45-Series Tax Credits: Part of a Robust ESG Strategy

October 4, 2023

In today’s rapidly evolving ESG (Environmental, Social, and Governance) landscape, corporations and investors are striving to align their environmental and social responsibilities with financial objectives. Tax credits, especially those under Section 45 of the Internal Revenue Code, offer a potent, yet often overlooked, tool to achieve this balance. These credits are not just feel-good initiatives: they’re a crucial part of a financially sound ESG strategy. This blog post aims to shed light on the numerous benefits that 45-series tax credits offer, with a particular focus on 45Q credits.

A Brief Overview: What are 45-Series Credits?

The 45-series credits serve as a catalyst for eco-friendly endeavors, encompassing sectors like renewable energy, carbon sequestration, and the conversion of waste into energy. The scope of covered activities and credit value were recently enhanced under the Inflation Reduction Act (IRA). The IRA also made these credits more accessible by allowing certain entities to receive a “direct pay” cash payment. Moreover, the credits can now be sold or transferred to third parties, enabling credit recipients to receive up-front financing through the sale of the credits their projects generate.

The Star of the Show: 45Q Credits

The 45Q credits are designed specifically for taxpayers engaged in carbon capture and storage or its utilization in defined processes. Simply put, 45Q credits reward entities for capturing carbon and either storing it securely or using it effectively. Projects eligible for 45Q credits may also be able to generate carbon offsets on the voluntary market, making these credits a potent catalyst for emission reduction.

“Carbon Removal, Capture & Sequestration Opportunities and Risks” Kirkland & Ellis. April 2023.

Why 45Q Credits are a Game-Changer

    •  Financial Rewards: Capturing and storing carbon is no small feat and comes with its expenses. The 45Q credits can offset a substantial portion of these costs, making the projects financially viable.

    •  Direct Pay: 45Q credits can be received as fully refundable direct payments within the first 5–12 years of the start of CCUS operations.

    •  Transferability of Credits: One of the standout features of the 45Q credits is their transferability, allowing recipients the flexibility to assign the full or partial credit value to external parties.

Integrating 45-Series Credits into Your ESG Strategy

For forward-thinking organizations and investors, the acquisition of 45-series credits, particularly the 45Q variant, presents a golden opportunity to reinforce their ESG commitments. There are a few items to consider when integrating 45Q credits into your ESG strategy:

Understand the Source:
Before purchasing 45-series credits, it’s vital to understand the projects from which these credits are derived. Ensuring the credits come from compliant and environmentally effective projects not only safeguards your investment, but also aligns with ESG objectives.

Cost-Efficient Offsetting:
By merging the financial advantages from 45Q credits with purchases of voluntary carbon credits, credit buyers can reduce the effective price paid per credit.

Portfolio Diversification:
Incorporating 45Q-supported projects into a carbon credit portfolio offers a balanced mix of regulatory incentives and market-driven advantages, ensuring stability and growth.


45-series credits, and particularly the 45Q credits, are not just financial incentives; they can also be a tool for enhancing the performance of ESG portfolios. Harnessing the potential of these tax credits within an ESG framework paves the way for sustainable financial outcomes, garners investor interest, and drives tangible positive environmental changes.

If you’re looking to take advantage of these opportunities, either as a seller or buyer of credits, Capturiant specializes in bringing projects eligible for 45-series credits to market. With our expertise, you can navigate the complexities of these tax incentives, ensuring that your venture is not only sustainable but also financially rewarding.

This article was written by Will Baird (Director, Capturiant) and Catalina Row (Environmental Consultant, Entoro ESG Advisors).

Disclaimer: This blog post is for informational purposes only and should not be considered as financial or tax advice. Consult your financial advisor or tax professional for personalized guidance.

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