A Production Tax Credit for Clean Industrial Heat

This policy design brief by Energy Innovation proposes a Production Tax Credit (PTC) to accelerate the transition to zero-emissions industrial heat. The author argues that because industrial facilities emit approximately a quarter of global greenhouse gases—primarily from burning fossil fuels for processes like melting metals and cooking food—a targeted PTC can drive decarbonization while supporting manufacturing jobs and national security.

• A Production Tax Credit (PTC) for industrial heat should be based on 'useful heat'—heat used productively for equipment, materials, or combustion air—rather than total heat generated or input energy. This approach prevents the penalization of efficient technologies like heat pumps and incentivizes the recovery of lost heat.
• To maximize investment efficiency, the PTC should be refundable (direct pay or elective pay). This ensures that new or unprofitable businesses can access the credit without relying on tax equity investors, who typically take about half of the credit's value.
• The PTC should target 'scope 1' direct emissions from industrial facilities and ignore 'scope 2' emissions from purchased electricity. This prevents the policy from merely paying firms to buy clean electricity without upgrading equipment and avoids the political and technical complexity of 'three pillars' tests for electricity.
• To avoid overpaying or underpaying, the PTC rate should be adjusted based on the temperature of the heat and the power (delivery rate). The author suggests using a smooth mathematical function or a system of bins (resulting in 9 to 16 rates) to account for the fact that high-temperature heat (e.g., over 1,000 °C for glass) is more expensive to produce than low-temperature heat (e.g., 100 °C for food).
• The policy should include specific exclusions and bonuses to ensure cost-effectiveness and meet social goals. It should exclude the combustion of solid biomass, liquid biofuels, and byproducts, while allowing biomethane. Additionally, percentage bonuses (e.g., 10% increments) could be applied for projects using domestic content, unionized labor, or those located in disadvantaged communities.

APA

RISSMAN, J. (2024). A Production Tax Credit for Clean Industrial Heat. Energy Innovation. https://energyinnovation.org/wp-content/uploads/A-Production-Tax-Credit-for-Clean-Industrial-Heat.pdf

Chicago

RISSMAN, JEFFREY. A Production Tax Credit for Clean Industrial Heat. Energy Innovation, 2024. https://energyinnovation.org/wp-content/uploads/A-Production-Tax-Credit-for-Clean-Industrial-Heat.pdf.

Wikipedia

{{cite report |last1=RISSMAN |first1=JEFFREY |title=A Production Tax Credit for Clean Industrial Heat |publisher=Energy Innovation |date=July 2024 |url=https://energyinnovation.org/wp-content/uploads/A-Production-Tax-Credit-for-Clean-Industrial-Heat.pdf |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{rissman2024production, author = {RISSMAN, JEFFREY}, title = {{A Production Tax Credit for Clean Industrial Heat}}, institution = {Energy Innovation}, year = {2024}, month = jul, url = {https://energyinnovation.org/wp-content/uploads/A-Production-Tax-Credit-for-Clean-Industrial-Heat.pdf}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }