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
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December 06, 2025 08:30 ET (13:30 GMT)
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