June 20, 2025 - In 2022, the Inflation Reduction Act (IRA) launched a powerful regime of hundreds of billions of dollars in tax breaks for green buildings designed to carry through the early 2030s unless repealed. Now, in the current climate, repeal is a distinct possibility — the administration discussed it during its campaign. As organizations such as LEED lobby to ensure the IRA’s existence, we thought it timely to examine the financial and accounting side of sustainable design and construction.

The current market is unpredictable, and architecture and engineering leaders tell us they are having difficulty making long-term plans. They are hesitant to embark on long-range projects without some guarantee that the laws will not turn on their projects. However, readers may take heart that the economics are increasingly turning in favor of sustainability whether or not the tax breaks remain to support it in the U.S.

This article examines the financial side of sustainability and why green buildings may make the most financial sense for some developers and engineering firms.

How Sustainability is Making Projects Possible and Profitable

Sustainability has gone from expensive and vogue to cost-effective and rote. Building for solar power and installing heat pumps is now a clever way to reduce cost, and every architecture and engineering team should explore the financial advantages of reducing waste.

Smarter Materials Cost Less

Building construction accounts for 37% of global emissions according to the United Nations, which is due largely to producing the underlying materials, notably steel and cement. Cement alone accounts for 9% of total human emissions because it must be expensively baked at *1,450 Celsius and releases more emissions in that process. However, new materials science has answers.

Novel cement recipes that replace limestone with basalt can reduce emissions by 70% and cost less. Materials scientists and designers are also drawing materials and techniques from nature. Skybridges and overpasses constructed with natural curves can be just as strong using 40% less material, and wood can offer better insulation and flexural strength than concrete and can be regrown. The C6 tower in South Perth, Australia, is a show of such properties — it is 627 feet tall and built with 42% wood.

“Technology has a way of catching up to some of our greatest societal challenges,” says Eric Prescott, partner at Citrin Cooperman. “Look back a century and the earlier “green” revolution was agriculture, where new fertilizers and farming techniques averted a global food shortage. It will take time, and the transition will not be easy, but new materials and alternatives may significantly reduce emissions.”

Sustainable Buildings May Command Higher Rents

Hotel Marcel in New Haven, Connecticut is the first Passive House certified hotel in the U.S. and is also the first hotel in the U.S which uses no fossil fuels for any aspect of its operations. Partly because of these distinctions, its rooms and venues are often booked up far in advance by non-profit and business travelers whose organizations seek to reduce their impact on CO2 emissions.

Hotel Marcel is as self-contained as the developers could make it. It uses solar energy to run its washing machines, typically one of the most power-intensive services in a hotel, and heat pumps to use that energy to heat the building’s water. On sunny days, it sells power back to the grid.

Lest Hotel Marcel seem like an anomaly, a study by the World Economic Forum found that businesses will increasingly pay a premium for Class A, green-certified offices:

• 7.1% more in North America
• 11.6% more in London
• 9.9% more in Asia

There Are Incentives to Refurbish Old Buildings

Hotel Marcel was not constructed new — it was a renovation project of the corporate offices of a tire company. Many cities now feature programs to help offset the costs of such retrofits, and these programs will likely endure no matter what the federal government decides.

Sustainable Buildings Can Generate Carbon Credits

Federal regulatory carbon credits are not the only way to monetize sustainable decisions. States such as New York will continue to operate their own regimes into the foreseeable future, to both compel and reward. In addition, there are voluntary markets where sustainable developers can generate credits for resale to other companies.

“Architects and developers that engage in deep energy retrofits and solar projects may find they can sell energy back to the grid and earn renewable energy certificates which generate carbon credits,” says Bob Alperin, partner at Citrin Cooperman. “This means that even if most developers are not building to be sustainable, those who can benefit by selling credits in states that support such regimes.”

All of the above can make sustainable projects attractive. When adding the IRA tax breaks in, they may become even more so.

Inflation Reduction Act Tax Credits

So long as the IRA is not repealed, it makes a variety of tax credits available to developers and construction companies that they should take advantage of, including:

• Incentives for on-site renewables, energy storage, microgrids, and EV charging
• Incentives and rebates for efficiency upgrades to new and existing commercial buildings, homes, multifamily, public buildings
• Grants for climate mitigation, environmental justice, and coastal resilience
• Federal green building upgrades, and technology
• Grants for affordable housing upgrades and building energy codes
• Funding for environmental product declarations (EPDs) and the procurement of low-carbon materials

Work With Tax Specialists to Maximize Your Advantage

Whatever the future holds, the economics of sustainable buildings are tipping toward change. What may in the past have been a way to signal virtue to elite buyers has now become a simple matter of economics. As energy and labor prices rise, and traditional materials grow scarce or are disallowed, building sustainably with renewable materials and fewer materials is the cost-effective option.

Citrin Cooperman’s Architecture and Engineering Industry Practice can help you understand how to offset your project with tax breaks or carbon credits to help you reach your financial and sustainability goals. For more information, reach out to Jeffrey Stuart.