Passage of the U.S. Inflation Reduction Act (IRA) in 2022 was a game changer in the United States’ effort to address climate change. The hundreds of billions of dollars the IRA has made available for clean energy and climate mitigation projects will likely double the pace of U.S. decarbonization. While this rapid expansion in clean energy development is tied to the sheer scale of the IRA (it is the largest climate spending bill ever passed), how climate spending from this bill is taking place is also a critical.
Most of the IRA funding for climate change mitigation is in the form of generous tax credits for developing a new project, or producing clean energy. But, most developers that could receive credits for large capital projects don’t have enough tax liability to use them. As a solution, for the first time ever, IRA tax credits for clean energy development were made transferable, meaning that the credits can be sold for cash to third parties. To understand what this finance rule change means, Climate Now sat down with Crux CEO Alfred Johnson, whose startup company provides a comprehensive platform for buyers and sellers in this new transferable tax credit market. Alfred explains how tax credit transfers work, why they are so important to unlocking the financing potential of the IRA, and Crux’s role in cultivating the clean energy tax credit ecosystem.
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