IRS Allocates $6B To Boost Clean Energy And Decarbonization

The U.S. Internal Revenue Service (IRS) has issued a major allocation of $6 billion in tax credits to support over 140 projects to advance clean energy infrastructure, critical materials production, and industrial decarbonization. This is the second round of allocations under the Qualifying Advanced Energy Project Credit (48C) program, expanded under the Inflation Reduction Act (IRA).

The 48C program is designed to promote innovation and sustainability in the U.S. energy sector, providing investment tax credits of up to 30% for qualifying advanced energy projects. The projects qualifying for these credits have to adhere to prevailing wage and apprenticeship standards, meaning environmental benefits are also complemented with economic and social ones. The newly announced second round follows an earlier allocation of $4 billion in April 2024, bringing the total funding to date to $10 billion and the number of selected projects to approximately 250.

Launched in 2009, the 48C program was revitalized and expanded by the IRA with a $10 billion injection, of which at least $4 billion is set aside for projects located in "energy communities." These are regions that have faced economic challenges due to the closure of coal mines or coal-fired power plants. The latest funding round directs around $2.5 billion to roughly 50 projects in these communities, aiming to reinvigorate local economies while advancing the nation's energy transition.

A significant portion of the funding—$3.8 billion—was allocated to projects focused on expanding clean energy manufacturing and recycling capacity. This aligns with the program’s mission to enhance U.S. manufacturing capabilities critical to clean energy deployment and the production of low-emissions materials. These projects span diverse areas such as clean hydrogen electrolyzers, fuel cells and their components, grid equipment, electric vehicle parts, batteries, nuclear power, solar photovoltaics, and wind energy.

An additional $1.5 billion went toward critical materials processing and refining projects, such as the refinement and processing of key materials including lithium, copper, and rare earth elements. Projects are also included in the scope for recycling lithium-ion batteries, copper, aluminum, and rare earth elements, among others. Such projects will strengthen the domestic supply chain of these critical materials necessary for clean energy technologies and economic security.

Additional to that, the other $700 million of this funding will target improving process efficiency at industrial facilities around the United States to reduce their GHG emissions. The set of projects it is going to target includes virtually every sector across the U.S. economy. Upon implementation, it is anticipated to eliminate some 2.8 million tons of CO2.

The 48C program is implemented through a partnership between the IRS and the Department of Energy's Office of Manufacturing & Energy Supply Chains (MESC). This partnership reflects government support for clean energy innovation while being sensitive to climate challenges and integrating economic benefits to communities nationwide.

Underlining the significance of the allocations, Deputy Director for Batteries and Critical Materials at the US Department of Energy Ashley Zumwalt-Forbes said that the strategic focus was on critical materials. Posting on social media, Zumwalt-Forbes announced funding on her last day in federal service, saying, "This round allocates a total of $6 billion across more than 140 projects in over 30 states. What is particularly noteworthy is the allocation of $1.5 billion towards critical materials recycling, processing, and refining projects- a sector that has outsized importance in our nation's economic security.

The second round of 48C tax credits signifies a transformational investment in the US energy and industrial landscape. Clean energy manufacturing, critical materials processing, and reduction of emissions were key priorities, and once implemented, these projects are likely to be central in the realization of the nation's clean energy objectives, community renewal, and strengthening the resiliency and sustainability of the U.S. economy.