The Market for Clean Energy Tax Credits Is Booming.

• Date: 01 March 2024
• Author: Parker, Rob

Since Congress passed the Inflation Reduction Act (IRA) in August 2022, private companies have announced over $628 billion in commitments to American industries like clean energy manufacturing, electric vehicles, and clean power. The economic research firm Rhodium Group reports that clean energy investments in the twelve months ending in July 2023 rose fifteen percent year over year to $61 billion, and investments in clean manufacturing more than doubled, to $39 billion.

Tax credit transferability is a key mechanism driving this surge of investment in clean energy and manufacturing. Clean energy project sponsors often cannot use the full value of their tax incentives right away. Selling these credits to companies that can use them offers projects an efficient pathway to realizing the value of these tax credits. Under the IRA, companies can purchase twelve different clean energy tax credits to satisfy their tax liabilities at a discount on their face value.

Purchasing tax credits became legal in 2023. In the wake of regulatory guidance the Internal Revenue Service issued in June, transactions rapidly accelerated, with buyers, sellers, and intermediaries entering the market for the first time. They were motivated by the opportunity to manage tax liabilities, receive essential investments, and scale syndication and advisory businesses, all while supporting sustainability goals and clean energy development.

Crux Climate released its inaugural market intelligence report in January, outlining the market for tax credits...