Senators draft energy innovation tax credit proposal

Two members of the Senate Finance Committee released a discussion draft of a bipartisan energy tax credit bill Monday that could represent a path forward for Republicans and Democrats.

The Energy Sector Innovation Credit Act, proposed by Sen. Mike Crapo, R-Idaho, the top Republican on the committee, and Sheldon Whitehouse, D-Rhode Island, aims to encourage innovation in the clean energy sector by providing investment tax credits and production tax credits for generation, storage, carbon capture and hydrogen production.

The proposal comes as the Biden administration is meeting with lawmakers in both parties to push its infrastructure plan, known as the American Jobs Plan, and try to find enough votes to pass it through a narrowly divided House and Senate. The American Jobs Plan includes tax credits for electric vehicles and other incentives for protecting the environment. The Treasury Department’s accompanying Made in America Tax Plan includes more incentives for other forms of clean energy, including solar and wind power. An alternative energy tax credit plan released last week by Senate Finance Committee chairman Ron Wyden, D-Oregon, would take a different approach by creating a new emissions-based tax credit instead of various types of tax credits for different forms of energy (see story).

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Crapo and Whitehouse’s proposal would allow up to a 40 percent investment tax credit or a 60 percent production tax credit for low market penetration technologies across a variety of energy sources, including renewables, fossil fuels and nuclear energy. It proposes to phase out credits as technologies mature to enable the most innovative technologies to compete on their own, instead of having Congress pick winners and losers when the temporary credits expire. The bill would offer flexibility for unforeseen clean energy technologies to be eligible for the tax credit in the future.

“This proposal incentivizes technologywide clean energy innovation so new, clean technologies can rapidly scale up and compete independently in the market,” Crapo said in a statement. “Moreover, the credits scale down as technologies’ market share ramps up, so taxpayer dollars do not subsidize market-mature technologies.”

He and Whitehouse are hoping to spur more conversations within their committee about how to offer tax incentives for clean energy. The Senate Finance Committee will be holding a hearing Tuesday on addressing the climate crisis with the Tax Code.

“We have plenty of good ideas for clean energy technology to battle climate change; the challenge is bringing them online quickly enough to make a difference,” Whitehouse said in a statement. “That’s why we need proposals like this one. Our legislation will hit the accelerator on promising new sources of clean energy, and help those technologies compete with heavy-polluting sources on the open market. I’m glad to partner with Senator Crapo in beginning work on this bipartisan bill, and look forward to strengthening it as others weigh in.”