Influential IRA Tax Credit Leaves Door Open for Dirty Energy
WASHINGTON – Today, the Treasury Department and the IRS released draft guidance on the most influential clean energy tax credit in the Inflation Reduction Act, the 45Y Clean Electricity Credit. This credit is technology neutral, intended to incentivize any electricity that produces zero greenhouse gas emissions. The proposal affirms the eligibility of renewables like wind and solar, but requests comments on the eligibility of gasification and combustion-based electricity with major implications for woody biomass, incineration, and methane biogas. The proposal also requests input on the eligibility of book-and-claim accounting gimmicks – a dangerous precedent that could worsen energy sacrifice zones and give Big Oil a pathway to gaming the tax credit.
Sarah Lutz, Senior Climate Campaigner at Friends of the Earth, released the following statement:
“For the sake of communities and the climate, the 45Y tax credit can’t be another dirty energy subsidy. The Treasury and IRS must protect taxpayer dollars from being used for incentivizing harmful practices like trash burning, factory farming, and forest clearcutting. It’s especially concerning that book-and-claim accounting gimmicks are even under consideration. We expect these loopholes to be closed when the rule is finalized.”
Not only are these combustion-based power sources often worse for the climate than fossil fuels, but they’re significant sources of pollution. Despite these climate and environmental justice costs, these dirty energy sources have benefited from significant climate subsidies, including the current renewable tax credit that will be replaced by 45Y at the end of this year. Simply by accurately measuring the full lifecycle GHG emissions of these fuel sources, as the law requires, the Treasury can ensure that the IRA supports the Biden Administration’s climate and justice commitments, rather than undermining them.
COMMUNICATIONS CONTACT: Erika Seiber, [email protected]