jointly conduct restoration projects in areas where federal land management impacts private lands.
• $100 million for removal of hazardous forest vegetation for creation of biochar and innovative wood products.
• $400 million for Department of the Interior Grants for Voluntary Restoration on public, tribal and private lands.
• $200 million for post-fire restoration of native vegetation on National Forest System land.
• Over $1.6 billion for EPA geographic programs, which allow entities to complete restoration projects that are in line with a region’s conservation or management plan.

Inflation Reduction Act of 2022 Provisions

In addition to the BIL’s investments, the IRA, which was signed into law in August 2022, included an additional $2 billion for natural CDR alongside tax credits supporting carbon removal technologies expected to be worth several billions more. The section 45Q tax credit, which was originally created in the Energy Improvement and Extension Act of 2008 for carbon dioxide sequestration and first enhanced in 2018, was further expanded as part of the IRA. This tax credit supports technological carbon removal, such as direct air capture. Enhancements to 45Q made in the IRA include:

Technological CDR Investments

• Adding direct pay provisions:
  • Corporate projects can receive direct pay for the credits’ first 5 years.
  • Non-profit organizations and co-ops can receive direct pay for the credits’ full 12 years.
• Increasing the credit funding amounts (facilities must meet prevailing wage and registered apprenticeship requirements to receive the full credit):
  • $180/tCO₂ captured via DAC that’s sequestered geologically
  • $130/tCO₂ captured via DAC and used for beneficial uses or enhanced oil recovery
• Decreasing the threshold for the annual amounts captured to be eligible:
  • Direct Air Capture: 1,000 tCO₂/year
  • Electricity generating facility: 18,750 tCO₂/year
  • All other industrial facilities: 12,500 metric tCO₂/year
• Extending the start of construction date to January 1, 2033.

Natural CDR Investments

Additionally, investment was made in natural CDR pathways including tree restoration and agricultural practices that increase soil carbon. These investments include:

• $450 million for the Landscape-Scale Restoration Program, which supports partnership-based forest restoration projects on state, tribal and private lands.
• $700 million for the Forest Legacy Program that supports conservation of private forests.
• $1.5 billion for the Urban and Community Forestry Assistance Program, which assists communities with urban forestry and tree planting.
• $100 million for Wood Innovation Grants, which provides grant funding for projects and facilities that develop innovative wood products, including climate-beneficial products like biochar or products made from biomass produced from wildfire risk mitigation treatments.

• $8.45 billion for the Environmental Quality Incentives Program (EQIP), which provides cost-share grants and technical assistance to farmers and foresters looking to address resource concerns. IRA funding for EQIP is specifically intended to support the implementation of climate-smart agriculture and forestry practices that can sequester carbon in soils and plants.
• $3.25 billion for the Conservation Stewardship Program (CSP), which is an incentive program available to producers already implementing conservation practices. CSP offers payments for the implementation of new conservation practices, including practices that could sequester carbon.  
• $1.40 billion for the Agricultural Conservation Easement Program (ACEP), which allows landowners and land trusts to put easements on agricultural lands to limit non-agricultural uses and enhance degraded lands. Preventing land use change and restoring degraded agricultural lands can protect existing carbon stocks and increase soil carbon sequestration.

Why These Pieces of Legislation Are Important

In addition to deeply reducing emissions, significant amounts of carbon dioxide removal will be necessary to achieve our climate goals and minimize the worst impacts of climate change. The CDR investments in the BIL and IRA have the capacity to transform the growth of carbon dioxide removal in the United States, across both natural and technological approaches.

The DAC Hubs funding in the BIL provided the largest influx of funding toward CDR technology to date and will help provide critical learnings in terms of technological optimization and social acceptance, as well as a proof of concept as part of the first generation of large-scale DAC plants expected to come online in the mid to late 2020s. Combined with funding for transport and storage of captured CO₂, the full lifecycle of capture from the air to sequestration in the ground is supported through BIL funding. Add to that the IRA more than tripling the 45Q tax credit for carbon sequestration via DAC and other enhancements to increase its efficacy, and the private sector has much stronger incentives to pursue DAC as a CDR technology.

The investments included in the BIL and IRA lay a critical foundation for ecosystem restoration and resiliency, reforestation and climate-smart agricultural practices in the U.S. These programs will benefit private landowners, public lands and tribal lands. In addition to increasing the land carbon sink, these investments will provide communities with increased resiliency from extreme weather events. To accurately quantify the greenhouse gas benefits that these investments provide, however, increased investment in measurement and monitoring is needed.

Now that this funding been enacted, efficient and thoughtful implementation will be key to realizing the full benefits of these CDR activities.