A Market for Investment Tax Credits: Lessons From Clean Energy Infrastructure and the Diluting Impact of Pre‐Existing Tax Provisions

Traditionally, clean energy project developers relied on tax equity financing, where they partner with investors who have large tax liabilities and can use tax credits more efficiently. The IRA expanded the tax credits and introduced a mechanism that allowed developers to “sell” their tax credits: transferability. This study captures the project‐level mechanics oef tax credit design to examine whether interactions with existing provisions of the tax code and their timing reduce the effectiveness of tax credits and how that influences the relative present benefits of transferability and tax equity financing.