MW How the oil industry's climate-change solution is surviving Trump's attack on green energy
By Jillian Berman and Victor Reklaitis
The carbon-capture story reveals the nation's shifting priorities and inconsistent approach to clean energy and climate change
Back in 2008, Massachusetts Institute of Technology professor Charles Harvey had an idea for a company that he thought would both help the environment and make money. He wanted to become part of a growing industry aimed at removing carbon dioxide and carbon monoxide from the environment.
At the time, Harvey believed that technologies focused on what's called carbon capture would be necessary to tackle climate change. He had difficulty imagining a future in which clean-energy sources would be cheaper than fossil fuels, and he figured companies and policy makers would need to find ways to rid the atmosphere of heat-trapping carbon created by burning fossil fuels and other industrial processes.
Carbon capture refers to a range of approaches that grab carbon oxides and then either store them underground permanently or make use of them, which for the most part means injecting carbon dioxide into oil and gas reservoirs to boost their production. But in the years after Harvey co-founded his company, competing clean-energy technologies developed and advanced, and their costs came down. Harvey's thinking shifted. Instead of running a company focused on carbon capture, he has become a critic of the field, publishing op-eds with titles like "Every dollar spent on this climate technology is a waste" and producing research on the government's extensive subsidies for carbon capture.
Harvey, a professor of civil and environmental engineering, changed his thinking about being involved in the carbon-capture business because "the financial reality changed," he said. "I can't come up with any case where carbon capture and sequestration is a less expensive way to reduce emissions" than investing in renewable-energy sources. Harvey believes that "the way that a company can make money now" with carbon capture is by combining government subsidies for the technology with using the captured carbon for oil production. Some research indicates that carbon capture hasn't had a meaningful impact - at least so far - in combating climate change.
Despite such doubts over carbon capture, U.S. government subsidies for the field received a boost this year, even as President Donald Trump delivered on his campaign promise to wind down most of the Biden era's green-energy programs. The One Big Beautiful Bill Act enacted by Trump and his fellow Republicans this year slashed incentives for solar projects, wind power and electric vehicles established by the Biden administration's Inflation Reduction Act of 2022. But the GOP's massive tax and spending legislation kept and expanded a subsidy for carbon capture that's known as the 45Q tax credit.
As part of the changes, companies that use captured carbon in fossil-fuel production or other industrial processes will receive larger 45Q tax credits, scoring a level of government support that previously only went to carbon-storage projects. Experts say most of the CO2 that's used in what's called "enhanced oil recovery," in which it is injected into reservoirs, ends up staying underground. The carbon-capture story reveals the nation's shifting priorities and inconsistent approach to clean energy and climate change - with supporters arguing the technology is the key to eliminating CO2 from the atmosphere as the world transitions to clean energy, and detractors saying it's a tool used by oil and gas companies to prolong their relevance.
Interviews with lobbyists, critics and carbon-capture supporters indicate that carbon capture ended up as a winner in the OBBBA in large part due to the field's strong links to an oil and gas industry that has close ties to Trump and his fellow Republicans. Most U.S. carbon-capture projects now in operation are connected to enhanced oil recovery, rather than simply underground storage of CO2. The oil industry - especially its leader in carbon capture, Occidental Petroleum $(OXY)$ - made a concerted effort to lobby Trump and other Republicans about the importance of the 45Q tax credit when the GOP bill was taking shape.
But there are widespread concerns - including from supporters of carbon capture - about how the legislation increased tax incentives for the oil industry's favorite climate-change solution while cutting subsidies for solar and wind power and electric vehicles. The Trump administration has also made cuts to federal grants for carbon-capture projects, with more potentially coming. Since technological change is so hard to predict and climate challenge is so significant, some experts argue that a smart policy approach is to back renewables, carbon capture and other technologies - much as people manage their money by having a diverse portfolio of investments.
The key to carbon capture's victory
President Donald Trump signed the One Big Beautiful Bill Act in July.
As Trump campaigned for president and then returned to the White House, Occidental CEO Vicki Hollub made a big push around the 45Q tax credit. Hollub told analysts on an earnings call in February 2025 that enhanced oil recovery is "the next round of technology that's going to add significant barrels" to U.S. oil reserves. "So 45Q is important for the development of the technology," she said on the call, adding that Trump "knows the business case for this - I've had several conversations with him." She said that Occidental officials also had been "talking with members of Congress and senators, and we've met with many of the new cabinet members."
When Hollub spoke with Trump and advocated for the 45Q tax credit, she had the advantage of being a donor to his 2024 presidential campaign, while many advocates for other climate-related programs opposed his White House bid. Hollub co-hosted a Houston fundraising event in May 2024 for Trump and made many donations to Republican candidates and groups in last year's election cycle, including $400,000 to the Trump 47 Committee.
Carbon capture can be used to boost fossil-fuel production, and that helped make it popular as GOP lawmakers crafted the OBBBA, said Frank Maisano, a senior principal at lobbying firm Bracewell, whose clients have included fossil-fuel interests as well as renewable-energy players. Maisano said advocates for carbon capture did not feel like they were on "much of a roller coaster" and "seemed to be in the clear very early," while proponents of wind and solar power did experience ups and downs as the legislation changed. The One Big Beautiful Bill Act in part aimed to pull back on and "almost erase" what Biden administration officials had done on clean energy, he told MarketWatch.
The fossil-fuel industry has put a lot of money behind keeping subsidies for carbon-capture technology or making them bigger. Fossil-fuel interests spent $954 million from 2005 to 2024 on lobbying the U.S. government on carbon capture, according to recent research by MIT's Harvey and a co-author. That represents nearly 90% of the money spent on lobbying around the technology.
At least for now in the U.S., fossil-fuel companies are benefiting more than any other industry from carbon-capture tax subsidies. The key types of carbon capture are "point-source" capture, which involves grabbing emissions from industrial facilities and receives a 45Q tax credit of $85 per metric ton, and "direct-air capture," which sucks CO2 out of the atmosphere and gets a tax credit of $180 per ton. Before the OBBBA, only storage projects got credits at those levels, while "enhanced oil recovery" was at lower levels of $60 per ton for point-source capture and $130 per ton for direct-air capture, known as DAC. Examples of carbon-capture projects include an Archer Daniels Midland $(ADM)$ facility near Decatur, Ill., that does point-source capture for ethanol production, as well as Occidental Petroleum's DAC facility in Ector County, Texas, and its planned DAC facility in Kleberg County, Texas.
The oil and gas industry will account for 40% of the total metric tons of carbon captured at current and proposed facilities, according to a 2024 report from Taxpayers for Common Sense, a nonpartisan federal budget watchdog organization - meaning the industry stands to benefit the most from 45Q subsidies. Cement, on the other hand, represents just 4% of carbon captured by current and proposed facilities.
In response to a request for comment, an Occidental Petroleum spokesman pointed MarketWatch to the Carbon Capture Coalition and didn't respond to follow-up questions. The Carbon Capture Coalition, whose membership includes a range of companies and environmental groups, pushed back on the idea that Occidental's influence and ties to the Trump administration were crucial in achieving the preservation and expansion of the 45Q tax credit. "It really was the smaller producers that had the best argument and were really the leaders in terms of messaging on [Capitol] Hill for this," said Madelyn Morrison, the coalition's director of government affairs.
Carbon capture is "tied for better or worse to the fossil-fuel industry," while other fields are more heavily associated with "addressing the climate crisis," said Anna Littlefield, a carbon-capture program manager at the Payne Institute for Public Policy at the Colorado School of Mines who previously worked as a geologist for Occidental and Anadarko Petroleum. "We're drilling into the subsurface. It requires a rig crew, it requires pipe - it's all the same project operations, and because of that, it's just kind of a natural home for it," she said.
Confusion around costs and inconsistent support
MW How the oil industry's climate-change solution is surviving Trump's attack on green energy
By Jillian Berman and Victor Reklaitis
The carbon-capture story reveals the nation's shifting priorities and inconsistent approach to clean energy and climate change
Back in 2008, Massachusetts Institute of Technology professor Charles Harvey had an idea for a company that he thought would both help the environment and make money. He wanted to become part of a growing industry aimed at removing carbon dioxide and carbon monoxide from the environment.
At the time, Harvey believed that technologies focused on what's called carbon capture would be necessary to tackle climate change. He had difficulty imagining a future in which clean-energy sources would be cheaper than fossil fuels, and he figured companies and policy makers would need to find ways to rid the atmosphere of heat-trapping carbon created by burning fossil fuels and other industrial processes.
Carbon capture refers to a range of approaches that grab carbon oxides and then either store them underground permanently or make use of them, which for the most part means injecting carbon dioxide into oil and gas reservoirs to boost their production. But in the years after Harvey co-founded his company, competing clean-energy technologies developed and advanced, and their costs came down. Harvey's thinking shifted. Instead of running a company focused on carbon capture, he has become a critic of the field, publishing op-eds with titles like "Every dollar spent on this climate technology is a waste" and producing research on the government's extensive subsidies for carbon capture.
Harvey, a professor of civil and environmental engineering, changed his thinking about being involved in the carbon-capture business because "the financial reality changed," he said. "I can't come up with any case where carbon capture and sequestration is a less expensive way to reduce emissions" than investing in renewable-energy sources. Harvey believes that "the way that a company can make money now" with carbon capture is by combining government subsidies for the technology with using the captured carbon for oil production. Some research indicates that carbon capture hasn't had a meaningful impact - at least so far - in combating climate change.
Despite such doubts over carbon capture, U.S. government subsidies for the field received a boost this year, even as President Donald Trump delivered on his campaign promise to wind down most of the Biden era's green-energy programs. The One Big Beautiful Bill Act enacted by Trump and his fellow Republicans this year slashed incentives for solar projects, wind power and electric vehicles established by the Biden administration's Inflation Reduction Act of 2022. But the GOP's massive tax and spending legislation kept and expanded a subsidy for carbon capture that's known as the 45Q tax credit.
As part of the changes, companies that use captured carbon in fossil-fuel production or other industrial processes will receive larger 45Q tax credits, scoring a level of government support that previously only went to carbon-storage projects. Experts say most of the CO2 that's used in what's called "enhanced oil recovery," in which it is injected into reservoirs, ends up staying underground. The carbon-capture story reveals the nation's shifting priorities and inconsistent approach to clean energy and climate change - with supporters arguing the technology is the key to eliminating CO2 from the atmosphere as the world transitions to clean energy, and detractors saying it's a tool used by oil and gas companies to prolong their relevance.
Interviews with lobbyists, critics and carbon-capture supporters indicate that carbon capture ended up as a winner in the OBBBA in large part due to the field's strong links to an oil and gas industry that has close ties to Trump and his fellow Republicans. Most U.S. carbon-capture projects now in operation are connected to enhanced oil recovery, rather than simply underground storage of CO2. The oil industry - especially its leader in carbon capture, Occidental Petroleum (OXY) - made a concerted effort to lobby Trump and other Republicans about the importance of the 45Q tax credit when the GOP bill was taking shape.
But there are widespread concerns - including from supporters of carbon capture - about how the legislation increased tax incentives for the oil industry's favorite climate-change solution while cutting subsidies for solar and wind power and electric vehicles. The Trump administration has also made cuts to federal grants for carbon-capture projects, with more potentially coming. Since technological change is so hard to predict and climate challenge is so significant, some experts argue that a smart policy approach is to back renewables, carbon capture and other technologies - much as people manage their money by having a diverse portfolio of investments.
The key to carbon capture's victory
President Donald Trump signed the One Big Beautiful Bill Act in July.
As Trump campaigned for president and then returned to the White House, Occidental CEO Vicki Hollub made a big push around the 45Q tax credit. Hollub told analysts on an earnings call in February 2025 that enhanced oil recovery is "the next round of technology that's going to add significant barrels" to U.S. oil reserves. "So 45Q is important for the development of the technology," she said on the call, adding that Trump "knows the business case for this - I've had several conversations with him." She said that Occidental officials also had been "talking with members of Congress and senators, and we've met with many of the new cabinet members."
When Hollub spoke with Trump and advocated for the 45Q tax credit, she had the advantage of being a donor to his 2024 presidential campaign, while many advocates for other climate-related programs opposed his White House bid. Hollub co-hosted a Houston fundraising event in May 2024 for Trump and made many donations to Republican candidates and groups in last year's election cycle, including $400,000 to the Trump 47 Committee.
Carbon capture can be used to boost fossil-fuel production, and that helped make it popular as GOP lawmakers crafted the OBBBA, said Frank Maisano, a senior principal at lobbying firm Bracewell, whose clients have included fossil-fuel interests as well as renewable-energy players. Maisano said advocates for carbon capture did not feel like they were on "much of a roller coaster" and "seemed to be in the clear very early," while proponents of wind and solar power did experience ups and downs as the legislation changed. The One Big Beautiful Bill Act in part aimed to pull back on and "almost erase" what Biden administration officials had done on clean energy, he told MarketWatch.
The fossil-fuel industry has put a lot of money behind keeping subsidies for carbon-capture technology or making them bigger. Fossil-fuel interests spent $954 million from 2005 to 2024 on lobbying the U.S. government on carbon capture, according to recent research by MIT's Harvey and a co-author. That represents nearly 90% of the money spent on lobbying around the technology.
At least for now in the U.S., fossil-fuel companies are benefiting more than any other industry from carbon-capture tax subsidies. The key types of carbon capture are "point-source" capture, which involves grabbing emissions from industrial facilities and receives a 45Q tax credit of $85 per metric ton, and "direct-air capture," which sucks CO2 out of the atmosphere and gets a tax credit of $180 per ton. Before the OBBBA, only storage projects got credits at those levels, while "enhanced oil recovery" was at lower levels of $60 per ton for point-source capture and $130 per ton for direct-air capture, known as DAC. Examples of carbon-capture projects include an Archer Daniels Midland (ADM) facility near Decatur, Ill., that does point-source capture for ethanol production, as well as Occidental Petroleum's DAC facility in Ector County, Texas, and its planned DAC facility in Kleberg County, Texas.
The oil and gas industry will account for 40% of the total metric tons of carbon captured at current and proposed facilities, according to a 2024 report from Taxpayers for Common Sense, a nonpartisan federal budget watchdog organization - meaning the industry stands to benefit the most from 45Q subsidies. Cement, on the other hand, represents just 4% of carbon captured by current and proposed facilities.
In response to a request for comment, an Occidental Petroleum spokesman pointed MarketWatch to the Carbon Capture Coalition and didn't respond to follow-up questions. The Carbon Capture Coalition, whose membership includes a range of companies and environmental groups, pushed back on the idea that Occidental's influence and ties to the Trump administration were crucial in achieving the preservation and expansion of the 45Q tax credit. "It really was the smaller producers that had the best argument and were really the leaders in terms of messaging on [Capitol] Hill for this," said Madelyn Morrison, the coalition's director of government affairs.
Carbon capture is "tied for better or worse to the fossil-fuel industry," while other fields are more heavily associated with "addressing the climate crisis," said Anna Littlefield, a carbon-capture program manager at the Payne Institute for Public Policy at the Colorado School of Mines who previously worked as a geologist for Occidental and Anadarko Petroleum. "We're drilling into the subsurface. It requires a rig crew, it requires pipe - it's all the same project operations, and because of that, it's just kind of a natural home for it," she said.
Confusion around costs and inconsistent support
MW How the oil industry's climate-change solution -2-
Even as Congress increased subsidies for carbon capture this year, there isn't agreement over how much that will cost taxpayers. Sheila Olmstead, a Cornell University professor who specializes in the economic impact of environmental policies, puts the cost at more than $100 billion over 10 years, while the Carbon Capture Coalition estimates taxpayers could spend between $14 billion and $17 billion on the credits over the same period.
Meanwhile, the Trump administration's overall stance on carbon capture, which has been hard even for industry players to determine, suggests the administration isn't that serious about supporting the field. Carbon capture fared well in the OBBBA, but back in May, Trump's Department of Energy canceled nearly $4 billion in grants for green projects. The two biggest awards that were nixed were for $500 million each for carbon-capture projects at cement plants, including one in Mitchell, Ind., that's run by Heidelberg Materials (XE:HEI).
The GOP megalaw's approach to 45Q tax credits shows that the Trump administration "recognizes the value of providing incentives for carbon capture and storage," but the action on Heidelberg's grant looks like an "inconsistency," said David Perkins, a senior vice president for sustainability and public affairs at Heidelberg. "What we're seeing in terms of action - at least at this time - would lead you to think that they're not as supportive," he added. Heidelberg has appealed the cancellation.
Multiple published reports have said the Trump administration has been considering canceling grants for even more carbon-capture projects, including for Occidental's project in Texas's Kleberg County. Jessie Stolark, executive director of the Carbon Capture Coalition, said this "rumored round" of possible clawbacks looks much deeper than the coalition had been anticipating, adding that it's "disheartening" but that the field has a lot of momentum. She called it "sort of a mixed bag" for carbon capture this year, given that there have been positive developments such as the expansion of the 45Q tax credit but also setbacks like the Department of Energy's cancellation of grants.
The case for investing in the technology
Advocates for carbon capture say part of the reason it's not making much of a dent in the nation's carbon footprint is because there hasn't been enough investment to make it financially viable.
"We have the technology to do this, and we're not waiting for a eureka moment. We need to iterate on that and come down the cost curve," said Noah Planavsky, a professor at the Yale Center for Natural Carbon Capture. One way to spur activity in the short term is for the government to use subsidies to incentivize companies to invest in the technology, he said.
International climate bodies estimate that CO2 removal will need to account for about 10% of the efforts to slow down global warming in order to meet climate goals, according to Planavsky. It will be decades before other technologies fully replace fossil fuels, and some sectors, particularly agriculture, will continue to produce emissions, he said. But he estimates that of the money currently spent on green energy from both private and public sources, carbon removal makes up much less than 10%.
Carbon capture, utilization and storage, or CCUS, is "the only solution" that has the "capacity to handle the volume of CO2 that we need to get out of the atmosphere and the volume of CO2 that's actively being pumped into the atmosphere every day," said Littlefield at the Colorado School of Mines. "People who don't like CCUS - it's because they don't like fossil fuels, and that's fine. But the fact of the matter is that there is going to be a transition period. We can't just turn everything off, and there really is no better option to address the emissions associated with that transition period."
Still, the very high cost of the technology right now makes it difficult to know whether it's a good idea for the government to incentivize it, said Bruce Usher, a professor at Columbia Business School who studies climate finance. Carbon capture is an expensive technology that is in the early stages of development, he noted, making it very different from something like solar that is already profitable and can accelerate with further funding and incentives.
"It comes back to this big discussion. There's no right answer," Usher said about whether the government should back the development of mature and profitable green technologies through subsidies or use subsidies to boost early-stage technologies to the point where the market eventually adopts them. "There's a lot of analysis suggesting one or the other is more effective."
Stolark at the Carbon Capture Coalition said wind and solar technologies have needed more than 40 years to reach their current levels of viability and effectiveness, and her group is asking for "the same policy structures and treatment that have been afforded other low- and zero-emitting technologies."
In addition, adoption of carbon capture has the potential to cut down on the pollution tied to fossil-fuel production, according to Jack Andreasen Cavanaugh, an expert at the Center on Global Energy Policy at Columbia University's School of International and Public Affairs. Enhanced oil recovery is "beneficial for helping to build out the infrastructure backroom" for carbon capture, he said, and it "can create a much less carbon-intensive barrel of oil, prevent new drilling and prevent larger-scale environmental disruption from all the new drilling and exploration."
'This is an expensive tax credit with a history of waste'
Carbon capture's critics point to its ties to the oil and gas industry as well as questions about whether it's actually effective at fighting climate change. Even some who see value in carbon capture are questioning Washington's support of the technology this year, particularly as the government has pulled back from subsidizing other climate solutions.
'It comes back to this big discussion. There's no right answer. ... There's a lot of analysis suggesting one or the other is more effective.' Bruce Usher, professor of professional practice, Columbia Business School
The Trump administration has been "taking an axe" to many of the Inflation Reduction Act's provisions "in a way that isn't cognizant of how that's going to affect a lot of other pieces of the puzzle," said Heather Boushey, a professor at the University of Pennsylvania's Kleinman Center for Energy Policy and a former economic adviser in the Biden administration. Boushey said that it's important for the U.S. to invest in carbon capture, and that she can see why the field fared well in the GOP megalaw since it's tied to continued use of fossil fuels. But she stressed that an "all-of-the-above strategy" is important in energy policy, saying that she remains hopeful the U.S. government can get back to supporting a wider range of green-energy efforts.
"We have invented many of these clean-energy technologies here in the United States, but we haven't come up with a plan to produce them here," Boushey told MarketWatch. "I don't want the American people to lose out on that, and I think I'm not alone in that."
The structure of the 45Q credit is also a crucial issue, according to some experts. Cornell's Olmstead said it rewards "carbon-intensive production," or the "dirtiest production over the cleanest production." That's because companies receive the credits based on the number of tons of carbon they remove, not whether they're reducing their overall emissions.
Aside from its design, the credit has been plagued by other challenges. For example, a Treasury Department probe in 2019 found that companies claiming a total of about $1 billion in 45Q credits over the past decade often didn't comply with rules from the Environmental Protection Agency, leading the Internal Revenue Service to withhold about half of those credits.
"The bottom line for us is that this is an expensive tax credit with a history of waste, fraud and abuse," said Autumn Hanna, vice president of Taxpayers for Common Sense and a critic of carbon capture. "This is an inefficient use of money. If your goal is reducing carbon emissions, it's a very expensive and inefficient way to do it."
Research from the Congressional Budget Office has also sparked questions about carbon capture's impact. The nonpartisan agency estimated in 2023 that the carbon-capture facilities operating at that time had the potential to capture about 0.4% of the country's total emissions of CO2. If all of the facilities that were proposed or under construction in 2023 were built, they would be able to capture about 3% of the nation's carbon emissions, the CBO found.
"Instead of getting rid of the pollution that you're emitting, you could just stop emitting pollution," said Rachel Patterson, senior policy director at Evergreen Action, which advocates for policies that address climate change. Patterson said the taxpayer support should go toward "just deploying clean energy."
Stolark said it's pushing a false narrative to pit clean-energy solutions against each other, and the Carbon Capture Coalition's view is that "we need all of these technologies." Carbon capture is especially needed, she said, to mitigate the CO2 generated in the production of cement and steel, which are responsible for 12% of global emissions.
Harvey, the former carbon-capture entrepreneur, said he's skeptical that carbon capture can be a viable way to reduce emissions for sectors that are crucial to the economy but also have high carbon emissions. For example, he said getting to zero emissions in cement production would be challenging, because cement plants are located across the country and can't be consolidated. Every city and town needs cement, and it's heavy to move.
MW How the oil industry's climate-change solution is surviving Trump's attack on green energy
By Jillian Berman and Victor Reklaitis
The carbon-capture story reveals the nation's shifting priorities and inconsistent approach to clean energy and climate change
Back in 2008, Massachusetts Institute of Technology professor Charles Harvey had an idea for a company that he thought would both help the environment and make money. He wanted to become part of a growing industry aimed at removing carbon dioxide and carbon monoxide from the environment.
At the time, Harvey believed that technologies focused on what's called carbon capture would be necessary to tackle climate change. He had difficulty imagining a future in which clean-energy sources would be cheaper than fossil fuels, and he figured companies and policy makers would need to find ways to rid the atmosphere of heat-trapping carbon created by burning fossil fuels and other industrial processes.
Carbon capture refers to a range of approaches that grab carbon oxides and then either store them underground permanently or make use of them, which for the most part means injecting carbon dioxide into oil and gas reservoirs to boost their production. But in the years after Harvey co-founded his company, competing clean-energy technologies developed and advanced, and their costs came down. Harvey's thinking shifted. Instead of running a company focused on carbon capture, he has become a critic of the field, publishing op-eds with titles like "Every dollar spent on this climate technology is a waste" and producing research on the government's extensive subsidies for carbon capture.
Harvey, a professor of civil and environmental engineering, changed his thinking about being involved in the carbon-capture business because "the financial reality changed," he said. "I can't come up with any case where carbon capture and sequestration is a less expensive way to reduce emissions" than investing in renewable-energy sources. Harvey believes that "the way that a company can make money now" with carbon capture is by combining government subsidies for the technology with using the captured carbon for oil production. Some research indicates that carbon capture hasn't had a meaningful impact - at least so far - in combating climate change.
Despite such doubts over carbon capture, U.S. government subsidies for the field received a boost this year, even as President Donald Trump delivered on his campaign promise to wind down most of the Biden era's green-energy programs. The One Big Beautiful Bill Act enacted by Trump and his fellow Republicans this year slashed incentives for solar projects, wind power and electric vehicles established by the Biden administration's Inflation Reduction Act of 2022. But the GOP's massive tax and spending legislation kept and expanded a subsidy for carbon capture that's known as the 45Q tax credit.
As part of the changes, companies that use captured carbon in fossil-fuel production or other industrial processes will receive larger 45Q tax credits, scoring a level of government support that previously only went to carbon-storage projects. Experts say most of the CO2 that's used in what's called "enhanced oil recovery," in which it is injected into reservoirs, ends up staying underground. The carbon-capture story reveals the nation's shifting priorities and inconsistent approach to clean energy and climate change - with supporters arguing the technology is the key to eliminating CO2 from the atmosphere as the world transitions to clean energy, and detractors saying it's a tool used by oil and gas companies to prolong their relevance.
Interviews with lobbyists, critics and carbon-capture supporters indicate that carbon capture ended up as a winner in the OBBBA in large part due to the field's strong links to an oil and gas industry that has close ties to Trump and his fellow Republicans. Most U.S. carbon-capture projects now in operation are connected to enhanced oil recovery, rather than simply underground storage of CO2. The oil industry - especially its leader in carbon capture, Occidental Petroleum (OXY) - made a concerted effort to lobby Trump and other Republicans about the importance of the 45Q tax credit when the GOP bill was taking shape.
But there are widespread concerns - including from supporters of carbon capture - about how the legislation increased tax incentives for the oil industry's favorite climate-change solution while cutting subsidies for solar and wind power and electric vehicles. The Trump administration has also made cuts to federal grants for carbon-capture projects, with more potentially coming. Since technological change is so hard to predict and climate challenge is so significant, some experts argue that a smart policy approach is to back renewables, carbon capture and other technologies - much as people manage their money by having a diverse portfolio of investments.
The key to carbon capture's victory
President Donald Trump signed the One Big Beautiful Bill Act in July.
As Trump campaigned for president and then returned to the White House, Occidental CEO Vicki Hollub made a big push around the 45Q tax credit. Hollub told analysts on an earnings call in February 2025 that enhanced oil recovery is "the next round of technology that's going to add significant barrels" to U.S. oil reserves. "So 45Q is important for the development of the technology," she said on the call, adding that Trump "knows the business case for this - I've had several conversations with him." She said that Occidental officials also had been "talking with members of Congress and senators, and we've met with many of the new cabinet members."
When Hollub spoke with Trump and advocated for the 45Q tax credit, she had the advantage of being a donor to his 2024 presidential campaign, while many advocates for other climate-related programs opposed his White House bid. Hollub co-hosted a Houston fundraising event in May 2024 for Trump and made many donations to Republican candidates and groups in last year's election cycle, including $400,000 to the Trump 47 Committee.
Carbon capture can be used to boost fossil-fuel production, and that helped make it popular as GOP lawmakers crafted the OBBBA, said Frank Maisano, a senior principal at lobbying firm Bracewell, whose clients have included fossil-fuel interests as well as renewable-energy players. Maisano said advocates for carbon capture did not feel like they were on "much of a roller coaster" and "seemed to be in the clear very early," while proponents of wind and solar power did experience ups and downs as the legislation changed. The One Big Beautiful Bill Act in part aimed to pull back on and "almost erase" what Biden administration officials had done on clean energy, he told MarketWatch.
The fossil-fuel industry has put a lot of money behind keeping subsidies for carbon-capture technology or making them bigger. Fossil-fuel interests spent $954 million from 2005 to 2024 on lobbying the U.S. government on carbon capture, according to recent research by MIT's Harvey and a co-author. That represents nearly 90% of the money spent on lobbying around the technology.
At least for now in the U.S., fossil-fuel companies are benefiting more than any other industry from carbon-capture tax subsidies. The key types of carbon capture are "point-source" capture, which involves grabbing emissions from industrial facilities and receives a 45Q tax credit of $85 per metric ton, and "direct-air capture," which sucks CO2 out of the atmosphere and gets a tax credit of $180 per ton. Before the OBBBA, only storage projects got credits at those levels, while "enhanced oil recovery" was at lower levels of $60 per ton for point-source capture and $130 per ton for direct-air capture, known as DAC. Examples of carbon-capture projects include an Archer Daniels Midland (ADM) facility near Decatur, Ill., that does point-source capture for ethanol production, as well as Occidental Petroleum's DAC facility in Ector County, Texas, and its planned DAC facility in Kleberg County, Texas.
The oil and gas industry will account for 40% of the total metric tons of carbon captured at current and proposed facilities, according to a 2024 report from Taxpayers for Common Sense, a nonpartisan federal budget watchdog organization - meaning the industry stands to benefit the most from 45Q subsidies. Cement, on the other hand, represents just 4% of carbon captured by current and proposed facilities.
In response to a request for comment, an Occidental Petroleum spokesman pointed MarketWatch to the Carbon Capture Coalition and didn't respond to follow-up questions. The Carbon Capture Coalition, whose membership includes a range of companies and environmental groups, pushed back on the idea that Occidental's influence and ties to the Trump administration were crucial in achieving the preservation and expansion of the 45Q tax credit. "It really was the smaller producers that had the best argument and were really the leaders in terms of messaging on [Capitol] Hill for this," said Madelyn Morrison, the coalition's director of government affairs.
Carbon capture is "tied for better or worse to the fossil-fuel industry," while other fields are more heavily associated with "addressing the climate crisis," said Anna Littlefield, a carbon-capture program manager at the Payne Institute for Public Policy at the Colorado School of Mines who previously worked as a geologist for Occidental and Anadarko Petroleum. "We're drilling into the subsurface. It requires a rig crew, it requires pipe - it's all the same project operations, and because of that, it's just kind of a natural home for it," she said.
Confusion around costs and inconsistent support
(MORE TO FOLLOW) Dow Jones Newswires
December 06, 2025 08:30 ET (13:30 GMT)
MW How the oil industry's climate-change solution -2-
Even as Congress increased subsidies for carbon capture this year, there isn't agreement over how much that will cost taxpayers. Sheila Olmstead, a Cornell University professor who specializes in the economic impact of environmental policies, puts the cost at more than $100 billion over 10 years, while the Carbon Capture Coalition estimates taxpayers could spend between $14 billion and $17 billion on the credits over the same period.
Meanwhile, the Trump administration's overall stance on carbon capture, which has been hard even for industry players to determine, suggests the administration isn't that serious about supporting the field. Carbon capture fared well in the OBBBA, but back in May, Trump's Department of Energy canceled nearly $4 billion in grants for green projects. The two biggest awards that were nixed were for $500 million each for carbon-capture projects at cement plants, including one in Mitchell, Ind., that's run by Heidelberg Materials (XE:HEI).
The GOP megalaw's approach to 45Q tax credits shows that the Trump administration "recognizes the value of providing incentives for carbon capture and storage," but the action on Heidelberg's grant looks like an "inconsistency," said David Perkins, a senior vice president for sustainability and public affairs at Heidelberg. "What we're seeing in terms of action - at least at this time - would lead you to think that they're not as supportive," he added. Heidelberg has appealed the cancellation.
Multiple published reports have said the Trump administration has been considering canceling grants for even more carbon-capture projects, including for Occidental's project in Texas's Kleberg County. Jessie Stolark, executive director of the Carbon Capture Coalition, said this "rumored round" of possible clawbacks looks much deeper than the coalition had been anticipating, adding that it's "disheartening" but that the field has a lot of momentum. She called it "sort of a mixed bag" for carbon capture this year, given that there have been positive developments such as the expansion of the 45Q tax credit but also setbacks like the Department of Energy's cancellation of grants.
The case for investing in the technology
Advocates for carbon capture say part of the reason it's not making much of a dent in the nation's carbon footprint is because there hasn't been enough investment to make it financially viable.
"We have the technology to do this, and we're not waiting for a eureka moment. We need to iterate on that and come down the cost curve," said Noah Planavsky, a professor at the Yale Center for Natural Carbon Capture. One way to spur activity in the short term is for the government to use subsidies to incentivize companies to invest in the technology, he said.
International climate bodies estimate that CO2 removal will need to account for about 10% of the efforts to slow down global warming in order to meet climate goals, according to Planavsky. It will be decades before other technologies fully replace fossil fuels, and some sectors, particularly agriculture, will continue to produce emissions, he said. But he estimates that of the money currently spent on green energy from both private and public sources, carbon removal makes up much less than 10%.
Carbon capture, utilization and storage, or CCUS, is "the only solution" that has the "capacity to handle the volume of CO2 that we need to get out of the atmosphere and the volume of CO2 that's actively being pumped into the atmosphere every day," said Littlefield at the Colorado School of Mines. "People who don't like CCUS - it's because they don't like fossil fuels, and that's fine. But the fact of the matter is that there is going to be a transition period. We can't just turn everything off, and there really is no better option to address the emissions associated with that transition period."
Still, the very high cost of the technology right now makes it difficult to know whether it's a good idea for the government to incentivize it, said Bruce Usher, a professor at Columbia Business School who studies climate finance. Carbon capture is an expensive technology that is in the early stages of development, he noted, making it very different from something like solar that is already profitable and can accelerate with further funding and incentives.
"It comes back to this big discussion. There's no right answer," Usher said about whether the government should back the development of mature and profitable green technologies through subsidies or use subsidies to boost early-stage technologies to the point where the market eventually adopts them. "There's a lot of analysis suggesting one or the other is more effective."
Stolark at the Carbon Capture Coalition said wind and solar technologies have needed more than 40 years to reach their current levels of viability and effectiveness, and her group is asking for "the same policy structures and treatment that have been afforded other low- and zero-emitting technologies."
In addition, adoption of carbon capture has the potential to cut down on the pollution tied to fossil-fuel production, according to Jack Andreasen Cavanaugh, an expert at the Center on Global Energy Policy at Columbia University's School of International and Public Affairs. Enhanced oil recovery is "beneficial for helping to build out the infrastructure backroom" for carbon capture, he said, and it "can create a much less carbon-intensive barrel of oil, prevent new drilling and prevent larger-scale environmental disruption from all the new drilling and exploration."
'This is an expensive tax credit with a history of waste'
Carbon capture's critics point to its ties to the oil and gas industry as well as questions about whether it's actually effective at fighting climate change. Even some who see value in carbon capture are questioning Washington's support of the technology this year, particularly as the government has pulled back from subsidizing other climate solutions.
'It comes back to this big discussion. There's no right answer. ... There's a lot of analysis suggesting one or the other is more effective.' Bruce Usher, professor of professional practice, Columbia Business School
The Trump administration has been "taking an axe" to many of the Inflation Reduction Act's provisions "in a way that isn't cognizant of how that's going to affect a lot of other pieces of the puzzle," said Heather Boushey, a professor at the University of Pennsylvania's Kleinman Center for Energy Policy and a former economic adviser in the Biden administration. Boushey said that it's important for the U.S. to invest in carbon capture, and that she can see why the field fared well in the GOP megalaw since it's tied to continued use of fossil fuels. But she stressed that an "all-of-the-above strategy" is important in energy policy, saying that she remains hopeful the U.S. government can get back to supporting a wider range of green-energy efforts.
"We have invented many of these clean-energy technologies here in the United States, but we haven't come up with a plan to produce them here," Boushey told MarketWatch. "I don't want the American people to lose out on that, and I think I'm not alone in that."
The structure of the 45Q credit is also a crucial issue, according to some experts. Cornell's Olmstead said it rewards "carbon-intensive production," or the "dirtiest production over the cleanest production." That's because companies receive the credits based on the number of tons of carbon they remove, not whether they're reducing their overall emissions.
Aside from its design, the credit has been plagued by other challenges. For example, a Treasury Department probe in 2019 found that companies claiming a total of about $1 billion in 45Q credits over the past decade often didn't comply with rules from the Environmental Protection Agency, leading the Internal Revenue Service to withhold about half of those credits.
"The bottom line for us is that this is an expensive tax credit with a history of waste, fraud and abuse," said Autumn Hanna, vice president of Taxpayers for Common Sense and a critic of carbon capture. "This is an inefficient use of money. If your goal is reducing carbon emissions, it's a very expensive and inefficient way to do it."
Research from the Congressional Budget Office has also sparked questions about carbon capture's impact. The nonpartisan agency estimated in 2023 that the carbon-capture facilities operating at that time had the potential to capture about 0.4% of the country's total emissions of CO2. If all of the facilities that were proposed or under construction in 2023 were built, they would be able to capture about 3% of the nation's carbon emissions, the CBO found.
"Instead of getting rid of the pollution that you're emitting, you could just stop emitting pollution," said Rachel Patterson, senior policy director at Evergreen Action, which advocates for policies that address climate change. Patterson said the taxpayer support should go toward "just deploying clean energy."
Stolark said it's pushing a false narrative to pit clean-energy solutions against each other, and the Carbon Capture Coalition's view is that "we need all of these technologies." Carbon capture is especially needed, she said, to mitigate the CO2 generated in the production of cement and steel, which are responsible for 12% of global emissions.
Harvey, the former carbon-capture entrepreneur, said he's skeptical that carbon capture can be a viable way to reduce emissions for sectors that are crucial to the economy but also have high carbon emissions. For example, he said getting to zero emissions in cement production would be challenging, because cement plants are located across the country and can't be consolidated. Every city and town needs cement, and it's heavy to move.
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MW How the oil industry's climate-change solution -3-
"You'd have to have this insane network of pipes," Harvey said of cutting down emissions in cement production. "It's a super hard problem, but I don't think the answer is going to be [carbon capture and storage]."
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