Strategic Tax Credits to Decarbonize Buildings

This policy brief by RMI argues for the implementation of a strategic suite of refundable tax credits to decarbonize buildings in the United States. The authors contend that current tax provisions are insufficient to meet President Biden's climate goals and propose six specific tax credit modifications and additions to incentivize zero-carbon new construction, deep energy retrofits for existing buildings, and the scaling of clean heating and cooling manufacturing.

• Buildings are the primary source of global greenhouse gas emissions, accounting for approximately 40 percent of the total. To achieve the goal of reducing GHG emissions by 50 percent by 2030, the U.S. must build only zero-carbon buildings and perform deep energy retrofits on roughly 4 million buildings annually, which represents 5 percent of existing buildings.
• Current U.S. tax credits and deductions for building energy efficiency are described as too low, cumbersome, and complicated to drive the necessary market transformation. Furthermore, these existing incentives often exclude low-income households and federally supported low-income housing.
• RMI proposes a suite of six refundable tax credits to accelerate decarbonization. These include: improving the Energy Efficient Home Credit (45L) with a $12,500 credit for zero-carbon performance; increasing the Commercial Buildings Energy-Efficiency Tax Deduction (179D) to a $15–$20 per square foot credit for 50 percent or more energy reduction; and creating a 30 percent basis adjustment for deep energy retrofits via the Low-Income Housing Tax Credit (LIHTC-DEBA).
• To address specific barriers and supply chain needs, RMI recommends three additional credits: a Home Lead Safety Tax Credit (36B) to mitigate lead paint hazards during decarbonization; a Clean Heating and Cooling Tax Credit (45X) providing a 30 percent investment tax credit for replacing fossil fuel or electric resistance heating in commercial and multifamily buildings; and an updated Energy Efficient Appliance Credit (45M) for manufacturers to scale heat pump production.

APA

RMI (2021). Strategic Tax Credits to Decarbonize Buildings. https://rmi.org/resources/strategic-tax-credits-to-decarbonize-buildings/

Chicago

RMI. Strategic Tax Credits to Decarbonize Buildings. 2021. https://rmi.org/resources/strategic-tax-credits-to-decarbonize-buildings/.

Wikipedia

{{cite report |author=RMI |title=Strategic Tax Credits to Decarbonize Buildings |date=7 July 2021 |url=https://rmi.org/resources/strategic-tax-credits-to-decarbonize-buildings/ |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{rmi2021strategic, author = {{RMI}}, title = {{Strategic Tax Credits to Decarbonize Buildings}}, institution = {RMI}, year = {2021}, month = jul, url = {https://rmi.org/resources/strategic-tax-credits-to-decarbonize-buildings/}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }