The Biden administration announced on Tuesday the introduction of new tax credits aimed at companies engaged in clean electricity generation, emphasizing that any attempts by President-elect Donald Trump to rescind these measures would be misguided. In a strategic move, the Treasury Department and the Internal Revenue Service unveiled finalized guidelines for the clean electricity investment and production tax credits mere weeks before Trump takes office. These credits stem from a broader suite of approximately twenty tax provisions included in the Inflation Reduction Act, passed solely with Democratic backing in 2022.
The primary goal of these credits is to alleviate energy costs for households while promoting the advancement of clean energy resources, electric vehicles, energy-efficient buildings, and low-carbon manufacturing practices. Currently, the United States generates over 40% of its electricity from clean energy sources, which include solar, wind, hydropower, and nuclear energy. Trump’s energy agenda is principally characterized by a “drill, baby, drill” approach as he seeks to dismantle what he has termed Democrats’ “green new scam.” His focus hinges on increasing fossil fuel production—namely oil, natural gas, and coal—which are known contributors to climate change due to greenhouse gas emissions. He has also indicated intentions to eliminate subsidies for wind power, which were integral to the 2022 climate legislation. The demand for electricity has surged recently, spurred by advancements in artificial intelligence, the proliferation of electric vehicles, and new manufacturing facilities. In the past year alone, the U.S. added 60 gigawatts of clean electricity and energy storage solutions, such as large-scale batteries, to its power grid, a feat that equated to the capacity of approximately 30 Hoover Dams, according to Energy Deputy Secretary David Turk.
During a recent press briefing, Turk and Treasury Deputy Secretary Wally Adeyemo lauded the benefits of these tax credits, noting they will catalyze job creation, address the increasing demand for electricity, save American households billions on their utility bills, and foster the development of new zero-emission technologies. Adeyemo described the initiative as an “energy moonshot,” incentivizing innovation and the growth of new technologies within the United States to lower energy costs and generate employment opportunities.
Anticipated impacts of the climate legislation include a reduction of U.S. emissions by about 40% by 2030, contingent on successful implementation in the following years. In combination with provisions outlined in the Bipartisan Infrastructure Law, these measures could potentially save electricity consumers up to $38 billion through 2030, as per a Department of Energy analysis. James Hewett, senior manager of U.S. policy and advocacy at Breakthrough Energy, remarked on the ongoing manufacturing renaissance, noting that since the Inflation Reduction Act’s passage, over 900 new clean energy and transportation manufacturing facilities have been announced.
However, Adeyemo cautioned that any rollback of clean energy incentives could jeopardize America’s position in the global shift from traditional fossil fuels, ultimately resulting in higher costs for consumers. “Lower electricity bills for American families should take precedence over extending tax breaks for the wealthiest taxpayers,” he stated. Turk emphasized that these new credits are resilient in part because they were informed by input from businesses during their development. The projects eligible for the new clean electricity credits, designated as 45Y and 48E, will include newly established or expanded power facilities that begin generating electricity after December 31, 2024.
These tax benefits will be available for the initial decade of electricity production, a certainty that businesses require to invest confidently in future projects. Business leaders are expected to actively oppose any measures that could undermine this investment trajectory, Turk asserted.
