However, much of this funding has since been withdrawn.38 In 2025, the “One Big Beautiful Bill” further amended 45Q, bringing tax credits for utilization in line with those for sequestration: $85/ tonne CO2 from point sources and $180/tonne from DAC. Furthermore, the 2025 changes brought forward inflation adjustment by one year, starting in 2027.39 The 45Q credit pays out to operators over 12 years provided construction starts before 2033.40 While the final bill has enhanced the position of carbon utilization under 45Q, the preceding political and regulatory volatility has contributed to a sense of heightened risk around US climate subsidies among investors. In Canada, the federal government provides a CCUS Investment Tax Credit (ITC), introduced in 2024 via the Income Tax Act. The scheme provides a tax credit covering between 37.5% and 60% of eligible capital costs up to 2030, depending on technology. From 2031 and 2040, the ITC rates will be halved and from 2040 phased out completely.41 Canada has also implemented Clean Fuel Regulations (CFR), under which e-fuels projects can generate credits worth on average C$133.20/ tonne.42 On a provincial level, the Alberta Carbon Capture Incentive Program (ACCIP) also provides grant funding of 12% of eligible capital costs for CCU projects which permanently sequester CO2.43 Europe The EU regulatory environment is composed of a range of measures which have been introduced and revised over time. The result is a complex system of fragmented regulation, where member states have also implemented their own national- level frameworks. Overall, the EU’s CCU ambition is integrated with CCS and carbon dioxide removal (CDR) through the Industrial Carbon Management Strategy. The strategy outlines the EU’s intention for CO2 to become a traded commodity within the single market by 2040. It envisions that 280 Mtpa CO2 will need to be captured by 2040, of which one third (~92 Mtpa) could be utilized.44 The EU’s regulatory levers currently focus on three delivery areas: the EU Emissions Trading System (EU ETS), e-fuel supply mandates and innovation support. The EU ETS currently only allows for carbon stored permanently in products to be counted against carbon price obligations, creating a level of incentive for carbonated aggregates and concrete. An upcoming EU ETS review in 2026 is expected to consider a number of changes which could enable CCU. This includes considering charging at the point of emission to atmosphere (rather than point of capture), whether to recognize non-permanent CCU and whether to include CDR.45 The EU’s e-fuels measures focus on increasing the cost of counterfactual fuels to drive demand for CCU-derived alternatives. The Renewable Energy Directive (RED III) is the principal EU renewable fuels policy, which includes specific mandates and rules for e-fuel use across the bloc. At a minimum the regulation requires that FIGURE 7 Political and regulatory volatility has contributed to a sense of heightened risk around US climate subsidies among investors. Penalty calculation under ReFuelEU Aviation regulations $8,348$15,104 $796$7,552x2 02,0004,0006,0008,00010,00012,00014,00016,000 e-SAF reference price Conventional aviation fuel priceConventional fuele-SAF Penalty Difference between cost of conventional fuel and e-SAF Penalty$/tonne Source: Wood Mackenzie Lens Hydrogen. Defossilizing Industry: Considerations for Scaling-up Carbon Capture and Utilization Pathways 15

Defossilizing Industry Scaling-up CCU 2025