I don’t love 45Q credits, or any any credits that seem to support the climate hoax. And I don’t love spending huge amounts of money removing a natural inert gas that actually helps our environment. But there has been a lot of disingenuous and uninformed noise lately about so-called “money-printing schemes” tied to climate policies like industrial Carbon Capture, Utilization, and Storage (CCUS), 45Q tax credits, and carbon markets. Some claim these tools are artificially inflating the M2 money supply, threatening economic stability, and fueling inflation. And, on a very small scale, 45Q might contribute. But let’s cut through the fear-mongering and be honest. These policies are not tanking the economy or flooding our monetary system with new cash; right now they’re far too small, too targeted, and too limited to do that.

So, first we have to define some terms:

~ M2 is the technical term for the total amount of money floating around in the U.S. economy that people can spend or save such as cash, checking accounts, savings, and other liquid or semi-liquid assets. As of January 2025, the M2 supply sits at around $21.56 trillion. That’s a huge number. And, while the Federal Reserve keeps an eye on it for good reason, it’s not something that’s easily manipulated by modest climate-related tax credits or incentive programs. Only huge increases drive inflation.

To fully understand M2’s movement, we need to look at the big levers: Federal Reserve actions like quantitative easing, interest rate changes, bank lending practices, and large-scale government spending, especially deficit spending that gets monetized by the Fed. For example, in 2020 during the COVID crisis, M2 ballooned by over 25 percent when Congress passed trillions in relief and the Fed injected liquidity into the system. These are monetary policies, the things that drive major shifts in M2; not a fiscal policy that creates a few billion dollars a year in tax credits.

~ 45Q tax credit. This is a federal tax credit designed to incentivize companies to capture and permanently store carbon dioxide. (I get it. Stooopid right?) But right now, companies can claim up to $85 per metric ton for carbon stored underground and $60 for carbon reused in industrial processes like enhanced oil recovery or bottling and selling schemes. The monetary influence of this is $5 – $10 billion a year in foregone or lost federal tax revenue; that’s about 0.02 to 0.05 percent of M2 supply; not even a ‘skeeter on a moose’s butt. This is a targeted fiscal policy.

And even when you include total CCUS investments, hovering between $20 and $30 billion a year, (in the U.S.), we are still only talking about 0.1 percent of the total money supply. That’s .1%. Carbon credit trading globally reaches about $100 billion per year, or 0.46% of M2; but most of that is outside U.S. jurisdiction, and it’s not even new money. To me it looks like is existing capital moving between companies. Again, fiscal policy.

The alarmists and conspiracy theorists say these carbon fiscal policies create new money by encouraging borrowing for CCUS projects. That could very well be but again, realistically, fewer than 200 CCUS projects exist nationwide. Yes, they use loans to build infrastructure, and yes, those loans create new deposits in banks, which “technically” could increase M2. But compared to mortgage lending, commercial development, or even car loans, the 45Q scale is tiny.

Others argue that 45Q and similar programs “print money” by reducing government revenue. That’s not even close to how it works. These are tax credits, not checks. Companies pay less tax, but that’s not money flowing into the economy from nowhere. It’s simply retained earnings or capital redirected into infrastructure. If anything, these credits are driving innovation, spurring job creation, and encouraging investment in domestic industries, hardly the stuff of economic collapse. Again, I don’t like them because of what they represent. But I suspect that we will have to learn how to deal with them. I think it starts by being honest with ourselves and our opponents.

And then there’s the carbon credit market (oh boy – I really dislike this one). Critics claim it’s a shell game, a way for companies to dodge responsibility while jacking up prices and gaming the system. But the truth is simpler: these markets are structured exchanges, where companies trade emission reductions like any other commodity. There’s no new money being printed; it’s just one company paying another for their “right” (does that sound weird to anyone else) to pollute less. It’s not a perfect system, but it doesn’t add to M2. Even carbon taxes, if implemented, are designed to be revenue-neutral, offset by tax reductions elsewhere, not dumped back into the system without discipline. Despite the alarmists, M2 is not affected.

The Federal Reserve reports that M2 is growing at a controlled pace, 3.9 percent annually. That’s a healthy rate, far from the double-digit surges that led to the 9.1 percent inflation we saw in 2022 right after Covid. Arguably, current inflation sits around 3 percent (depending on how it is parsed), with interest rates finally stabilizing. These numbers tell a clear story: the economy is not overheating because of 45Q or CCUS. And I do not believe these tools are big enough to drive macroeconomic shifts.

On social media, especially on platforms like X, it’s easy to get caught up in conspiracy theories and half-baked economic takes. I’ve seen claims that 45Q is a “globalist scam” or a “money-printing scheme” for Big Oil. Facts just don’t support that claim. Then the CAVE people (Citizens Against Virtually Evererything) all line up against a worthwhile project that will save Alaskans money in energy costs. Most 45Q credits go to industrial sites such as cement plants, ethanol refineries, steel mills, not just fossil fuel companies or energy producing companies.

And the so-called “flood of cash” just is not materializing.

We absolutely should be skeptical of any policy that could be abused. Oversight matters. Transparency matters. I’ve said it before; Alaska doesn’t need more federal overreach or sweetheart deals for mega-corporations. But when it comes to 45Q, the scale simply doesn’t justify the panic. It’s a tool for companies to use when stakeholders and funding groups require some form of decarbonization. Despite what some claim, it is not a monetary time bomb.

We’ve got real challenges to tackle, like reining in reckless federal and state spending, defending our resource industries from bureaucratic interference, and protecting Alaskans from being steamrolled by distant agendas. Let’s focus on those. Because when it comes to M2 and the stability of our economy, the data is clear: 45Q credits and carbon policies aren’t the problem.

Let’s not chase shadows; let’s deal in facts and be honest with the climate alarmists who have not reciprocated.

Originally published on Substack: https://kevinjmccabe.substack.com/p/what-is-the-m2-money-supply-and-why