By Cordia Scott Hennaman, MNE Tax
US Secretary of the Treasury Janet L. Yellen spoke on April 21 of the Biden administration’s “whole-of-government approach” to aggressively tackling climate change – including creating a targeted investment tax credit and removing tax subsidies for fossil fuels.
“After sitting on the sidelines for four years, the US government is fully committed to rejoin the fight against climate change,” Yellen said. The American Jobs Plan is “the cornerstone” of the administration’s approach on this topic, she said.
“To help move clean electricity to where it is needed the most, the plan creates a targeted investment tax credit that incentivizes the buildout of at least 20 gigawatts of high-voltage power lines,” Yellen said.
It also removes tax subsidies for fossil fuels, which she said cost taxpayers about $4 billion a year and incentivize the use of higher-emission fuels.
Subsidized fossil fuels have harmed air and water quality in US communities –especially in communities of color — in addition to contributing to climate change, she said.
The American Jobs Plan aims to dramatically reduce US emissions by greening the electricity and transportation sectors. It also seeks to retrofit US buildings to be more sustainable, promote clean energy manufacturing, and increase climate research and development.
“The Jobs Plan provides critical funds via direct investments and tax credits—but meeting the total cost over the next ten years will require substantially more,” she said. “One estimate placed the needed incremental investments at over $2.5 trillion for the United States alone. Private capital will need to fill most of that gap.”
In particular, the plan adopts a technology-neutral “Clean Electricity Standard,” which would help the US to achieve 100 percent carbon-free electricity by 2035.
A key feature of this approach is that it is technology-neutral in that it allows the market to determine the best way to meet the Clean Electricity Standard, she said.
The US accounts for about 13 percent of global emissions. “We are committed to working closely with our international partners—particularly other large emitters, such as Europe, India, and China—in our shared responsibility to implement ambitious emissions reduction measures.”
Because international coordination on these issues is critical, the US Treasury is co-chairing a newly relaunched G20 Sustainable Finance Working Group, she said. This effort will bring G20 finance ministries and central banks together to evaluate how to improve current international initiatives and approaches to sustainability disclosures. It also will coordinate approaches to identifying investments as climate-aligned or sustainable, she said.
President Biden has outlined an ambitious strategy to transition the United States to net-zero emissions and has mobilized the entire government to achieve it, Yellen said.
Cordia Scott Hennaman
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