Post-election market update: Webinar recap

Last week, Crux co-founder and CEO Alfred Johnson sat down with a panel of energy, tax, finance, and legal experts to discuss how tax reform under the next administration will likely impact energy tax credits. The webinar speakers included:

• Jason Clark, CEO and founder, Power Brief
• Hilary Lefko, Partner, Norton Rose Fulbright
• Rich Powell, CEO, Clean Energy Buyers Association
• Jennifer Acuña, Principal, KPMG

Four key pieces of context for energy tax credits

Clark began the webinar with four key pieces of context for the energy tax credit discussion. 

Energy dominance exists within a broader ecosystem of priorities for the incoming administration

That ecosystem includes a number of big challenges, from immigration to appointments to geopolitics. Even the single category of energy dominance includes many different sub-priorities, some of which will be easier to accomplish unilaterally than others. The administration is likely to tackle other energy and non-energy priorities before turning its attention to energy tax credits.

The administration faces looming — but as yet undefined — tax discussions in 2025

One of the largest and most immediate issues facing the new administration will be the expiration of the Tax Cuts and Jobs Act (TCJA) in 2025. Voters will feel a material impact if those tax credits expire, but a 10-year extension would come with a very large price tag. The Inflation Reduction Act (IRA) is part of this broader tax policy conversation, and Congress has many paths to navigate it.

Expect negotiations over each piece of the legislation, especially considering the tax promises that President-elect Donald Trump made on the campaign trail. For now, it’s difficult to know how the debate will ultimately shape up, what the final tax code will include, or how long the provisions will be for.

Download the full post-election analysis from Power Brief and Crux —>

Republicans will be governing with narrow margins

Although Republicans control both the House of Representatives and the Senate, their margins are small in both chambers. That leaves very little room for disagreement across an entire caucus, especially on major legislation such as a tax bill. Intra-party debates could drag out the process or stall new tax measures.‍

The IRA has some inherent political durability

Many of the bill’s effects have bipartisan appeal — 80% of the investments from the policy are flowing to Republican and historically swing states, for instance, and the law is broad enough to cover aspects that both parties support. Each tax credit has its own risk profile and could be handled differently. A whole spectrum of options exists beyond full repeal. 

The transferable tax credit market certainly shows no sign of slowing down. Crux has seen more than $3.4 billion in bids in the three weeks since the election. Eighty percent of those bids contain forward commitments for future tax credit years.

We certainly have not seen a slowdown in activity, a slowdown in investment. In fact, we’ve seen activity pick up toward the end of the year.” — Hilary Lefko, Partner, Norton Rose Fulbright

Panel discussion: Looking ahead at the energy tax credit market

With the broader context in mind, the panel discussed a range of questions about the market, ranging from the incoming administration’s legislative and policy agenda to market sentiment regarding the election.

Panelists agreed that there are many paths forward for tax policy, influenced by the administration’s broader economic objectives. They expect to see a reconciliation bill in 2025, driven by the need to address the expiring provisions of the TCJA.

Tariffs stand out as a key question in the upcoming tax debate. The administration could turn to tariffs as a way to offset spending on tax credits, although that approach may face resistance. And while tariffs could provide a short-term solution for funding energy tax credits, in the longer term they could raise costs and decrease availability of those same technologies. The incoming administration’s ability to balance these factors will be critical in advancing its policy goals.

Regarding energy tax credits specifically, each tax credit carries its own risk profile based on its political vulnerability and the potential cost savings of repealing it. The panelists agreed that the electric vehicle (EV) credit, for instance, could be particularly vulnerable. But they also pointed to opportunities for bipartisan cooperation on areas such as domestic manufacturing and energy independence. 

Looking toward 2025, the incoming administration’s focus on energy independence and domestic manufacturing suggests a potential shift toward policies that support these goals. The path forward on those policies will likely involve complex negotiations and trade-offs to balance various interests and priorities. The market for energy tax credits remains robust in the weeks since the election, but stakeholders will need to remain engaged to influence the outcomes of policy debates.

To hear the panel’s full responses to these and more questions, watch the full webinar recap below.

For more information on taking part in the transferable tax credit market, contact Crux.