If Transferable Tax Credits are an asset class in formation, what can we learn from Renewable Energy Certificate (REC) markets?

Transferable tax credits, enabled by the Inflation Reduction Act, allow eligible project owners to sell tax credits for cash to third parties, expanding the buyer base beyond traditional tax equity.

With clear guidance and repetition, what once felt like bespoke transactions can become an established market. Renewable Energy Certificate (REC) markets have been there, and Transferable Tax Credits are following a similar path. This opens a window of opportunity for US taxpaying entities to benefit from a market in transition.

 

What is clear about clean energy tax credits today

With the Inflation Reduction Act (IRA), the US Congress created transferability; it did not create a market. Like most markets born from statute rather than convention, the transferable tax credits market is still being shaped.

The legal framework is largely set. Section 6418 of the Internal Revenue Code, reinforced by Treasury and Internal Revenue Service (IRS) regulations, permits the sale of eligible credits for cash, expands the universe of buyers beyond traditional tax equity, and assigns audit and recapture risk to the transferee.

Last year, The One Big Beautiful Bill Act (OBBBA) solidified transferability while setting clear sunsets for certain credits, followed by additional guidance on safe-harbor mechanism and the involvement of foreign entities. From a policy standpoint, the intent is to unlock liquidity, accelerate deployment, and broaden participation.

But the system remains underbuilt.

 

Challenges in the transferable tax credit market

Since the IRA, mandatory pre-filing registration introduced timing uncertainty and documentation requirements that market participants are still learning to navigate. Transaction timelines now depend not only on construction milestones and placed-in-service dates, but also on IRS processing timelines, especially for the certification of certain adders. That delay risk is also being priced.

Today’s transferable tax credit market is still plagued by uncertainties where indemnities, representations, and insurance are doing the work that standardized protocols have not yet assumed. In many transactions, tax credit insurance is functioning as a bridge to standardization, substituting capital for institutional maturity. So, buyers are pricing in the quality of diligence, the credibility of counterparties, the structure of representations and the probability that future regulatory interpretation aligns with current assumptions. And while capital is available, the challenge lies in finding people who know how to close these transactions.

Pricing reflects this transitional stage. Credits that were initially priced in the low 90s have more recently transacted in the high 80s, in part because corporate tax planning was disrupted by the 2025 legislation. When projected tax liability shifts, appetite and purchasing capacity shift with it. Dispersion across otherwise similar credits remains high, driven less by underlying asset quality than by documentation confidence, insurance structure, and perceived risk exposure.

 

How transferable tax credits compare to Renewable Energy Certificates (RECs)

The analogy that fits best is RECs. State renewable portfolio standards created legal demand for RECs starting in the late 1990s. Texas passed its mandate in 1999. California followed and a dozen states built similar frameworks. But it took years for the market to take off.

What eventually moved things was accumulation – successive rounds of regulatory clarification on which technologies qualified, which vintages counted toward compliance, and how certificates related to physical energy delivery. With each guidance release, the interpretive gap narrowed. Then contracts got shorter because fewer things needed negotiating. Pricing compressed not because the asset got simpler, but because the rules became legible.

Transferable tax credits are moving through a comparable arc. IRS guidance on safe harbors, adder eligibility, and foreign entity compliance is doing the same iterative work of converting ambiguity into boundaries that deal teams can build around. Both markets share the same structural premise: use capital markets to accelerate investment in clean energy infrastructure by making policy benefit tradable.

But the differences should also be acknowledged. In the REC market, a defective certificate has a relatively well-defined remedy: the seller goes back to the secondary market and delivers replacements. Transferable credits don’t work that way as a credit can transfer only once. If it is later disallowed, the transferee holds the exposure. That asymmetry is why indemnification architecture and insurance play a heavier role here than they ever needed to in REC transactions.

The buyer base is different too. Mandatory REC buyers are energy market participants who have been transacting certificates for fifteen or twenty years. The corporate buyer market for transferable credits is a diverse group with companies not having prior exposure to energy project finance or IRS audit risk, learning the asset class in real time. Getting that buyer base comfortable is not purely a sales problem. It requires building the educational infrastructure around the transaction itself.

That is where standardization actually happens. Not through a single regulatory event, but through the accumulation of diligence frameworks that get reused, legal opinions that establish shared reference points, and tax counsel building consensus around successive IRS guidance until what was once a judgment call becomes the norm. The REC market got there, even if it took longer than expected, and required more regulatory scaffolding than the initial legislation contemplated. I believe transferable tax credits are on that path.

Scale tends to follow structure. Pricing dispersion then narrows. Corporate participation deepens. What now feels bespoke then becomes routine.

Infrastructure is not defined by the absence of risk. Instead, it is defined by repeatability. Transferable tax credits are on that path and the market’s next phase will belong to those who can turn policy into process, and process into scale.

 

The future for Transferable Tax Credits

The next phase will belong to platforms that can translate statute into execution and do so consistently and at scale.

Marex is well positioned for this moment: institutional underwriting, policy-literate structuring, and a distribution channel built for corporate taxpayers rather than niche tax equity. In a market where liquidity depends on confidence, not volume, the advantage can shift to those who can convert regulatory complexity into repeatable process. That is what we are building.

 

Learn more about how you can leverage clean energy tax credits to help manage your tax obligations.

 

Speak to a member of our team today

 

 

 

Frequently Asked Questions

What are transferable tax credits?

Transferable tax credits allow companies to purchase eligible clean energy tax credits for cash from project owners, enabling them to reduce their tax liability under Section 6418 of the Internal Revenue Code.

Why are transferable tax credits sold at a discount?

Credits are often sold at a discount to reflect factors such as timing uncertainty, IRS processing requirements, audit risk, and the cost of structuring and insurance.

How are transferable tax credits different from RECs?

Unlike Renewable Energy Certificates (RECs), transferable tax credits can only be transferred once and may carry recapture risk, placing greater emphasis on diligence, indemnities, and insurance.

Who can buy transferable tax credits?

U.S. corporate taxpayers can purchase transferable tax credits, including companies outside traditional energy markets, provided they have sufficient tax liability and meet applicable IRS requirements.