U.S. Treasury announces guidelines on additional clean energy tax incentives
- September 12, 2023
- Posted by: Quatro Strategies
- Categories: China, ESG & Renewable Energy, Sanctions & Regulation, United States
The U.S. Treasury has announced plans to provide guidance on additional clean energy tax incentives, including measures aimed at deterring companies from relying on Chinese supply chains, before the end of 2023.
Lily Batchelder, the Treasury’s assistant secretary for tax policy, mentioned that this guidance will include rules for the “foreign entity of concern,” which are set to go into effect in 2024 for completed batteries and 2025 for critical minerals used in their production. These rules will impact investments in batteries for electric vehicles, including Ford Motor Co’s deal with Chinese battery manufacturer CATL.
Additionally, the guidance will cover the “45X” manufacturing production tax for clean energy products like solar, wind, batteries, and critical minerals components.
The U.S. auto industry is closely watching these rules, as they play a significant role in investment decisions related to electric vehicle battery production. The industry is looking for clarity on whether deals like Ford’s licensing of CATL’s technology will qualify for tax credits.
The Treasury also plans to release guidance on tax credits for energy-efficient home improvements and sustainable aviation fuel in the near term. Other guidance expected by the end of 2023 includes Section 48 clean power investment tax credits and clean hydrogen tax credits.
These tax incentives are part of the Inflation Reduction Act (IRA), passed in August 2022, which is estimated to cost around $369 billion over 10 years. However, strong demand for these credits has led some analysts to project that the fiscal costs of the IRA could reach $1 trillion.
Interested in learning more?
Sign up for Top Insights Today
Top Insights Today delivers the latest insights straight to your inbox.
You will get daily industry insights on
Oil & Gas, Rare Earths & Commodities, Mining & Metals, EVs & Battery Technology, ESG & Renewable Energy, AI & Semiconductors, Aerospace & Defense, Sanctions & Regulation, Business & Politics.
Read more insights
BOJ faces hurdles in changing Japanese investors’ trillion-dollar global bond habit
As the Bank of Japan (BOJ) gears up for a potential shift in monetary policy, analysts caution that significant efforts will be needed to substantially alter the approximately $3 trillion worth of yen Japanese investors have allocated in global bond markets and yen-based trades. Japanese investors…
Europe’s weak demand contains the Gulf conflict inflation shock
An analysis of eurozone corporate earnings commentary has produced a finding with significant implications for monetary policy: only about a third of the region’s largest companies are raising prices in response to the Gulf conflict, a sharp contrast with the nearly two-thirds that did so following Russia’s invasion of Ukraine.
The divergence suggests that the eurozone’s weak economic backdrop is suppressing corporate pricing power, reducing the risk that the war’s energy shock will translate into the kind of broad-based, self-reinforcing inflation that gripped the region in 2022.
Europe’s circular economy experiment hits the plastics recycling wall
The European Union is preparing a package of measures designed to shore up a plastics-recycling industry that officials now describe as being in acute distress, after a wave of plant shutdowns and worsening economics for recyclers.
Central to the proposals is a plan to tighten scrutiny of imported plastics, especially materials marketed as “recycled”, through checks intended to verify that the imported content is genuinely recycled rather than virgin polymer relabeled to meet buyer requirements or exploit regulatory definitions. The initiative is expected to be presented imminently.