Nuclear Power Production Tax Credit (45U) 2 Includes Direct Pay and Transferability.Begins to phase out in 2029 and phases out completely in 2032.Eligible components include solar components, wind turbine and offshore wind components, inverters, many battery components, and the critical minerals needed to produce these components.New Advanced Manufacturing Production Tax Credit (45X)Ĭreates a tax credit for the production of clean energy technology components that are produced in the United States or by a U.S. Cannot stack with the Carbon Capture and Sequestration Tax Credit (45Q).Eligibility includes retrofit facilities.Projects must begin construction by 2033.New Clean Hydrogen Production Tax Credit (45V) 1Ĭreates a new 10-year incentive for clean hydrogen production with four tiers and a maximum of 4 kilograms of CO2 equivalent (CO2e) per kilogram of hydrogen (H2). Provisions listed with a superscript are associated with bipartisan legislation.Ĭlean Energy Tax Credits Production Tax Credits.For more on why direct pay is essential, see BPC’s explainer on direct pay. This limitation does not apply to the first 5 years of the section 45V clean hydrogen credit, section 45Q carbon capture and sequestration credit, and section 45X advanced manufacturing credit. Direct pay is limited to certain tax exempt and governmental entities for most of the eligible tax credits. Many of the tax credits included in the legislation allow direct payments to be made in lieu of a reduction in tax liability (“direct pay”) and/or an option to monetize the credits by transferring them to an entity with greater tax liability (“transferability”).For the Renewable Electricity Production Tax Credit, Energy Investment Tax Credit, and new Clean Electricity Investment Tax Credit (ITC) and Production Tax Credit (PTC), facilities with maximum net output less than 1 megawatts (MW) are exempt from the labor requirements and receive the bonus automatically.
Tax credit values throughout this summary assume that facilities or projects satisfy prevailing wage and apprenticeship requirements and thus receive bonus credits for a total credit value of 5 times the base amount.To assist our readers, we also include the following notes and context: Share Read Nextįigure 1: Data and figure from Rhodium Groupīelow, BPC summarizes the key energy and climate provisions included in the IRA. Should the IRA become law, this would increase to between 31% to 44% by 2030. Under a business-as-usual scenario, the United States is on track to reduce greenhouse gas (GHG) emissions by between 24% to 35% by 2030 compared to 2005 levels. Recent modeling by Rhodium Group highlights the substantial emissions reduction impact of these provisions. Additionally, by investing in disadvantaged communities, prioritizing projects that reutilize retired fossil fuel infrastructure and employ displaced workers, and including incentives for climate-smart agricultural practices, the IRA would make meaningful progress towards a fair, equitable, and economic clean energy transition. Clean energy provisions in the bill would accelerate the deployment of clean energy technologies, reduce global emissions, lower energy prices, help export American innovation, strengthen our economy and build a reliable and affordable energy sector.Ĭlean energy tax credits and other provisions included in the bill would increase energy production at home and accelerate energy innovation abroad. While the Bipartisan Policy Center does not support the use of reconciliation to pass major legislation, many of the energy and climate provisions in the IRA have enjoyed bipartisan support and match our previous recommendations. Hot on the heels of the bipartisan CHIPS and Science Act being signed into law-a major victory for energy and climate policy - the Inflation Reduction Act (IRA) reconciliation package would make significant progress towards America’s mid-century climate goals. Inflation Reduction Act Summary: Energy and Climate Provisions | Bipartisan Policy Center Skip to main content Bipartisan Policy Center logo
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