Proposed Tax Package Is Critical for Clean Energy Momentum and Progress on Climate

November 19, 2019
Architect of the Capitol
Sam Gomberg
Senior Analyst

The clean energy tax package proposed today by House Ways and Means Committee Democrats is Congress’s best chance to do something meaningful on clean energy and climate change this year. The proposal would provide tax incentives for a host of renewable energy technologies as well as battery storage that is critical to decarbonize our power sector. The package also looks to increase the number of electric vehicles that would qualify for a tax credit, making an important step towards addressing emissions from the transportation sector.

The proposal will continue our clean energy momentum, create jobs, and grow local economies while leading to tangible reductions in global warming emissions. It’s critical that the package be a top priority in any end-of-year spending deal negotiations and that we get this package over the finish line and enacted into law.

House Democrats deserve credit for recognizing the opportunity to make meaningful progress on our transition to a clean energy economy and for following through on previous commitments to provide tax support for clean energy technologies. As the committee of jurisdiction over tax matters, the House Ways and Means Committee is juggling a lot of balls right now, but we can’t lose sight of the urgent need to address climate change and transition to a modern, clean, and resilient power sector.

Incentivizing clean energy across sectors and across the US

The clean energy tax package proposed today by House Ways and Means Democrats would provide important federal incentives to invest in renewable energy technologies. (Source: DOE)

Specifically, the clean energy tax package would, among other things, extend the production tax credit for onshore wind and the investment tax credit for solar and offshore wind while also expanding eligibility to standalone energy storage (previously it had only been available to storage when paired with solar). The package also moves the ball forward to reduce emissions from our transportation sector by raising the cap on the electric vehicle tax credit to 600,000 from 200,000 units per auto manufacturer. Finally, the package would provide incentives for the manufacturing of zero-emission commercial vehicles and buses, and update and extend multiple incentives for energy efficiency investments in the residential and commercial sectors.

These tax policies have been an important driver in our transition to clean energy, driving billions of dollars of investment in industries that support hundreds of thousands of jobs. And these investments in clean energy are reducing carbon emissions as states across the country are now meeting significant amounts of their energy needs with renewable energy. It makes sense to continue incentivizing these resources as critical elements to the clean energy economy and to level the playing field with fossil fuel industries that continue to enjoy permanent tax incentives.

Supporting nascent clean energy industries with enormous potential

For offshore wind, energy storage, and electric vehicles in particular, these proposed tax incentives will play a key role in developing relatively nascent industries with enormous potential to drive economic growth and emissions reductions.

States up and down the east coast are committing to offshore wind–from Virginia to Maine–representing a potential to develop nearly 25,000 megawatts of offshore wind and drive a supply chain worth more than $70 billion. These projects are a huge economic and carbon-reduction opportunity, and it is absolutely Congress’s role to provide the tax incentives to support this investment.

And whether it’s solar, onshore wind or offshore wind, there is an important role for energy storage technologies to enable a reliable, resilient electricity supply. Whether paired directly with renewables or installed at strategic locations on a modern grid, storage provides a wide range of

Extending the investment tax credit for offshore wind makes sense. This industry is just getting started in the U.S. but has enormous potential to drive economic growth, create jobs, and reduce emissions. (Credit: Ad Meskens)

services that strengthens reliability and resilience. Utilities and grid operators are just now realizing the suite of benefits that energy storage can provide and tackling the hard work to understand how best to take advantage. Expanding the investment tax credit for energy storage systems provides the market certainty to accelerate investments in storage and bring those benefits to consumers.

Last but not least, increasing the number of electric vehicles that are eligible for a federal tax credit would make an already successful policy even better by putting more electric vehicles on the road. The benefit of doing so is obvious: electric vehicles reduce carbon emissions and save consumers money.  And as our electricity supply shifts to low and zero-carbon resources, those emissions reductions only grow.

The economic, environmental, and climate benefits of clean energy warrant broad support for these policies

In October, more than 160 US representatives sent a “dear colleague” letter to House Speaker Nancy Pelosi that clean energy tax incentives “would go a long way in providing planning certainty in clean energy investments… and helping us strive toward and ultimately beyond our Paris agreements.” But this should be only the tip of the iceberg when it comes to who should support this clean energy tax package.

Whether coastal states with offshore wind potential, Midwestern states with onshore wind industries, or states all over the nation (but particularly in the South and Southwest) that can take advantage of strong solar resources, these tax incentives will accelerate clean energy investments, modernize our electricity grid, and reduce greenhouse gas emissions while creating jobs and spurring economic growth. It’s a win-win-win, but at this point it’s still only a proposal. It must be a top priority for Congress to move this over the finish line and get it passed as part of an anticipated end-of-year deal.