Last week, Congress passed the Reconciliation Bill – also known as the “One Big, Beautiful Bill Act” – and President Trump moved swiftly to sign it into law. As explained in the statement issued by 3Degrees’ CEO, Philippe Vedrenne, the bill includes provisions that significantly hamper the development of clean energy in the United States. While this is a disappointing hurdle along our collective climate action journey, we firmly believe that there is still significant opportunity for progress, and we must remember that innovation and resilience are the hallmarks of our industry.
To that end, the 3Degrees team remains committed to our mission of helping companies take urgent action on climate change – which is now more critical than ever. In the most immediate term, we will be helping corporate buyers who have operations in the U.S. to navigate the key provisions of the bill, understand the potential implications on their own decarbonization initiatives and timeline, and make timely and informed decisions on how to best advance their climate goals in this new policy environment.
The table below highlights a few of the key provisions of the bill that are the most time sensitive, and are also the pieces of legislation driving the majority of questions from our clients.
| Legislative Impact on Tax Credits | Timeline for Tax Credit Changes | Anticipated Market Implications + Recommendations |
|---|---|---|
| 45Y / 48E – Clean Energy Investment and Production
Earlier, multi-year phase out of clean energy investment and production tax credits. Tax credits unavailable for projects owned or under effective control of “foreign entities of concern” (FEOC)* and credit recapture. |
Wind and solar projects must commence construction within 12 months of the bill’s enactment (by July 4, 2026) OR if they start construction after this date, must be placed in service by the end of 2027 to qualify for credits.
Wind and solar projects that commence construction after December 31, 2025 must meet new FEOC restrictions. |
The law eliminates tax credits for wind and solar projects much earlier than was planned under the Inflation Reduction Act (IRA). This will cause PPA prices to increase substantially after tax credits are no longer available and will substantially reduce the amount of renewables added to the grid in the late 2020s and beyond.
The decrease in construction of new renewable energy projects after the tax credit phase out will cause electricity prices to increase as power demand continues to grow with less new generation to meet it. Additionally, generation resources that are more expensive than solar and wind will get built instead. 3Degrees has typically advised clients against trying to “time the market” for PPAs. However, with the bill’s passage and these anticipated market headwinds, it is clear that to meet any near-term climate goals (through 2030), buyers should move quickly to execute PPAs before PPA prices increase significantly. |
| 45V – Clean Hydrogen
Expedited sunset of credit availability. |
Eligible projects must commence construction by December 31, 2027 (originally 2032). | Projects already under construction should proceed as normal; however, new projects will need to be accelerated to meet the “begin construction” deadline by the end of 2027.
Additionally, demand for RECs that meet the temporal, deliverability, and incrementality criteria will decrease. These implications primarily impact project developers, who should evaluate REC prices sooner before prices increase. |
| 45Z – Clean Fuels
Extended credit availability. Reduced value of SAF-derived credits. Removal of negative CI scoring. Feedstock restrictions. FEOC restrictions. |
Tax credits available for eligible fuel production through December 31, 2029 (originally 2027).
Credits generated for sustainable aviation fuel (SAF) produced after December 31, 2025 will have the same base and enhanced credit values as non-SAF fuels. Fuel feedstocks must be produced or grown within the U.S., Mexico, or Canada beginning with fuels produced after December 31, 2025. FEOC restrictions apply after the bill’s enactment. |
The extension of the 45Z tax credit could provide a temporary boost in investments for clean fuel producers, but eliminating the enhanced SAF rate will slow investment and growth in SAF projects. 3Degrees has deep technical and market expertise, and is already helping many clients access these tax credits. |
* Foreign Entity of Concern (FEOC) restrictions apply to almost all tax credits (but not 45V) and deny credits or transferability to projects that are owned or controlled by certain foreign entities — or that purchase components from or make payment to these foreign entities.
The bottom line is that these recent policy developments, including the Executive Order signed by President Trump on July 7th that may put forth additional restrictions on market development, will cause further turbulence in the clean energy industry for the foreseeable future. However, the business case for decarbonization remains strong – but buyers should move expediently. As we have for nearly two decades, 3Degrees will continue to serve as a trusted advisor to advance global organizations’ clean energy procurement and climate strategies. It will require determination and commitment on all of our parts, and 3Degrees stands ready to walk alongside our clients and partners to help you transform your climate ambition into action.
Please reach out to discuss the renewable energy strategy and implementation services that we can offer to help your organization take immediate action.
