Illustration: Shoshana Gordon/Axios
Treasury's latest IRA guidance is likely to revive grappling about what qualifies as "clean" energy.
Why it matters: The Biden administration is trying to decide how to factor biomass and biogas into the IRA's tech-neutral energy tax credits.
- Its final guidance for the incentives will have implications for the running controversy about whether these fuels are climate-friendly.
- Some environmentalists want Treasury to shut these fuels out of the IRA.
Zoom in: Treasury's initial proposal, released last week, effectively punts on whether fuels like biomass and "renewable" natural gas will qualify for the incentives.
- The law requires it to consider the life cycle emissions of burning or gasifying these fuels to make electricity. The administration set out a list of questions about how to model those emissions.
- That's likely to set off a letter and comment war, as industry and green groups clash over the future of these fuels.
Between the lines: It's not make-or-break for the industry. The credit isn't trying to create an industry from scratch, and RNG currently has limited scale in the power sector.
- Still, "there's just so many opportunities to take this industry and really kind of bring it to the next level," said Lauren Collins, a tax lawyer with Vinson & Elkins.
Treasury asked a similar series of questions about RNG in its initial proposal for the 45V hydrogen credit.
- In both cases, the RNG industry essentially wants the department to use a version of the GREET model to back up what it says is its "enormous climate benefit."
- "We are evaluating the opportunity to clarify a few issues and look forward to responding to broader questions" in the electricity credit guidance, Geoff Dietz, director of federal government affairs for the RNG Coalition, said in a statement.
The other side: Companies and state governments see these fuels as carbon-neutral. But Sarah Lutz, a climate campaigner at Friends of the Earth, argues that those evaluations are based on "very arbitrary or honestly incorrect baseline assumptions."
- "The main thing that we're advocating for is that Treasury is taking a really hard look at what the baseline assumptions are for their model and that they're not putting their blinders on," she said.
What we're watching: Hill progressives have already tried to stop biomass companies from getting the IRA's advanced manufacturing incentive.
- But RNG's got some bipartisan support. Rep. Linda Sanchez and Sen. Thom Tillis have legislation that would create a new tax credit for RNG in vehicles and airplanes.
