Future Of Transferable Tax Credits: Marketplaces, Technology, And Policy Evolution

Each country and industry is looking towards a greener and cleaner future. To make it happen, we are witnessing new and powerful legislative changes, and the transferable tax credits policy implemented by the U.S. Inflation Reduction Act of 2022 is a great example of that. It has transformed clean energy and advanced manufacturing in the United States. 

How? 

Project owners can transfer (sell) their clean energy tax credits to a third party for direct cash. This helps them to sidestep the complex tax-equity structures and make participation in the clean energy finance more appealing and hassle-free. 

It is a great change that will have key effects on major avenues such as marketplaces, technology, future policy making, and consumers. In this blog, we’ll dive deeper into these changes.

What are Transferable Tax Credits?

The goal of the transferable tax credits created by the IRA in May 2022 is to bring in more investment in clean energy production. The new rules let the clean energy project developers sell their credits to private investors and co-own a project. The eligible taxpayers can sell all or some part of their tax credits, resulting in breaking the monopoly-like situation in the tax equity investment market in recent years. Here are some additional advantages of this revolutionary change:

• Simplified and Faster Process: Most tax credit deals can take place under 3 months, which helps save legal fees and time.
• Lower Entry Barriers: Section 6418 brings in more capital for low and mid-size projects that are not supported by large organisations. 

The Future of Transferable Tax Credits

These policies are not only changing the economic and climate-conscious climate of the US but also bleeding into the marketplace, technology, and policy frameworks:

Marketplaces

Within a few years of its implementation, we can witness a boom in investments in clean-energy projects. In 2023 alone, approximately $7 to $9 billion worth of credits were transferred. In 2024, the number is estimated to triple, with approximately $30 billion in tax credit transfers. It has also seen a much diversified buyer profile, including private corporations and oil companies. 

The average pricing of the transferring credits ranges between 92 and 95 cents on the dollar for varied types and sizes of projects. This means that the market is becoming increasingly competitive, leading to fair value for the sellers. For buyers, this helps in fulfilling the Environmental, Social, and Governance (ESG) goals while optimizing tax strategies.  

Technology: Enabling Innovation, Speed, and Scalability

The increase in the participants means an increase in the volume and complexity of the system. To deal with this issue, more and more digital marketplaces are rising. These platforms offer specialised tools, including::

• Credit matchmaking between buyers and sellers.
• Standardized contracts and workflows.
• Integrated due diligence, documentation, and compliance.
• Real-time transaction status and analytics.

This bill also inspires changes in different sectors with some fresh innovations and policy changes. One such sector is agriculture. The Supporting Innovation in Agricultural Act of 2025 (H.R. 1705) proposes a 30% transferable ITC. It is eligible for taxpayers investing in new-age agricultural technologies. Plus, under Section 6417, the bill would allow direct pay to the sellers. Here are a few types of innovative agricultural technology projects included in the bill:

• Controlled Environment Agriculture: It refers to indoor and closed farming. The crops are grown in a controlled environment throughout their lifecycle. It includes technologies like aquaponics, vertical farming, and hydroponics. 

• Precision Agriculture Technologies: It inspires the use of advanced gadgets such as drones, sensors, and GPS for optimized agricultural processes.

Policy Evolution: The Long Road Ahead

While the Solar sector enjoyed the largest 40% share of the deals in 2023, this policy brought in high investments in advanced manufacturing facilities and bioenergy projects. On top of that, the business of tax credit insurance is rapidly increasing day by day. Till now, there are 11 types of transferable clean energy tax credits:

This policy marks a shift from the passive incentive distribution to an active market design, creating one of the world’s largest clean finance ecosystems. Future developments are expected to include other resources such as low-carbon cement, recycling, and critical minerals. Plus, as the demand and the market grow, the IRS will have to enforce some oversight rules and regulations to keep the deals in check. On top of that, the rise in insurance policies for ITC will help buyers stay protected from fraud or market risks.

Conclusion

The transferable tax credits open the pathways to a greener and better future for every sector and consumer in the United States. And, rather than a single-handed operation from the public sector, it brings in small and medium private businesses to make the dream a reality. This has unlocked a new era of clean energy with faster project developments, diverse participation, and revolutionary innovations. With the help of strong policies, guidelines, and large-scale infrastructure, this market is here to stay.