Clean energy tax credits have largely contributed to commercializing innovative clean energy technologies. ClearPath supports energy-related tax incentives to accelerate American innovation and reduce global emissions.
The technologies needed to achieve deep global emissions reductions do not yet exist at scale. The latest analysis from the International Energy Agency shows that half of the emissions reductions needed to reach net zero come from technologies not yet on the market. The U.S. has a world-class innovation apparatus that is uniquely positioned to solve this problem.
Tax credits represent the majority of federal support for clean energy deployment over the past two decades. Examples include the enhanced oil recovery credit and the marginal well tax credit to support oil & gas development or the 45J advanced nuclear generation credit to accelerate next-generation nuclear power. Federal tax incentives can play an important role to facilitate early commercial deployment by reducing the effective cost of low-carbon technologies rather than increasing the cost of emitting technologies. Most of these credits are structured either as production tax credits (PTCs) that are determined by the amount of electricity produced or carbon sequestered or as investment tax credits (ITCs) that are determined based on the amount of capital investment for a project.
This approach is important to early commercialization here and to position American technology for commercial adoption across the world. Hence the innovation focus of our vision–America leads the world as an early adopter and tech exporter that contributes to deep global emissions reductions.
These include 45Q for carbon capture and 45Y/48E for tech-neutral clean electricity generation, including nuclear, geothermal and hydropower. Early stage support for innovative energy technologies can spur private sector investment supporting the U.S. economy and reducing emissions.
Changes to energy tax credits that promote American innovation and can bring American industry back could be a major part of a 2025 tax package. It is clear that 2025 will be a major tax policy year as key Tax Cuts and Jobs Act (TCJA) provisions are scheduled to expire. These expirations are paired with the reinstitution of the statutory debt ceiling and Republican interest to rollback parts of the Inflation Reduction Act (IRA) which passed through partisan reconciliation. Republicans will likely focus their attention on areas of the IRA that may not promote the development of American energy. Both parties have a vested interest in a wide ranging tax deal to preserve expiring policy priorities for businesses, families and clean energy innovation.
ClearPath views tax policy discussion through the following key principles:
Congress has recently enacted or amended several energy related tax credits including:
45Q - Carbon Sequestration. The carbon capture and sequestration credit provides a 12-year production incentive to companies that remove emissions from point sources or through direct air capture. The captured CO2 can be used in enhanced oil recovery or permanently stored. This credit has been revised and extended on a bipartisan basis in past Congresses.