Colorado Energy Office prepares to launch new tax incentive to reduce industrial air pollution

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Incentives are available to help Colorado factories identify and implement projects that reduce energy costs and improve air quality

Statewide - Friday, Mar. 29, 2024 - The Colorado Energy Office (CEO) announced details for the first Colorado Industrial Tax Credit Offering (CITCO) competitive application cycle Friday, which will open on April 1. With this program, Colorado becomes one of the first states in the nation to offer tax credits for Colorado businesses to invest in  air pollution reduction projects, and the first to use competitive application cycles to prioritize and award this type of funding. 

The industrial sector, which is a leading source of greenhouse gas emissions in Colorado, is notably challenging to clean up due to its reliance on fossil fuels for heating and emissions coming from chemical reactions required in some manufacturing processes. 

“Enabling Colorado’s industrial sector to adopt innovative technologies to reduce greenhouse gas pollution is essential to achieve net-zero emissions in Colorado by 2050,” said CEO Executive Director Will Toor. “This tax credit will help develop the market for these new technologies and make it easier for industrial entities to implement them, and it will also allow for significant air quality improvements in the communities surrounding these facilities.”

CITCO is an important component of the state’s broader strategy to reduce industrial air pollution, which also includes a $25 million investment through Clean Air Program grants and technical assistance, requests for federal funding, and a statutory requirement for 18 of the state’s highest emitting industrial facilities to collectively reduce emissions 20% by 2030 compared to 2015 levels. CITCO will help ensure that Colorado industrial facilities have the financial resources they need to reduce emissions and improve air quality, while continuing to operate and create jobs in Colorado.

HB23-1272 "Tax Policy that Advances Decarbonization" allocates $168 million for this tax credit through the end of 2032. This bill was sponsored by Senators Lisa Cutter and Steve Fenberg and Representatives Mike Weissman and Junie Joseph and signed by Governor Polis following the 2023 legislative session.

Industrial facilities may apply for this refundable tax credit to conduct industrial studies, such as energy and emissions audits,  feasibility studies, or front-end engineering and design studies; or implement improvements that reduce emissions, such as electrification, carbon management, hydrogen utilization, and waste heat recovery. Applicants can apply to reserve tax credits for the current or future tax years, and may submit applications for multiple projects during the same application cycle.

CEO will award up to 30% of approved costs for selected projects, not to exceed $1 million for studies or $5 million for improvements. CEO plans to award $8 million during the first application cycle, but may award more based on the applications it receives. To ensure this investment benefits the communities that are most exposed to air pollution from industrial operations, CEO is prioritizing CITCO funding for projects that reduce co-pollutants and/or are located in disproportionately impacted communities or an ozone nonattainment area.

The upcoming application cycle will be open April 1 through June 30 at 5:00 PM MT. Going forward, CEO will open application cycles twice annually in April and October until 2032 or until all tax credit funding is awarded.

CEO will host an informational webinar for CITCO on April 3 at 2:00 PM MT, in addition to regular office hours from 11:00 AM - 12:00 PM MT on the second and fourth Wednesdays of each month during the application period (April, May, and June). Registration links for CITCO office hours, as well as more information about applicant and project eligibility and how to apply, are available on the CITCO webpage.

In addition to state investments to reduce air pollution from the industrial sector, the U.S. Department of Energy recently awarded the Golden Aluminum facility in Fort Lupton $22.3 million to reduce natural gas consumption, improve process efficiency, and recycle 15% more aluminum scrap.