The Investment Tax Credit (“ITC”) is an essential part of U.S. policymakers’ strategy to encourage investment in clean energy. We investigate the effect of Investment Tax Credits on firms’ electricity generation and emissions with a sample of electric utilities from 2001-2022. Using a stacked cohort difference-in-differences design, we find that firms generate less electricity from renewable sources than peer firms after claiming ITC, a roughly 2% decrease in renewable electricity generated relative to pre-ITC generation levels. This effect appears driven by substituting away from wind and other renewable sources to solar, consistent with selective technology provisions in the ITC. We also observe ITC firms employ 7% more people following initial adoption and observe similar patterns as firms claim more ITCs. Finally, we observe declines in ESG scores following ITC usage. Our analyses suggest that selective technology provisions of the ITC may have hampered its goal of growing renewable electricity generation.
Jesse Chan of Boston University’s Questrom School of Business presented.
Read the paper here.
See the slides here: Energy Investment Tax Credits
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