CCUS After the "Cheap Wins": How 45Q and the CCUS ITC Shape the Decarbonization Investment Case
CCUS is not a first resort. It's a late-stage, high-impact lever that becomes strategically unavoidable once low-cost levers are exhausted.
By Koorosh Behrang • • 8 min read
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$85/t
45Q geologic storage credit
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$180/t
45Q direct air capture credit
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60%
Canada CCUS ITC for DAC (to 2030)
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The Decarbonization Ladder: From Low-Hanging Fruit to CCUS |
Industrial decarbonization rarely follows a single "silver bullet" pathway. In practice, most facilities move through a sequenced abatement curve: first capturing low-cost operational gains, then pursuing deeper — but increasingly expensive — technology shifts. CCUS becomes most relevant after the "cheap wins" have been largely harvested.
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Low-Cost Levers
$0–$30/tCO₂e
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Energy efficiency (motors/VFDs, heat recovery, controls optimization), maintenance, steam trap programs, compressed air management, operational setpoint optimization. |
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Mid-Cost Levers
$30–$100/tCO₂e
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Fuel switching (coal to gas, gas to electrified heat), onsite renewable power/PPAs, material substitution and process tweaks. |
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High-Cost Levers
$80–$200+/tCO₂e
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Full process redesign, new furnaces/chemistries, hydrogen, e-fuels, high-temperature electrification, CCUS (point-source capture), and carbon removal. |
This ladder is exactly why strategy needs to be dynamic: the marginal cost of the next tonne abated rises as options are exhausted, and the optimal mix varies by site, sector, grid, and policy regime.
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CCUS Is Expensive — So Cost Per Tonne Matters |
The central investment question is not whether CCUS "works" technically, but what it costs per tonne abated — inclusive of capture, compression, transport, storage, and monitoring — then netted against policy value.
Representative Cost Signals
• Cement capture (post-combustion, CO₂ avoided basis): ~US$88–$161 per tonne depending on plant scale and context
• Industrial capture costs vary widely by sector, CO₂ concentration/pressure, capture fraction, and energy prices
• Storage costs can be single-digit to low tens of dollars per tonne in favorable onshore basins, but rise in less favorable or offshore contexts
Implication
Once a facility has captured efficiency gains and feasible fuel switching, the remaining abatement often sits in the high-cost tail. That is exactly where CCUS becomes an "inevitable" pathway — but only if policy and markets close the gap between abatement cost and abatement value.
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Why Policy Support Is Not Optional for CCUS |
Because the cost is high and the asset life is long, CCUS investment typically requires a stack of policy support:
Carbon Price / Compliance ValueETS, OBPS/TIER-type systems, LCFS/CFR-type systems where applicable. |
Tax IncentivesTo lower capex and/or create per-tonne revenue for captured and stored emissions. |
Infrastructure EnablementTransport + storage hubs and permitting certainty for long-lived projects. |
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Incentive Design: Output-Based (45Q) vs Capex-Based (Canada CCUS ITC) |
United States — Section 45Q (Per-Tonne Credit)
45Q is structured as a production/output credit: value accrues in proportion to verified tonnes captured and securely stored or utilized. It embeds strong labor standards as a gateway to the highest credit values and includes minimum capture thresholds that differ by facility type.
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$85/t
Geologic storage (point-source)
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$60/t
Utilization / EOR (typical)
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$180/t
Direct air capture (storage)
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Canada — CCUS Investment Tax Credit (Refundable % of Capex)
Canada's CCUS ITC is primarily a refundable investment credit applied to eligible expenditures, with rates differentiated by capture type and a time-based step-down.
Design Distinction That Matters
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45Q improves project economics through ongoing per-tonne revenue (performance-linked). |
Canada's ITC de-risks deployment by reducing upfront capital intensity (investment-linked). |
In practice, the "better" policy depends on what's binding for the project: the financing hurdle (capex shock) or the operating economics (per-tonne net cost).
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Where TerraNova Fits: Making CCUS Investable |
Most organizations still evaluate decarbonization options using static MACCs — single-year costs, average assumptions, limited policy integration. That approach routinely mis-prices CCUS because it fails to treat incentives and carbon markets as dynamic financial variables.
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Dynamic MACCs Facility and pathway specific — shows how marginal abatement cost evolves as cheaper levers saturate. |
Policy-Aware Abatement Value Models incentive stacks explicitly (tax credits + carbon pricing + compliance exposure), turning "$/t cost" into net abatement economics. |
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Scenario Stress Testing Carbon price trajectories, incentive step-downs, energy price cases, capture rate sensitivity, and timing. |
Finance-Grade Outputs NPV/IRR/payback by lever, portfolio constraints (capex limits, downtime windows), and sequencing logic. |
Bottom Line
CCUS is not a first resort. It is a late-stage, high-capex, high-impact lever that becomes strategically unavoidable in many industrial pathways once low-cost levers are exhausted. But for CCUS to scale, economics must be engineered through credible policy design — and that means translating incentives like 45Q and Canada's CCUS ITC into bankable, scenario-tested investment cases.
Endnotes
1. Canada's Carbon Management Strategy (Government of Canada). 2. CO₂ Capture in the Cement Industry (IEA GHG R&D Programme). 3. Cost of Capturing CO₂ from Industrial Sources (U.S. DOE NETL). 4. Cost of CO₂ Storage (Global CCS Institute, 2025). 5. CRS In Focus: Section 45Q Tax Credit for Carbon Sequestration (Congress.gov). 6. Canada Revenue Agency: CCUS Investment Tax Credit rates (2022–2040). 7. Treasury/IRS final regulations (TD 9944) on credit for carbon oxide sequestration.
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About the Author Koorosh BehrangFounder, Climate Decode Koorosh leads Climate Decode's market intelligence platform, working at the intersection of carbon markets, industrial decarbonization, and corporate compliance strategy. |
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