Tax Policy and Power Sector Decarbonization

Over the past three decades, U.S. tax policy has provided an array of tax expenditures, such as production tax credits, investment tax credits, and accelerated depreciation, to promote the deployment of clean energy technologies in the electric power sector. In conjunction with non-tax subsidies (e.g., loan guarantees, grants in lieu of tax credits, state and local policies) and regulations (e.g., state renewable portfolio standards), public policy has enabled cost-reducing innovation and significant adoption of zero-carbon power generation technologies. With most scenarios for deep decarbonization of the U.S. energy economy relying on a combination of power sector decarbonization and broad electrification of energy services (e.g., mobility, heating), this paper focuses on the evolution of tax policy and renewable power technologies to draw insights and lessons for future policy design.