See “A Primer on Carbon-Negative AI Data Centers” for more on this topic
Clean energy infrastructure is not only a pathway to decarbonization. It is also a tool for revitalizing local economies. The New Markets Tax Credit (NMTC) program, created by the U.S. Department of the Treasury, helps channel private investment into low-income and underserved communities, offering an incentive that can make otherwise challenging projects financially viable.
While not every project qualifies for NMTCs, understanding this program is vital for developers, investors and community leaders seeking to pair clean energy progress with local economic growth.
What Are New Markets Tax Credits?
The NMTC program, administered by the Community Development Financial Institutions (CDFI) Fund, provides investors with a 39% federal tax credit over seven years when they make qualifying equity investments in Community Development Entities (CDEs). These CDEs, in turn, finance projects that create jobs and expand access to services in low-income communities.
Since its inception, the program has mobilized hundreds of billions in private investment for schools, manufacturing facilities, healthcare centers and increasingly, clean energy infrastructure.
Why NMTCs Matter for Clean Energy Projects
Clean energy projects, especially those in rural or economically distressed areas, fit naturally within the NMTC framework. They create long-term skilled jobs, modernize existing infrastructure and reduce environmental burdens.
For example, many biomass facilities are located in or near rural forestry and agricultural regions where economic diversification and wildfire prevention are urgent priorities. When these projects fall within qualifying census tracts, NMTCs can provide a meaningful boost to their financing structure by:
- Lowering overall project costs through equity-based incentives
- Attracting private investment to underserved communities
- Encouraging local hiring and workforce development
- Supporting rural industrial revitalization
In combination with the Investment Tax Credit (ITC) and other Inflation Reduction Act (IRA) incentives, NMTCs can significantly strengthen the capital stack for qualifying projects.
The Buena Vista Example
The Buena Vista Biomass Power (BVBP) project in Amador County, California, is an example of how not all projects are NMTC-eligible, even when they deliver significant community and environmental benefits.
Although BVBP is being redeveloped as a carbon-negative, behind-the-meter biomass-to-pyrolysis facility, it does not fall within a qualifying NMTC census tract. Eligibility for the program can be confirmed using tools such as the PolicyMap NMTC Eligibility Map, which shows which areas meet the program’s criteria based on income, poverty and demographic data.
Despite its ineligibility, BVBP still embodies the economic development goals that NMTCs aim to support. The project creates local jobs, reduces wildfire fuel loads and produces biochar and CO₂ Removal Certificates (CORCs), all while providing clean baseload power to co-located data centers.
Many Biomass Plants Do Qualify
Across the country, numerous legacy biomass plants are located in rural or economically depressed regions that align with the mission of the NMTC program. These facilities often sit idle or underutilized, yet remain permitted and grid-connected, making them ideal candidates for revitalization.
When such plants are converted to modern biomass-to-pyrolysis operations, they can:
- Reignite local employment in areas affected by mill closures or agricultural decline
- Utilize regional forestry and agricultural waste streams that would otherwise be burned or landfilled
- Enhance grid stability through distributed, behind-the-meter generation
- Contribute to state and federal decarbonization goals
For these reasons, NMTC-eligible biomass projects can deliver triple-bottom-line outcomes in the form of economic, environmental and social returns, while providing investors with measurable impact and risk-adjusted performance.
Stacking Incentives for Greater Impact
A well-structured clean energy project may combine several forms of public and private support, including:
- NMTC equity through certified Community Development Entities (CDEs)
- USDA loan guarantees for rural energy infrastructure
- ITC monetization or transfer under the Inflation Reduction Act
- Private debt and equity from mission-aligned investors
Even for projects like BVBP that are not NMTC-eligible, the same community and sustainability objectives such as job creation, waste reduction and carbon removal remain central to the investment thesis.
Clean Energy as a Catalyst for Inclusive Growth
The clean energy transition offers an unprecedented opportunity to align economic development with climate resilience. NMTCs play an important role in ensuring that this growth reaches the communities that need it most.
Whether or not a project qualifies for NMTCs, the broader goal remains the same: to build a cleaner, fairer and more resilient energy economy, one community at a time.
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