The Treasury Department is offering its first round of guidance instructing companies how to comply with novel labor requirements in the new climate law, including how to take advantage of exceptions where the requirements can’t be met.
Treasury rolled out initial guidance Tuesday on prevailing wage and apprenticeship requirements that must be met in order for companies building various kinds of clean energy projects to access the full tax credits available to them under the Inflation Reduction Act, the green energy and health spending bill Democrats passed in August. In some cases, meeting the requirements increases the total available credit amount by fivefold.
The guidance is among the first to serve implementation of the Inflation Reduction Act’s massive tax incentive regime, which is intended to initiate an exponential build-out of renewable and other clean energy technologies and incentivize the creation of new manufacturing jobs.
It also displays some of the tensions agencies are reckoning with in implementing President Joe Biden’s climate change agenda, which envisions the rapid expansion of green energy technologies of which sourcing is overwhelmingly located in foreign countries where supply and labor are cheaper, and his labor agenda, which seeks to reshore manufacturing and pay U.S. workers well.
The prevailing wage and apprenticeship conditions apply to eight separate tax credits, including the credits for carbon oxide sequestration, clean fuel production, and renewable energy production, while the prevailing wage requirement alone applies to the new energy efficient home credit and zero-emission nuclear power production credits.
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To get the full credits, the law requires that companies pay workers responsible for the construction, alteration, or repair of a qualified facility, such as a commercial solar farm, the local prevailing wage for that job as defined by the Department of Labor.
Accessing the full credits also requires project developers to employ a certain percentage of apprentices, which increases in subsequent years.
The requirements “will ensure we’re both creating good-paying jobs and strengthening the pathways into those jobs,” Treasury Secretary Janet Yellen told reporters Tuesday.
The guidance also instructs companies how to contact the Department of Labor in the event that no prevailing wage is posted for a specific geographic area or job classification, and it clarifies what kinds of documentation companies need to provide to prove they are meeting the requirements.
It also explains how Treasury will determine whether to extend a “good faith effort exception” to companies. The exception was provided for in the law, and the guidance explains that it applies where companies are unable to meet the apprentice requirements due to a lack of access to qualified apprenticeship programs or are otherwise denied requested apprentices.
Labor unions such as the International Brotherhood of Electrical Workers and AFL-CIO endorsed the labor and apprenticeship conditions. Biden has frequently pitched his climate policies as job-creators and aligned himself closely with union labor.
Some stakeholders requested flexibility and shared concerns about the ability of project developers in different regions to meet the labor requirements.
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For example, the Solar Energy Industries Association, which endorsed the labor requirements, suggested Treasury develop geographic boundaries governing how far a company would have to look for an apprenticeship program.
“There needs to be some recognition that in some parts of the country, there are not necessarily all of the infrastructure setup yet,” Abigail Ross Hopper, president and CEO of SEIA, recently told reporters. “In some states, there may not be sufficient apprenticeship program, and we need to acknowledge that and allow for companies to have ways to get waivers.”
The new guidance “appears to offer flexibility for the range of stakeholders,” Sean Gallagher, vice president of state and regulatory affairs at SEIA, said Tuesday.
John Podesta, Biden’s senior adviser for clean energy innovation and implementation, stressed that companies “have the choice to take advantage of the the enhanced credit or not.”
He said, however, that companies he’s talked to were eager to access the full credits and are looking forward “to being good employers, to paying prevailing wage.”
