The U.S. carbon capture and storage sector is absorbing simultaneous pressure from construction-cost inflation and federal policy retrenchment under the second Trump administration, according to the MIT Energy Initiative.

The framing places two distinct stresses on the same project pipeline. Capital costs for industrial carbon capture have climbed with steel, labor and engineering indices over the past several years. Federal policy has moved in parallel to narrow the financial scaffolding developers had been underwriting against.

That scaffolding includes the transferability mechanics of Section 45Q tax credits and the permitting pathway for Class VI injection wells. Carbon capture has carried a heavier capex profile than comparable point-source decarbonization options since the first commercial-scale U.S. projects came online.

That profile made the technology unusually sensitive to inflation. When steel and engineering costs rise faster than commodity revenues or carbon credit values, project returns compress faster than for a wind farm or solar array, where most costs sit in manufactured equipment rather than on-site construction.

The Trump administration's posture compounds the cost problem. The Inflation Reduction Act's 45Q provisions, the principal federal incentive for carbon capture, have come under reinterpretation through Treasury guidance and internal review.

Class VI well primacy transfers to additional states, the regulatory route to expanded saline storage capacity, have slowed. Direct air capture, a 45Q-eligible technology category, has faced particular scrutiny as the administration reshapes climate spending priorities.

The combination has reordered project sequencing at both majors and independents. Announced projects have slipped right on commissioning dates; a subset has paused pending credit clarity. Projects tied to enhanced oil recovery, which monetize captured CO2 through oilfield injection rather than depend solely on 45Q economics, have continued advancing more rapidly than dedicated saline storage builds.

The MIT Energy Initiative frames the next twelve months as decisive for whether delays stretch to a quarter or to a decade. Several milestones will decide.

What milestones decide the next phase?

Class VI primacy decisions in states with major storage potential will set the storage-side schedule. Treasury guidance on 45Q transferability will decide whether non-capture developers can continue monetizing credits through tax-equity structures.

Final investment decisions on the largest trunk pipeline proposals will establish whether the network materializes as a connected system or as stranded segments. Pipeline midstream operators and capture developers must reach FID on overlapping timelines for the network to function as designed.

Why does policy matter more than inflation?

Inflation compresses returns but does not, by itself, kill projects. Federal policy reversals can. If 45Q transferability narrows or Class VI permitting slows further, projects that survive the cost squeeze will still fail to reach financial close.

The MIT analysis treats federal signal as the binding constraint on whether announced capacity converts to operating capacity through 2027. Cost discipline at the engineering level cannot substitute for a workable credit market or a functioning storage permitting regime.

What does this mean for circularity commitments?

Industrial buyers with science-based decarbonization targets have incorporated CCS into their scope 1 reduction pathways. Those commitments carry hard deadlines that buyers will track against project commissioning dates.

A slip from 2026 to 2028 on a major project shifts the buyer's compliance arithmetic for the relevant reporting year. Procurement teams that signed offtake agreements expecting 2026-2027 delivery will renegotiate or face a Scope 1 gap.

Until one of the three binding elements — capture cost, storage tenure, or credit market — moves in a favorable direction, the announced pipeline will continue to look longer than the operating pipeline. The implication of the MIT Energy Initiative's analysis is that policy, not engineering, now sets the timeline.