As Prepared for Delivery
Thank you for joining us today.
On August 16, 2022, President Biden signed the Inflation Reduction Act (IRA), with the goal of tackling the climate crisis while creating good-paying jobs, strengthening energy security, and lowering consumer costs.
Just a little more than two years later, we are seeing remarkable results. Since the IRA was enacted, private businesses and consumers have invested nearly $500 billion in building America’s clean energy economy, a 71 percent increase from the prior two years. Treasury analysis shows that these investments are particularly concentrated in communities that are lower income and have fewer college graduates.
Because the bulk of the IRA’s climate and clean energy provisions take the form of tax incentives, the Department of the Treasury has been at the forefront of implementation, in close collaboration and partnership with experts across the federal government. To date, we have issued roughly 75 pieces of guidance totaling over 3,300 pages, moving at a rapid pace to provide clarity and certainty to taxpayers.
Today, I want to outline our plans for Phase Four of our implementation of the IRA’s clean energy provisions. Between now and the end of this Administration, we will continue to provide rules of the road and certainty to help make the IRA tax policies even more effective in reducing greenhouse gas emissions, supporting the development of clean energy industries of the future and the deployment of clean energy solutions across every sector of the economy, creating good-paying jobs, supporting domestic production and manufacturing, and lowering consumer costs.
But before I get to what’s to come, let me briefly recap our implementation work to date.
Phase One of implementation started with the IRA’s enactment. Treasury and the Internal Revenue Service (IRS) quickly published detailed requests for public input on nearly all of the law’s clean energy tax provisions, which helped us identify and prioritize issues. And then, to support immediate investment, we focused on issuing guidance on cross-cutting bonus and credit monetization provisions, as well as credits for electric vehicles.
Phase Two focused on boosting American manufacturing to create good-paying jobs and strengthen energy security. From fall 2023 through early 2024, we proposed regulations on the section 45X Advanced Manufacturing Production Credit, the section 45V Clean Hydrogen Production Credit, the section 48 Investment Tax Credit for electricity generation, and other key provisions.
And then, starting in early 2024, Phase Three focused on providing longer-term clarity and certainty. That included issuing final rules on elective pay (also known as “direct pay”) and transferability, provisions that are growing the scope and scale of clean energy projects by expanding their financing options. Already, more than 70,000 projects and facilities have received registration numbers for the purposes of elective pay and transferability. We also issued final rules for the New Clean Vehicle and Previously-Owned Clean Vehicle credits, and, crucially, final rules for the IRA’s prevailing wage and apprenticeship (PWA) requirements, which clarify the IRA standards for fair pay and strong workforce pipelines.
Now, in launching Phase Four, we are doubling down on our commitment to provide the rules of the road and certainty needed to realize the full benefits of the IRA. By the end of this Administration, we anticipate finalizing regulations on a number of key provisions that are especially central to the IRA’s climate and economic goals.
In particular, we intend to finalize rules for the Clean Electricity Production Credit and Clean Electricity Investment Credit, often referred to as the “technology-neutral” clean electricity credits. These credits will help continue the explosive growth of renewable sources like wind and solar while also enabling the growth of emerging clean electricity technologies that achieve a net greenhouse gas emissions rate of zero or less. A recent Rhodium Group study found that by 2035, the credits will reduce power sector carbon emissions by 29 to 46 percent, save American consumers up to $34 billion in annual electricity costs, and add between 259 and 648 gigawatts of clean electricity to the grid, all compared to a scenario without the credits. Final rules will provide additional certainty for the technologies identified as zero-emissions in the proposed rules and will chart a path for additional zero-emissions technologies to qualify.
Likewise, guidance on the existing section 48 Investment Tax Credit (ITC) also remains a priority, since it will continue to be an option for qualifying projects that began construction before the end of this year (and longer for certain property). After careful consideration of public comments, we expect to finalize rules for the 48 ITC (before finalizing rules for the technology-neutral credits) that will provide further certainty for investments, including for qualified biogas property and other types of eligible property.
We also know that clean hydrogen will be critical for reducing emissions from hard-to-decarbonize sectors in heavy industry, and we recognize that the clean hydrogen industry needs certainty. We intend to finalize rules for the section 45V Clean Hydrogen Production Credit by the end of the year. As we continue to review and evaluate the nearly 30,000 comments received on the proposed rules, we are working to include appropriate adjustments and additional flexibilities to help grow the industry and move projects forward, while adhering to the law’s emissions standards, including the requirement to consider indirect emissions.
In addition to these provisions, we also anticipate finalizing rules for the section 45X Advanced Manufacturing Production Credit, which is one of the most important provisions to accomplish the IRA’s goal of building domestic supply chains. Many of the announced investments in clean energy rely on the incentives this credit provides, and analysts have indicated that this is one of the fastest growing credits in the tax credit transfer market. We expect final rules will build on that growth and bolster market confidence for the production of clean energy components and critical minerals.
And we anticipate finalizing regulations that expand the reach of the Low-Income Communities Bonus Credit Program to additional clean energy technologies beyond wind and solar, implementing the transition from the legacy Investment Tax Credit to the technology-neutral Investment Tax Credit. Underscoring the importance of this provision, Treasury recently released a report from the 2023 program year, showing that the bonus supported nearly 1.5 gigawatts of expected solar and wind capacity and about $3.5 billion of investment that will directly benefit low-income and Tribal communities.
The last finalization project I’ll mention pertains to the rules for electing out of partnership tax status under section 761. This will make it easier for elective pay eligible entities to partner with private developers and investors, building on the successes we’re already seeing for direct pay. We anticipate finalizing those rules by end of year as well.
In addition to finalizing critical rules, we continue to work on guidance for provisions of the IRA for which we have not yet issued comprehensive guidance.
To date, Treasury and the IRS have issued at least initial guidance on most of the major new IRA provisions. Following up on procedural guidance issued in May, we continue to actively work on guidance for the section 45Z Clean Fuel Production Credit, which takes effect on January 1, 2025. We also continue to work on the section 45U Zero-Emission Nuclear Power Production Credit and the section 45W Credit for Qualified Commercial Clean Vehicles. Each of these credits incorporates complex policies, and we have received substantial stakeholder input regarding the unique dynamics of the credits’ respective markets; we’re now working to evaluate these issues with help from experts at other agencies.
Finally, as we enter Phase Four, we now have the benefit of comments received on earlier guidance and additional information about how markets are developing in key areas. For example, we have heard how helpful the domestic content safe harbor tables we released earlier this year have been for making this bonus a more usable incentive. We anticipate releasing guidance as part of Phase Four that will update these data, make technical clarifications, improve accuracy, and recognize the benefits of domestic supply chains by differentiating the treatment of solar cells that are manufactured with domestically produced versus imported wafers.
We have also heard input from stakeholders on the regulations for the section 45Q Credit for Carbon Oxide Sequestration, which were finalized by the previous Administration. We published a notice in 2022 requesting comment on this credit, and we continue to welcome input from industry, labor, and environmental stakeholders.
I’ll close with two final thoughts. First, I want to emphasize the importance of stakeholder input and interagency collaboration in all of our work on IRA implementation. We deeply value the input stakeholders have provided, whether empirical analysis, on-the-ground experience, or feedback on the significance of key issues to specific communities. And all of our implementation work relies heavily on the expertise of our colleagues at the Department of Energy, the Environmental Protection Agency, and elsewhere across government.
Second, all of our guidance and implementation work is made possible by strong, long-term funding for the Internal Revenue Service. The IRS is tasked with developing, administering, and enforcing tax guidance, including for the IRA’s clean energy tax incentives – and all of those responsibilities take resources. The IRA’s investments in the IRS are helping fund these core functions, as well as new capabilities, such as the Energy Credits Online portal for the electric vehicle credits. Maintaining IRS resources in the years to come will be critical to continuing the climate and economic progress that we have made to date.
Thank you.
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