Designing the Next Generation of Federal Tax Credits for Low-Carbon Technologies

This research paper by the World Resources Institute outlines six design considerations for the next generation of U.S. federal tax credits to accelerate the deployment of low-carbon technologies across the power, transportation, industrial, and buildings sectors to reach net-zero emissions by 2050.

• The author argues that current federal tax credits for low-carbon technologies have critical design deficiencies and that Congress's habit of repeatedly extending expiring credits creates uncertainty that discourages private sector long-term planning.
• The paper proposes six specific characteristics for future federal tax credits to effectively address decarbonization: technology-neutral design (except for crucial technologies), performance-based incentives over monetary investment, the use of both producer and consumer credits, long-term availability with clear phaseout criteria, refundability/direct-pay options, and equity measures for low- and middle-income Americans.
• Tax credits are identified as a tool for supporting both early-stage cutting-edge technologies—such as direct air capture, long-duration energy storage, advanced modular nuclear reactors, and green or blue hydrogen—and commercially available technologies that lack widespread deployment, such as heat pumps and electric vehicles.
• The paper notes a trade-off in phaseout strategies: while phasing out credits at a specific market share minimizes taxpayer costs and prioritizes innovation, maintaining credits for mature technologies may be necessary to accelerate the overall pace of decarbonization if no other policy addresses carbon pollution externalities.

APA

World Resources Institute (n.d.). Designing the Next Generation of Federal Tax Credits for Low-Carbon Technologies. https://www.wri.org/research/federal-tax-credits-low-carbon-technologies

Chicago

World Resources Institute. Designing the Next Generation of Federal Tax Credits for Low-Carbon Technologies. n.d. https://www.wri.org/research/federal-tax-credits-low-carbon-technologies.

Wikipedia

{{cite report |author=World Resources Institute |title=Designing the Next Generation of Federal Tax Credits for Low-Carbon Technologies |url=https://www.wri.org/research/federal-tax-credits-low-carbon-technologies |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{worldresourcesinstitutenddesigning, author = {{World Resources Institute}}, title = {{Designing the Next Generation of Federal Tax Credits for Low-Carbon Technologies}}, institution = {World Resources Institute}, url = {https://www.wri.org/research/federal-tax-credits-low-carbon-technologies}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }