Tax code

America Should Lead the Just Transition to Clean Energy, and the Tax Code Can Help


A small, relatively inexpensive change to the tax code could unlock billions of new climate investments from retail, accredited and institutional investors. This money could create thousands of new jobs, a cleaner and more resilient network, and local leadership in critical industries while sending a clear message to the world: the energy revolution will happen here in America, and it will leave no one behind. .

Changing clean energy tax credits to a direct payment model would ensure that clean energy developers, especially in underfunded and historically disadvantaged communities have access to capital.

A Bloomberg NEF study last year found that nearly 59% of solar projects and 67% of wind projects scheduled to begin construction in 2020 and this year still need tax equity financing. With an industry so critical to national and economic security, and with increasingly disproportionate climate impacts on the poorest and most vulnerable, it’s a level of uncertainty that the United States and the world can no longer afford. to afford.

As previous programs have demonstrated, direct payments can catalyze additional private and local investment and multiply the impact of every federal dollar spent.

A comprehensive direct payment policy for commercial and residential clean energy could also help the United States make a fair transition to the clean energy economy at low cost to taxpayers. Inclusive financing approaches that enable true community ownership and benefit climate solutions are currently hampered by a highly inefficient tax fairness system. By allowing a small subset of banks and high net worth investors to control which projects are worthy of tax fairness, current policy prevents most solar projects at the community level, such as those in churches, schools, communities. community centers, small businesses and non-profit organizations, to get completed.

Direct payment would also open access to clean energy finance for historically disadvantaged populations and small businesses. Coupled with crowdfunding, this means more means for everyone to invest directly in climate solutions, to create and conserve local wealth and to benefit from the transition to clean energy.

Unlocking a new level of inclusive investment is not only essential for the United States to meet its goal of reducing emissions by 50 to 52% from 2005 levels by 2030 as well as equity targets, but it could also stimulate the growth of domestic manufacturing of key materials. Ambitious bipartisan legislation aimed at securing national innovation in semiconductors, quantum computing and more has already been passed by a divided Senate. Stimulating investment in equally crucial energy technologies should not be overlooked.

Thanks to the tireless work of many House leaders on clean energy, the reconciliation program included either a direct compensation or a repayable component. Direct compensation and energy efficiency incentives are key elements to include in a package that will truly deliver local climate solutions faster than the rate of the problem.

Senate moderates called leaders of Congress to prioritize a competitive tax code. Direct payment is a bold step in this direction – it is simple, cost effective, and enables the nation to compete in critical technologies on the global stage. Importantly, it would also create a fairer tax code to attract additional capital and community ownership to underfunded urban and rural areas that risk being left behind in the transition to a clean energy economy.

This moment offers a historic opportunity for American leaders to lay the foundations for a healthy, just and sustainable future for the present and for future generations. Passing on direct payment under the Build Back Better program is a great way Congress can help.

Franz Hochstrasser is CEO and co-founder of Increase green. He served in the Obama administration at the White House, USDA, and the State Department, where he helped negotiate the Paris Agreement.


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