Twenty-first International Conference on Environmental, Cultural, Economic & Social Sustainability

Abstract

This study critically assesses the structural inequities embedded within the allocation of non-refundable energy tax credits in the U.S. residential solar market. By analyzing tax credit data from the Internal Revenue Service (IRS) and individual-level data from the Annual Social and Economic Supplements (ASEC), this study reveals a stark 74% discrepancy in tax credit utilization between low and higher-income households. Furthermore, it identifies that 28% of homeowner households are ineligible for solar tax credits due to tax liability constraints. Employing a structural model, this research quantifies the adverse impacts of current tax policies and uses counterfactual scenarios to argue that policy reforms—specifically, making tax credits refundable and increasing their value by 10%—could boost adoption rates by 23% and 12% among the most economically vulnerable populations. These findings serve as a pivotal call for policymakers to restructure energy tax credits to bridge the socioeconomic divide, thereby accelerating the transition towards a more sustainable and equitable energy system.