Option 75:
Reform Green Energy Tax Credits
Topline Estimates
Source: Tax Foundation General Equilibrium Model.
The Inflation Reduction Act of 2022 introduced or expanded numerous tax credits for green energy technology. The One Big Beautiful Bill Act repealed many of the individual-side tax credits and imposed limits or sharper phaseouts for many of the business-side credits.
This option further rolls back some of the remaining tax credits, all of which are scheduled to be temporary under current law. It repeals the clean fuel production credit and the carbon sequestration credit. It halves the clean electricity investment tax credit (from 30 to 15 percent), clean electricity production credit, and zero-emission nuclear electricity production credit. It also, where applicable, eliminates the prevailing wage and apprenticeship requirements and location-related bonuses.
Because the credits are temporary, repealing them does not raise the cost of capital in the long run, and so does not alter long-run investment incentives or output. The revenue raised from repeal reduces the budget deficit and federal government borrowing, which reduces interest payments to foreigners and raises American incomes as measured by GNP.
On a conventional basis, this option would decrease the primary deficit by $123.7 billion over the budget window. Long-run GDP would be unchanged, while long-run GNP would rise slightly. Incorporating changes in interest costs, the publicly held debt-to-GDP ratio would be lower than baseline, reaching 175.1 percent by 2056.
On average, in 2036, taxpayers would see decreases in their after-tax incomes of less than 0.05 percent.
Modeled Results
Explore All Reform Options
Browse, search, and sort every reform option in the guide.
About the Authors
Erica York is Vice President of Federal Tax Policy with Tax Foundation’s Center for Federal Tax Policy. Her analysis has been featured in The Wall Street Journal, The Washington Post, Politico, and other national and international media outlets.
Garrett Watson is Director of Policy Analysis at the Tax Foundation, where he conducts research on federal and state tax policy. His work has been featured in The Washington Post, The Atlantic, Politico, the Associated Press and other major outlets.
Dr. Huaqun Li is Senior Economist, Director of Modeling Projects at the Tax Foundation. She focuses on developing and maintaining the Foundation’s Taxes and Growth Model, which models the budgetary and economic effects of changes to federal tax policy.
Dr. William McBride is the Chief Economist & Stephen J. Entin Fellow in Economics at the Tax Foundation, where he oversees major research projects primarily related to reforming the federal tax code, advancing sound tax policy, and improving the federal government’s fiscal outlook.
Alex Durante is a Senior Economist at the Tax Foundation, working on federal tax policy and model development. Alex worked as a research assistant at the Federal Reserve Board and served as a staff economist on the Council of Economic Advisers.
Alex Muresianu is a Senior Policy Analyst at the Tax Foundation, focused on federal tax policy. Previously working on the federal team as an intern in the summer of 2018 and as a research assistant in summer 2020. He attended Tufts University, graduating with a degree in economics and minors in finance and political science.
Peter Van Ness
Peter Van Ness is a Research Software Developer at the Tax Foundation working on federal tax policy and model development. Peter previously worked as a research assistant at another think tank and as a data analyst at a consulting firm.
Aleksei Shilov
Aleksei Shilov is a Research Software developer at the Tax Foundation working on economic model development and federal tax policy. Aleksei joined the Tax Foundation as an intern in January 2025. He holds a B.S. in computer science and a minor in economics from Northeastern University and is currently based in Boston, MA.
Daniel Bunn is President and CEO of the Tax Foundation. Daniel has been with the organization since 2018 and, prior to becoming President, successfully built its Center for Global Tax Policy, expanding the Tax Foundation’s reach and impact around the world. Prior to joining the Tax Foundation, Daniel worked in the United States Senate at the Joint Economic Committee.