Innovation That Matters

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An ecosystem for managing and trading transferable tax credits

Financial Services

The network connects clean energy developers, tax credit buyers, banks, and syndicators

Spotted: It is roughly one year since the passage of the US Inflation Reduction Act (IRA). This landmark piece of legislation directs nearly $400 billion (around €364 billion) in federal funding to clean energy projects, in what the Environmental Protection Agency calls “the most significant climate legislation in US history.” 

Among the act’s provisions is the establishment of 11 types of transferable clean energy tax credits. Qualifying companies are awarded these credits, which can be used to offset their tax. But those who do not have substantial tax liabilities can sell the credits on to third parties in exchange for a tax-free cash payment. This is designed to encourage follow-on private investment in the clean energy sectors that are essential for the ongoing energy transition as the US aims to hit net-zero emissions by 2050.  

The transferable credits represent a huge new market, and one startup, Crux Climate, is aiming to streamline the process of managing and transferring the credits. The company has created a network of buyers and sellers, which is supported by a suite of tools that are designed to streamline transactions, reduce risk, and increase trust between counterparties. 

For clean energy developers, the network provides access to a deep pool of buyers to get the best price, while the tools help them collect bids in a single place and manage administrative tasks through contract templates and due diligence management and post-deal reporting tools. 

For buyers, Crux Climate simplifies the process of identifying projects, while helping them to manage risk through insurance options, a due diligence tool, and a network of advisory partners. All information about different credits is housed in one place, which reduces administrative overheads.  

In the archive, Springwise has previously come across other buyer-seller ecosystems in the context of the voluntary carbon market, such as a platform for purchasing permanent carbon removal credits. We have also spotted a transparency platform that’s making it easier to track and manage carbon offsets, and carbon insurance for the voluntary carbon market.

Written By: Matthew Hempstead

Website: cruxclimate.com

Contact: cruxclimate.com/contact

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