Texas refineries and other industry along the Buffalo Bayou dredged to form the Houston Ship Channel located about 4 miles east of downtown Houston, Texas shot aerially via helicopter from an altitude of about 500 feet at sunrise.
Capturing the $100 Billion Carbon Management Opportunity in Texas
The state’s existing workforce, infrastructure, and geological assets make it a natural fit to lead in the new carbon economy, and recently resolved federal policy makes the case even stronger.
Texas has long been a byword for energy leadership, whether that’s in its more-than-century-old oil industry or its position as the number one state in the nation for solar and wind capacity. Another accolade could soon be in reach for the Lone Star state: carbon management pioneer. By utilizing its world-class workforce, pipeline expertise, and unbeatable geological assets, Texas can be the global leader in the new multi-billion-dollar economy of storing and utilizing carbon — creating jobs, revenue, and cementing its status as a first-mover state.
Why now is different
The passage of the One Big Beautiful Bill Act was a significant moment for nearly every energy technology in the United States, but holds particular promise for carbon management — an emerging industry that creates value from the carbon dioxide produced from industrial activity, either by capturing and reusing it or by storing it. This can take the form of point-source carbon capture from industrial waste streams, direct air capture (DAC), pipelines to transport the carbon dioxide for various end uses, and using geological formations to store the carbon.
One of the critical policies for carbon management is the 45Q carbon oxide sequestration tax credit. Before July 2025, the tax credit was calculated based on the specific features of the project. Under that formulation of the credit, outlined in the Inflation Reduction Act, direct air capture projects qualified for more credit than point-source capture, and projects that stored the captured carbon in permanent storage qualified for more credit than those that sold or used the carbon for further industrial processes. However, the OBBBA modified the credit by raising the value of projects that utilize or sell carbon to equal that of projects that sequester carbon, for both point-source capture facilities and DAC facilities.
Exhibit 1
These changes will have a significant impact on the carbon management industry, closing the cost gap for more types of projects and presenting highly significant financial and job creation opportunities in states that pursue projects and infrastructure supportive of a carbon management economy.
Texas is poised to lead this growing industry
The increased value in 45Q presents a prime opportunity for Texas’s industrial clusters to source carbon at scale and unlock its considerable economic potential. Major industrial activities in Houston, San Antonio, Austin, Dallas-Fort Worth, Corpus Christi, and East Texas represent both sides of the supply and demand equation for carbon management processes, creating the potential for a homegrown industry.
Existing cement, refining, petrochemical, and plastic facilities offer both abundant carbon dioxide streams as well as strong demand for the captured carbon in order to produce urea, synthetic fuels, and other materials. The state offers a large carbon dioxide pool as industry produces over 367 million metric tons (Mt) of CO2 annually statewide, including power generation. Furthermore, the existing 2,325 miles of CO2 pipeline infrastructure, accounting for over 40% of the entire CO2 pipeline infrastructure in the US, can provide the needed infrastructure support to move the carbon where it is needed.
Beyond capturing and utilizing carbon, Texas’s subsurface geography provides unmatched long-term carbon storage capacity. The Department of Energy has estimated that Texas possesses over 1.6 billion Mt in potential storage capacity — equivalent to 4,000 years of today’s carbon output in the state. Texas offers an extensive carbon storage basin through depleted oil and gas reservoirs, and deep saline aquifer formations, which allow for proven containment with reduced costs and technical risks.
This storage capacity can be monetized. Companies that sequester the carbon dioxide underground are eligible to receive the federal 45Q tax credits, while an additional revenue stream can be created through the sale of carbon credits in voluntary carbon markets. Momentum is also building on the regulatory front: the EPA proposed approval of Texas’s Class VI underground injection well primacy application in June 2025. This represents one of the critical steps that will allow the state to streamline permitting for storage and accelerate carbon management.
Given this profile, over $10 billion in investments in carbon management are already flowing into Texas. Occidental Petroleum is investing $500 million to build the world’s largest DAC project in the Permian Basin, with the potential to capture 500,000 metric tons of carbon dioxide from the atmosphere. ExxonMobil’s acquisition of the 1,300-mile CO2 Denbury pipeline for $1.9 billion is also a critical infrastructure investment to facilitate carbon transportation in the Gulf. In Baytown, ExxonMobil is developing a $7 billion blue hydrogen facility (hydrogen produced via natural gas with carbon capture), the largest of its type in the world, to fuel its olefins plant and capture over 7 Mt of carbon annually. These projects demonstrate the scale and tangibility of Texas’s carbon management opportunity.
Exhibit 2
Exhibit 3
Texas stands to benefit immensely from the near-term opportunity to capture federal dollars from tax credits and generate economic growth. RMI analysis estimates that by 2050, Texas could see between $12 billion and $94 billion in investments in carbon management, and a cumulative economic benefit of $24 billion to $182 billion. (See Exhibit 4)
But carbon management’s benefits extend beyond the bottom line and reach into the wider Texas economy. Addressing carbon management proactively will retain Texas’s national and global status as an energy leader, with all the economic benefits that it brings. It also provides Texas with a low-risk, high-reward response to commercial opportunities from the global shift toward low-carbon energy.
The scaling of the carbon management industry can also support the creation of new jobs in engineering, construction of pipelines and carbon capture hubs, operations for hydrogen, carbon capture, and storage facilities, and advanced manufacturing for newer technologies like DAC and carbon utilization technologies. The world-class Texas oil and gas workforce is perfectly suited to transition into these new roles.
Depending on the uptake of carbon management in Texas, RMI analysis anticipates a cumulative creation of 21,000 to 211,000 new jobs through 2050 (See Exhibit 4).
Exhibit 4
Preparing for, rather than reacting to, the growing carbon management industry is the smartest way for Texas to seize this opportunity
The energy landscape is changing, new technology is emerging, and new policy frameworks are coming. Texas is a leader in the carbon economy today, and it should act now to ensure that it remains a leader in the new carbon economy of tomorrow.
The incentives through OBBBA will further help the economic case for projects that include carbon management technologies, and with its century of expertise in petroleum engineering and geology, and some of the highest-potential injection sites in the country, Texas has the foundation to define the future of carbon management in the United States. This opportunity is Texas’s to seize, and proactive policymakers and economic development organizations should start to get ready.