Designing the Next Generation of Federal Tax Credits for Low-Carbon Technologies

Abstract

Achieving emissions reductions to reach economywide net-zero emissions by 2050 will require sustained technological innovations and widespread deployment of emerging low-carbon technologies that are not yet commercially deployed on a mass-market scale. Tax credits are an important policy tool for supporting the early-stage deployment of emerging technologies as well as more mature technologies that have not yet reached widespread deployment. While existing federal tax credits have played an important role in enabling the deployment of several low-carbon technologies, including wind, solar, and electric vehicles, they also suffer from critical design deficiencies that make them less effective. This paper proposes six considerations for designing the next generation of federal tax credits that can support deployment of clean energy and low-carbon technologies in the U.S. power, transportation, industrial, and buildings sectors. Within each consideration, the paper lays out different approaches and discusses the tradeoffs between each.

Changing the Demand Preference for Electric Vehicles in Ho Chi Minh City: Costs and Benefits From Incentives in the Early Stages of Adoption

“…In the coming years, such rapid sales growth and widespread adoption will require strong incentives that continue to make EVs more affordable and convenient during the early stages of adoption. Saha et al (2021), who evaluate the role of financial incentives like tax credits and complementary policies in supporting low-carbon technologies through different stages of market adoption, also explain that during the early stages of adoption purchase incentives including tax credits, rebates, and grants are essential to making emerging clean technologies more affordable in their competition with incumbent fossil fuel-based alternatives (Figure 2). As emerging technologies like EVs reach cost parity with incumbents like ICE vehicles and experience market diffusion, purchase incentives can be supported and replaced by policies such as emissions standards, a carbon tax, or other environmental regulations.…”

“…The period of analysis is an eight-year period, based on recommendations from literature focused on financial incentives in the early stages of EV adoption (Saha et al 2021;Boehm et al 2021).…”

Thay đổi thị hiếu nhu cầu đối với phương tiện xe điện tại Thành phố Hồ Chí Minh: Chi phí và lợi ích từ các cơ chế ưu đãi trong giai đoạn đầu phát triển phương tiện giao thông sử dụng điện

“…As emerging technologies like EVs reach cost parity with incumbents like ICE vehicles and experience market diffusion, purchase incentives can be supported and replaced by policies such as emissions standards, a carbon tax, or other environmental regulations. These policy tools can help maintain a level playing field for cleaner technologies in the market and avoid technology "lock-in"-the prolonged use of high-emissions technologies because it is cheaper to use existing equipment and infrastructure until it reaches its natural end of life (Saha et al 2021).…”