A Production Tax Credit for Clean Industrial Heat

The policy brief outlines a framework for a production tax credit (PTC) to decarbonize industrial heat. It argues that the credit should target 'useful heat' used in manufacturing processes, be refundable to maximize investment efficiency, and utilize a rate based on heat temperature and power to account for varying technology costs. The author recommends excluding biomass and byproducts while focusing on scope 1 emissions to avoid complexity and ensure the policy targets industrial facilities rather than the electricity grid.

• To maximize the impact of public investment, the PTC should be a refundable tax credit (direct pay or elective pay). Nonrefundable credits often require partnerships with tax equity investors who typically take "about half of the value of the credit," meaning half of the investment is wasted.
• The PTC should be based on "useful heat"—heat used productively for equipment or materials—rather than total energy input or heat losses. This design prevents penalizing efficient technologies like heat pumps and encourages firms to minimize heat loss or recover lost heat.
• Because the cost of zero-emissions heat varies significantly by temperature (e.g., 100 °C for food vs. 1,000 °C for glass), a flat PTC rate would be inefficient. The author suggests defining rates based on a mathematical function or bins of temperature and power (heat delivery rate).
• The credit 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 and avoids the political and technical complexity of "three pillars" tests for electricity.
• To avoid subsidizing actions that would occur without the credit, the PTC should exclude the combustion of solid biomass, liquid biofuels, and byproducts. However, the combustion of biomethane from organic waste processed in anaerobic digesters should be included.

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} }