ACCELERATED DEPRECIATION AND CAPITAL ALLOWANCES

Accelerated depreciation lets a business deduct eligible equipment costs from taxable profit sooner than under normal depreciation. Full expensing permits the whole deduction in the purchase year. The business usually deducts the same total amount over the asset's life, but earlier relief improves cash flow and makes the investment cheaper in today's money. Lawmakers can apply the rule broadly or target equipment for direct air capture, biomass processing, CO₂ transport or permanent storage.

The design depends on which taxpayers, assets and purchase dates qualify, how quickly costs may be deducted, and how the allowance interacts with leases, grants, tax credits and business losses. CDR eligibility should distinguish equipment used for net atmospheric or sustainable-biogenic removal from equipment used only for fossil emissions. Sale or loss of qualifying use may require some relief to be repaid. Access also matters. Profitable firms receive the benefit quickly, while firms with tax losses may wait years. Clear asset records and anti-avoidance rules are needed to prevent relabelling or purchase-timing games.

Earlier deductions leave more cash with profitable businesses when equipment is purchased, which can improve project returns and bring forward investment. The rule can operate automatically through tax returns, avoiding a competitive grant process, and can cover capture, processing, transport or storage assets. Stable eligibility may make expected tax savings easier for lenders and investors to model. The effect is strongest for profitable firms making additional purchases. It does not reward removal performance and offers little immediate help to firms carrying tax losses.

An uncapped allowance can cause large near-term revenue losses and reward purchases that would occur anyway. Profitable incumbents can use it immediately, while young CDR firms may wait years for taxable income. Vague asset definitions invite reclassification and disputes, and expiry dates can shift purchases without increasing them. Faster deductions do not ensure that equipment operates, removes atmospheric carbon or meets safeguards. Broad eligibility may also favour capital-intensive methods regardless of wider value.

Evaluation should compare claims and delayed tax revenue with additional qualifying investment, project operation and verified removals. Results should also show who benefits by firm size and profitability. Evidence that the allowance mainly shifts purchase dates, rewards existing plans or supports idle equipment would justify narrower assets, lower rates or a different instrument.

Engagement is most useful when it establishes which assets genuinely support net removal, whether earlier deductions change investment and which firms can use the benefit. Evidence from developers, equipment suppliers, lenders and tax advisers should inform definitions and reporting. Tax and climate authorities, legislators, auditors and competition experts should examine revenue exposure, overlapping subsidies and unequal access.

Governments can change depreciation only where they control a tax on business profits. National legislatures normally hold that authority and revenue agencies administer the deduction. Regional, state and municipal governments may set their own rules where they levy a separate profit-based business tax, although many do not. Alignment across tax levels can reduce duplicate calculations, but each jurisdiction remains responsible for its own eligible assets, rates, audits and revenue effects.