Clean Energy Program | Idea Brief

A Small Tax Change, Big Clean Energy Results

by Joshua Freed and Mae Stevens

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Almost every one of America’s main global competitors—both advanced economies and emerging ones like China,Brazil, and India—are increasing public and private investment in clean energy. For most, the principle reason is not altruistic or environmental, it is economic. The race is on to capture a major share of the $2.3 trillion market in clean energy.

The United States, however, is sliding backwards. As a recent Third Way report found, early investment in clean energy is in decline, and federal investment in clean energy is likely to disappear at the end of 2011. This credit crunch could starve both mature and emerging clean energy companies in America just as the rest of the world races ahead.

It doesn’t have to be this way.

Congress could unleash significant private capital by reforming the tax code to permit the use of master limited partnerships for clean energy projects.This small change could make financing projects like wind farms and utility-scale solar much less expensive, encourage more development, stimulate economic growth, and reduce energy costs.

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