As Congress considers legislation that would extend and expand tax credits for the development of low- and zero-carbon energy, a new analysis by the Union of Concerned Scientists (UCS) compares how the various incentives would help fight climate change by reducing carbon emissions from the U.S. power sector.
“We found that federal tax credits are an effective tool and smart investment for boosting the deployment of renewable electricity that will provide health and economic benefits across the country,” said Steve Clemmer, director of energy research and analysis for UCS. “At the same time, more ambitious policies are necessary to achieve President Biden’s goal of 100 percent carbon-free electricity by 2035 and to ensure a just and equitable transition to a clean-energy economy.”
Using an energy planning model developed by the National Renewable Energy Laboratory, UCS energy experts examined the electricity sector provisions of proposed bills to determine their impact on accelerating the momentum away from coal and gas in the U.S. power sector:
- The Growing Renewable Energy and Efficiency Now (GREEN) Act of 2020, introduced by Rep. Mike Thompson (D-Calif.), includes a five-year extension of the production tax credit (PTC) for wind at 60 percent of the full value through 2026, a 30 percent investment tax credit (ITC) for solar and energy storage through 2026, ramping down to 10 percent by 2028, and a 30 percent ITC for offshore wind through 2028.
- The GREEN Act Plus, a UCS-designed policy that has not been introduced in Congress, extends the tax credits in the GREEN Act for an additional five years, through 2031 for wind, solar, and storage and through 2033 for offshore wind.
- The Clean Energy for America (CEA) Act of 2019, introduced by Sen. Ron Wyden (D-Ore.), is a technology-neutral tax credit that extends the full PTC for wind and solar and a 30 percent ITC for new renewables, nuclear, and carbon capture and storage. Those credits would ramp down over four years once the power sector’s carbon dioxide emissions reach 50 percent of 2019 levels.
The UCS analysis found that each of the proposed policies would spur increased use of renewable energy and reductions in carbon emissions. It concluded that the CEA Act would achieve the greatest increase in renewable energy capacity and the deepest reductions in both carbon dioxide and harmful air pollutants.
By 2035, the CEA Act’s tax credits would more than double the amount of renewable generation in the United States over today’s levels, displacing coal and gas and their associated carbon emissions and health risks. Under that proposal, renewable energy sources would account for half of total U.S. power generation by 2035 and total carbon-free generation growing from 40 percent in 2020 to 62 percent by 2035.
Last week, Sen. Wyden reintroduced the CEA Act with some new provisions and improvements. The UCS analysis modeled the 2019 bill, but the 2021version only qualifies facilities with zero or net-negative emissions to receive the credits while power and grid improvement projects can claim the tax credits as direct payments. The 2021 bill will also drive additional emission reductions, with the credits phasing out after power sector emissions reach 75 percent below 2021 levels, compared to the 2019 bill’s threshold of 50 percent below 2019 levels. Additional incentives are also available to locate projects in low-income communities and all projects are required to provide prevailing wages and apprenticeship opportunities.
The UCS experts determined that the health and economic benefits of avoided pollution from all of the tax credits analyzed are two to four times higher than the estimated costs of the tax credits to the U.S. Treasury. The analysis recommends a 10-year extension of the tax credits at full value to complement more ambitious national policies that are needed such as clean energy standards, stronger power plant pollution rules, and investments that directly benefit disadvantaged communities.
“To help meet the challenge of our worsening climate crisis, Congress must extend and expand tax credits for renewable energy and adopt the bolder policies necessary to achieve carbon-free electricity nationally,” said Brian LaShier, Washington representative for the UCS Climate and Energy Program. “Now is not the time to put on the brakes when we should be pressing the accelerator to advance climate change solutions.”