Legislative milestones—such as the Infrastructure Investment and Jobs Act (IIJA), the CHIPS and Science Act (CHIPS), and the Inflation Reduction Act (IRA)—established a solid foundation for climate and clean energy initiatives in the United States. However, critical gaps remain—particularly in sectors like industry and agriculture and forestry—where new policies are needed to accelerate decarbonization. While the future of existing programs is currently uncertain, we present a positive vision for a strong domestic clean energy sector that prioritizes affordability, energy security, environmental impact, and innovation.
In a new report for the Sustainable Energy & Environment Coalition (SEEC) Institute, DGA analyzed the full landscape of potential tax policy solutions tailored to address specific energy challenges across various sectors—namely, the electricity, transportation, buildings, industrial, and agriculture and forestry sectors, in addition to economy-wide policies. This report underscores the potential for future tax policy to reinvest in clean energy while ensuring energy affordability, resilience, and economic growth.
By offering an overview of current sectoral (and economy-wide) progress and benefits, the report identifies the main decarbonization challenges still facing our economy. The report draws on expert interviews and in-depth research to offer specific policy recommendations to bridge gaps and accelerate progress in critical areas. The priority policies were selected based on several critical factors, including estimated budgetary cost and revenue potential, economic impacts such as job creation, greenhouse gas (GHG) emissions reduction potential, benefits for underserved communities, and political feasibility.
The report outlines ten key policy recommendations:
- Establish a Carbon Border Adjustment Mechanism (CBAM) to impose a fee on imported goods based on their embodied GHG emissions, thereby leveling the playing field for domestic producers who invest in decarbonization.
- Establish a new incentive for diverse types of carbon dioxide removal (CDR)—including both nature-based solutions and emerging technological methods—to accelerate the removal of CO2 from the atmosphere.
- Create a new transmission investment tax credit (ITC) to incentivize investment in new and modernized transmission lines and upgrades to existing infrastructure, ensuring a resilient and efficient electricity grid.
- Create a new or enhanced clean electricity tax credit (Section 45Y) to promote the deployment of reliable clean firm power and support the early-stage adoption of nascent clean power technologies.
- Expand the commercial clean vehicle credit (Section 45W) to better incentivize purchasing of zero-emission medium- and heavy-duty commercial vehicles.
- Incorporate energy efficiency into the existing technology-neutral ITC (Section 48E) or create a new tax credit directly targeted at installing energy efficiency solutions, driving broader adoption of cost-saving technology.
- Create a new tax incentive for low-embodied carbon steel, cement, and chemicals, supporting domestic manufacturing.
- Create a new tax incentive to support the adoption of clean heat technologies in the industrial sector, a key impediment to industrial decarbonization.
- Create a new tax credit to promote less carbon-intensive farming practices (e.g., zero-emission equipment, nutrient management, methane reductions, regenerative agriculture, and low-carbon fertilizer).
- Create a new tax credit for land conservation and reforestation, simultaneously supporting agricultural communities and advancing emissions reductions.
These tax policy solutions would build upon the momentum created by bipartisan efforts in recent years. Congress has the opportunity to adopt forward-thinking policies that will lower household energy costs, reduce emissions, and strengthen America’s energy independence while providing benefits to communities nationwide.
To learn more, read the full report here.
