Overview:
Clean energy investments that once came at a cost to companies can now actually improve their bottom line. For companies with positive U.S. federal tax liability, transferable tax credits introduced by the Inflation Reduction Act offer a meaningful opportunity to fund clean energy investment while improving after-tax outcomes. This mechanism can be used by companies across the pet value chain, from manufacturers and retailers to distributors, logistics providers, and packaging companies. This case study outlines how the mechanism works and the steps that companies can take to get started.
The Challenge:
Pet industry companies are under growing pressure to reduce their environmental footprint from customers, retail partners, regulators, and investors.
Scope 2 emissions, those generated by purchased electricity, represent a significant and addressable portion of most organization’s carbon footprints. But the traditional paths to clean energy (Long-term power purchase agreements, on-site solar, and Renewable Energy Credits) often require meaningful financial commitment or long planning horizons.
The Solution
Sustainability spending has long been treated as an overhead cost, but transferable tax credits reframe it as an investment. The expansion of tax credit transferability under the Inflation Reduction Act (IRA) has provided corporations with a direct avenue for investment in clean energy that was previously unavailable. Renewable energy developers are now able to sell their tax credits to third-party corporate purchasers at a discounted rate.
In response to the IRA, STX created a transferable tax credit solution that supports corporate buyers through project selection, due diligence, contract execution, and reinvestment. The team first tested the process in-house before launching it to clients and has supported over $2.7B in tax credit transactions over the last 12 months.
Purchasing transferable tax credits is one of the most direct ways a corporation can support new clean energy development, as the transaction provides immediate capital for project developers.