Life After GHGRP: The Future of U.S. CCS Tax Credits
On This Topic
- What Happens to CCS Tax Credits If GHGRP Goes Away?
- How Did GHGRP Support 45Q Tax Credit Compliance?
- How Were Enhanced Oil Recovery (EOR) Projects Already Verified?
- How Will 45Q Tax Credits Be Verified Without GHGRP?
- Why Independent Certification Is Different from Regulatory Approval?
- How Do the GHGRP and IRS Verification Pathways Compare?
- What Are the Benefits and Risks of the New Verification Model?
- Why Sproule ERCE for Independent 45Q Tax Credit Verification?
- Why Auditor Independence Matters for 45Q Tax Credit Verification?
- What Does the GHGRP Repeal Mean for CCS Tax Credits?
- Life After GHGRP: Frequently Asked Questions (FAQ)
What Happens to CCS Tax Credits If GHGRP Goes Away?
Every year, thousands of industrial facilities across the U.S. file reports through the Greenhouse Gas Reporting Program (GHGRP), which underpins billions of dollars in decarbonization investment decisions.
That’s about to change. The Environmental Protection Agency (EPA) has proposed eliminating the GHGRP, and with it, the reporting mechanism that has verified carbon dioxide storage for Section 45Q tax credits since 2010. Roughly $85 billion in CCS investment across the United States is tied to the validity and availability of those credits. With the EPA and the Internal Revenue Service (IRS), the U.S. federal tax authority, having introduced real uncertainty about what comes next, independent, third-party audits are emerging as the new verification standard, and CCS operators and their investors need to understand what that shift means before it affects their next tax filing.
How Did GHGRP Support 45Q Tax Credit Compliance?
The Greenhouse Gas Reporting Program has required large emission sources, fuel suppliers, and CO₂ injection sites to report their emissions data annually since 2010, covering an estimated 85–90% of all U.S. greenhouse gas emissions. Within that program, Subpart RR has done the specific job that matters most for CCS: it requires facilities injecting CO₂ into secure geological formations to develop an EPA-approved Monitoring, Reporting and Verification (MRV) plan, track the mass of CO₂ received, injected, produced, or leaked, and report sequestered volumes using a mass balance approach.
That reporting wasn’t just a compliance exercise. The IRS’s 2021 regulations built Subpart RR directly into Section 45Q: operators claiming the credit for CO₂ stored in saline geological formations had to meet Subpart RR’s requirements to qualify. In effect, GHGRP became the federal government’s receipt for every tonne of CO₂ claimed under the credit. Remove that receipt, and the 45Q program needs a new one.
How Were Enhanced Oil Recovery (EOR) Projects Already Verified?
For enhanced oil recovery (EOR) projects claiming 45Q, the relationship has always looked a little different. Operators there have had two compliance paths available: Subpart RR itself, or an alternative route under ISO Standard 27916 combined with Subpart VV, which already required independent certification from a qualified engineer or geologist rather than the self-certification historically allowed under Subpart RR. That existing ISO pathway is part of why the shift toward independent certification for geological storage projects isn’t entirely unprecedented; it brings the saline-storage pathway in line with a model EOR operators have used for years.
How Will 45Q Tax Credits Be Verified Without GHGRP?
On September 12, 2025, the EPA proposed eliminating reporting obligations for 46 of the 47 source categories the GHGRP covers, framing the program as exceeding what the Clean Air Act actually requires and citing roughly $303 million a year in compliance costs to industry. That proposal created an immediate legal gap: without Subpart RR, the mandatory reporting mechanism behind 45Q would simply cease to exist.
The IRS moved to close that gap on December 19, 2025, with Notice 2026-1, a safe harbor for CO₂ disposed of in secure geological storage during the 2025 calendar year. Rather than reporting through the EPA’s e-GGRT system, taxpayers can instead maintain their MRV plan and monitoring activities, prepare an annual report covering the same mass balance and containment information Subpart RR would have required, and have that report reviewed and certified by an independent engineer or geologist, one who is state-registered, fully independent from the taxpayer and any credit claimants, and willing to certify the report under penalties of perjury. Form 8933, the standard 45Q claim form, is still required either way.
Why Independent Certification Is Different from Regulatory Approval?
This is an audit process, not an approval process. The independent certifier’s role is to verify that the numbers in the report are accurate and defensible, not to grant permission for a project to proceed. That distinction matters because it defines what CCS operators should be shopping for when they engage a certification partner: technical rigor and genuine independence, not a rubber stamp.
How Do the GHGRP and IRS Verification Pathways Compare?
Here’s how the two verification paths compare:
- Verifier: Under Subpart RR, oversight was provided through the EPA’s reporting framework. Under IRS Notice 2026-1, certification is performed by an independent, state-registered engineer or geologist.
- Basis for certification: The former relied on reporting through a federal database; the latter relies on a site-specific annual report certified under penalty of perjury.
- Transparency: GHGRP data was publicly available through a federal reporting framework. Under the new pathway, reports are submitted to a private certifier and are not automatically public.
- Scope: Subpart RR applied through a standardized federal framework. The IRS alternative currently applies only to CO₂ stored in secure geological formations during calendar year 2025.
- Permanence: Subpart RR has operated as part of a federal reporting program since 2010. Notice 2026-1 is an interim safe harbor while a longer-term replacement framework remains under discussion.
What Are the Benefits and Risks of the New Verification Model?
The new model has real advantages: site-specific independent certification can produce a more defensible, project-level assessment than a one-size-fits-all federal template, and it mirrors a verification approach the oil and gas industry has relied on for decades to certify petroleum reserves. It also has real risks. Operators were historically permitted to self-certify their Subpart RR reports, a vulnerability the Treasury Inspector General has already flagged, and with taxpayer exposure under 45Q projected to exceed $40 billion, weak accountability in a fragmented certifier market is not a small concern. Notice 2026-1 also only covers 2025; without a permanent regulatory replacement, 45Q claimants face ongoing uncertainty for 2026 and beyond.
Why Sproule ERCE for Independent 45Q Tax Credit Verification?
Sproule ERCE brings exactly what Notice 2026-1 demands, and exactly what the CCS industry now needs more of: full subsurface simulation modelling of CO₂ plume and pressure response, carbon storage assurance services under SRMS and UNFC frameworks, and independent, audit-ready GHG verification reports built for regulators, investors, and insurers. This isn’t a new discipline for Sproule ERCE; it’s the same rigor it has applied to petroleum reserves certification for decades, extended to carbon storage. That includes an established international track record: independent audits supporting 45Q-related insurance programs, advisory work for U.S. and international regulators developing CCS practices, and Competent Person verification on multiple international projects.
Why Auditor Independence Matters for 45Q Tax Credit Verification?
The independence requirement in Notice 2026-1 is the part worth taking seriously. A certifier’s state license is the minimum bar, not the differentiator. What protects an operator’s tax position and an investor’s capital is full organizational independence from the entities being audited, no commercial relationship with the operator or credit claimant that could compromise the certification. That’s the same standard the reserves certification market has long demanded of independent evaluators, and it’s the standard CCS operators and investors should now be applying when they choose a certification partner.
What Does the GHGRP Repeal Mean for CCS Tax Credits?
The regulatory landscape underneath U.S. carbon capture is changing quickly, and it isn’t finished changing. The proposed GHGRP repeal would shift the burden of proof for CO₂ storage from a federal database to independent experts, at least for now, and every signal points toward independent verification becoming a permanent, larger part of how 45Q tax credits get claimed and defended, not a temporary workaround.
- The world is changing regarding 45Q tax credits.
- More and more external validation, in the form of independent audits, is going to be required for these programs going forward.
- Sproule ERCE is uniquely positioned to help with both extensive experience in external audits and verification, and years of experience on matters that directly affect 45Q tax credits in the U.S.
For CCS operators and the investors backing them, the question is no longer whether independent certification will matter; it’s who they trust to do it. That’s a conversation worth having before the next filing deadline, not after.
Life After GHGRP: Frequently Asked Questions (FAQ)
Whether CCS operators still need to report through GHGRP depends on the year. GHGRP hasn’t been formally repealed, so it remains the underlying federal framework, but for the 2025 calendar year, IRS Notice 2026-1 already gives operators claiming 45Q credits the option to use independent certification instead of reporting through GHGRP’s e-GGRT system. For 2026 and beyond, no permanent replacement has been finalized yet, so operators should watch for further guidance.
Section 45Q is a U.S. federal tax credit that rewards companies for capturing and permanently storing carbon dioxide instead of releasing it into the atmosphere. It’s the tax credit that roughly $85 billion in current U.S. CCS investment is riding on, which is why how it gets verified matters so much.
Regarding whether independent audit will replace GHGRP, it looks that way, though nothing is locked in yet. If the EPA’s proposed repeal goes through, independent, third-party audits are expected to become the standard way of verifying CO2 storage for 45Q claims, replacing the federal reporting mechanism GHGRP has provided since 2010.
Sproule ERCE helps with 45Q tax credit compliance by bringing decades of experience conducting independent audits and verification work, plus years of direct experience on matters affecting 45Q tax credits in the U.S., giving CCS operators and investors a trusted, independent partner as the verification process shifts away from GHGRP.
