Technology-Neutral Clean Electricity Tax Credits Under the IRA and the OBBBA

When the FY2022 reconciliation law, also known as the Inflation Reduction Act (IRA), was enacted, it brought about a shift in the energy tax credit landscape. Among other changes, the IRA scheduled the two largest renewable energy tax credits to begin phasing out after 2024, thereafter replacing them with technology-neutral credits. In energy tax policy, technological neutrality refers to the idea of giving the same tax treatment to all energy technologies that achieve a prescribed end goal. The IRA thus made all energy technologies that could generate electricity with zero lifecycle greenhouse gas emissions eligible for the Clean Electricity Investment Tax Credit (CEITC) and the Clean Electricity Production Tax Credit (CEPTC). As seen in Table 1, these credits were similar to the preexisting Investment Tax Credit (ITC) and Production Tax Credit (PTC), except that the latter credits applied only to specific renewable sources.

Policymakers and regulators expressed three arguments in favor of moving to technological neutrality:

• 1. By setting a goal (zero greenhouse gas emissions) for electricity producers yet remaining agnostic about how to achieve that goal, technology-neutral credits do not allow lawmakers to pick winners and losers in the energy market based on potentially undisclosed or arbitrary selection criteria.
• 2. Zero-emissions sources that are discovered in the future will be automatically eligible for the credits, thus creating an incentive for technological innovation. This logic also applies to technological advances that eliminate emissions for existing energy sources.
• 3. For facilities using the same energy source, technology-neutral credits allow regulators to distinguish between facilities without emissions and those with them. For example, coal-fired power plants that capture and sequester 100% of their emissions are eligible for the technology-neutral credits, but plants with nonzero emissions are ineligible.

The CEITC and CEPTC statutes, as enacted by the IRA, include language stating that facilities "for which the greenhouse gas emissions rate … is not greater than zero" qualify for the credits. While this language is far simpler than the lengthy legal requirements for the ITC and the PTC, it implicitly outsources the more complicated implementation aspects to federal regulators.

In 2024 and 2025, the Internal Revenue Service (IRS) issued regulations clarifying how different energy sources are to be treated under the technology-neutral framework. It determined that electricity facilities using certain technologies—solar, wind, nuclear, hydropower, geothermal, and marine and hydrokinetic—always have zero greenhouse gas emissions and are categorically eligible for the credits. The IRS also stated that waste energy recovery properties utilizing the sources listed above are eligible. For facilities using other energy sources, facility owners may request an assessment from the Department of Energy to determine if the facility meets the zero-emissions requirement. The IRS stated that for purposes of measuring greenhouse gas emissions, it would include all emissions associated with producing electricity during the facility's first 10 years of operation, and it would exclude emissions from backup generators, facility construction, and facility maintenance. Greenhouse gases other than carbon dioxide (CO₂) are given CO₂-equivalence scores based on their global warming potential (relative to CO₂) over 100 years.

Table 2 shows which energy technologies are eligible for the renewable energy credits and which are eligible for the technology-neutral credits. Most energy sources that are eligible for one set of credits are also eligible for the other, though there are exceptions: Nuclear energy is categorically eligible for the CEITC and CEPTC, whereas biomass and municipal solid waste facilities are eligible only for the ITC and PTC. Table 2 also shows that whereas the technology-neutral tax credits exclusively subsidize electricity generation and storage, the renewable energy credits (the ITC in particular) also subsidize heating systems, electricity transmission and distribution, hydrogen production, and biogas production.

The FY2025 reconciliation law, also known as the One Big Beautiful Bill Act (OBBBA), departed from the technology-neutral framework in two ways. First, it allowed fuel cell properties to qualify for the CEITC regardless of the properties' greenhouse gas emissions. Second, the OBBBA shortened the credit eligibility timelines for wind and solar energy more than for other technologies. Specifically, to receive the CEITC or CEPTC, wind and solar facilities must either (1) have begun construction before July 5, 2026, or (2) be placed in service (i.e., begin producing electricity) before January 1, 2028. For other energy technologies, facilities must begin construction before 2034 to qualify for full credits or begin construction in 2034 or 2035 to qualify for partial credits. The OBBBA's changes to the IRA's original technology-neutral framework can be seen by comparing the last two columns in Table 2.

Even before the enactment of the OBBBA, other credits departed from the technology-neutral framework. For example, the Advanced Manufacturing Production Credit (AMPC), enacted in the IRA, subsidized the production of components used in wind and solar facilities but not the production of components used in other renewable facilities or nuclear facilities. The OBBBA disallowed the AMPC for wind energy components produced and sold after 2027 (an earlier phaseout than under prior law). However, whereas the IRA generally shifted energy tax credits closer to technological neutrality, the OBBBA mostly moved away from that framework. It did this both by statutorily excluding specified technologies (wind and solar) and by statutorily adding one technology (fuel cell properties) to the clean electricity tax credits.