The Biden administration announced on Tuesday the introduction of new tax credits aimed at businesses that produce clean electricity, stating that it would not be wise for President-elect Donald Trump to attempt to eliminate these incentives.
The Treasury Department, along with the Internal Revenue Service, unveiled the final regulations concerning clean electricity investment and production tax credits, just days ahead of Trump’s inauguration. These credits form part of the approximately two dozen tax measures included in the Inflation Reduction Act, which was passed solely with Democratic support in 2022. The incentives are intended to help families save on their energy expenses while also hastening the adoption of clean energy solutions, electric vehicles, energy-efficient constructions, and low-carbon manufacturing processes.
In the U.S., more than 40% of electricity is currently sourced from clean forms of energy such as solar, wind, hydroelectric, and nuclear power.
Trump’s energy strategy emphasizes the concept of “drill, baby, drill”, aiming to dismantle policies he labels as the Democrats’ “green new scam” and instead promote fossil fuel production, including oil, natural gas, and coal. These traditional energy sources are known contributors to climate change through greenhouse gas emissions during combustion. Trump has expressed intentions to eliminate subsidies for wind energy that were established in the significant 2022 climate legislation.
The demand for electricity has notably surged in recent years, propelled by advancements in artificial intelligence reliant on data centers, the rise of electric vehicles, and the emergence of new manufacturing plants. According to Energy Deputy Secretary David Turk, last year saw the addition of 60 gigawatts of clean electricity and significant energy storage, akin to the capacity of 30 Hoover Dams being integrated into the grid within just a year.
On a call with reporters, both Turk and Treasury Deputy Secretary Wally Adeyemo highlighted the advantages presented by these credits, asserting that they will generate employment, fulfill the increasing electricity demand, save Americans billions on their energy bills, and aid the gradual development of clean zero-emissions technologies. Adeyemo described these policies as an “energy moonshot”, championing American innovation and advanced technologies as a means to reduce energy costs and foster job growth.
The climate legislation is predicted to slash U.S. emissions by about 40% by 2030, provided the envisioned plans are effectively implemented in the upcoming years. Combined with measures included in the Bipartisan Infrastructure Law, the climate law could lead to savings of up to $38 billion on electricity bills for consumers through to 2030, according to an analysis from the Department of Energy.
James Hewett, senior manager of U.S. policy and advocacy at Breakthrough Energy, an organization that promotes clean energy adoption, remarked that the U.S. is experiencing a manufacturing revival, with over 900 new clean energy and transportation manufacturing facilities announced since the Inflation Reduction Act was passed.
However, Adeyemo cautioned that if the clean energy incentives were to be repealed, the nation risks falling behind in the global shift away from conventional fossil fuel energy, ultimately burdening American consumers with higher costs.
“Prioritizing lower electricity expenses for American households should take precedence over extending tax breaks for affluent taxpayers,” Adeyemo emphasized.
Turk remarked that the resilience of these credits stems partly from extensive input from businesses during the policy formulation process, noting that qualifying projects under the new clean electricity credits, identified as 45Y and 48E, must commence power generation post-December 31, 2024. Tax benefits are available for the first ten years of electricity production, with the business sector advocating for this policy stability to facilitate investments, Turk added.
Business leaders are likely to staunchly oppose any attempts to remove this investment framework going forward, he concluded.
