Republicans Didn’t Kill 45Q. They Saved It.
Author
Alexander M. Economides
Purpose
This article was written independently by Alexander M. Economides and originally published on LinkedIn. It was developed to examine the political and economic forces that underpin the durability of the 45Q carbon-capture tax credit and to explore what that durability means for investors, project developers, and the future of U.S. energy policy.
Original Article
The political and economic structure behind America’s most durable climate incentive
In late 2024, shortly after Trump won the election, I authored an article for Enerdatics stating that I did not expect the incoming administration to eliminate 45Q and 45V tax credits. At the time, the prevailing narrative was that the Republican victory would lead to the destruction of those two climate-linked subsidies; that did not happen. In fact, Republicans expanded 45Q.
I do not think that outcome was incidental. The core of my argument then was not ideological; it was political and economic. I believed many analysts were misunderstanding the structure of the credits themselves, particularly 45Q.
45Q is an environmental policy that aligns unusually well with industries, regions, and constituencies that Republicans want to support. Carbon capture, enhanced oil recovery, natural gas infrastructure, refining, petrochemicals, industrial development, pipeline systems, and related engineering activity are heavily concentrated in economically important regions, many of them politically conservative.
That creates a different political dynamic from policies associated with replacing existing energy systems. Coal subsidies would appeal to the political right; wind and solar subsidies appeal to the left. Their respective prospects rise and fall depending on which party is in charge; 45Q is different.
Democrats support 45Q because it reduces emissions. Republicans support it because it aids industry, infrastructure, jobs, and domestic energy production. Neither side needs to betray its worldview to support the policy. And both sides can use 45Q to create and claim victories, making it unusually durable.
By contrast, the credits and subsidy structures facing the greatest political pressure are those that prescribe specific technological pathways (such as green electrolysis) rather than simply rewarding technology-agnostic outcomes. 45V illustrates this distinction well. Unlike 45Q, which rewards a broad outcome, 45V attempts to restrict eligibility to specific production pathways, making it inherently more vulnerable to political and regulatory revision.
Some corporations have sought to reduce or circumvent those restrictions, and they may succeed because large industrial projects create their own political inertia. If major blue hydrogen developments, like Exxon’s currently paused project in Baytown, TX, proceed at scale, they could resolve the political tension surrounding 45V, and give Congress justification to preserve or expand the tax credit rather than abruptly terminate it in 2027. If that happens, and large-scale blue hydrogen projects gain broader access to 45V treatment, electrolysis will find it extremely hard to compete.
As I wrote about last week, the United States and global economy will require enormous, growing quantities of energy for decades to come. Reducing support for viable energy systems, simply because they fall outside the preferences of the currently favored political coalition, will prove shortsighted. But investors should still pay attention to political durability, because they should not trivialize regulatory risk.
There is a difference between subsidies that reinforce existing industrial systems and subsidies that depend on narrow political or technological preferences remaining intact indefinitely. That distinction is one reason I continue to view carbon capture projects with reasonable economics as structurally better positioned than projects dependent entirely on fragile policy assumptions.
The broader lesson is simple: the most durable U.S. energy policies are the ones both Republicans and Democrats can support, even if their reasons may be different.
Source Links:
https://corporate.exxonmobil.com/news/viewpoints/low-carbon-hydrogen
https://www.varnumlaw.com/insights/how-new-tax-legislation-impacts-clean-energy-tax-credits/
https://www.linkedin.com/pulse/energy-transition-only-expansion-alexander-economides-sbasc
Tags: 45Q, Carbon Capture, Energy Policy, Tax Credits, Carbon Management, Hydrogen, Regulatory Risk, Energy Transition