Tax impacts on energy transition investments

New global research by KPMG reveals both the opportunities and the challenges organizations are facing today amid one of the biggest, longest, and most critical investment megatrends in history — the energy transition.

It’s estimated that investment in renewable power generation, grids and storage will need to double to US$2.4 trillion between 2024 and 2030 to meet global transition targets, while efficiency and electrification investments will need to more than double to US$1.9 trillion.¹

The KPMG global report – Energy transition investment outlook: 2025 and beyond — seeks to provide timely insights into the current environment based on our survey of 1,400 senior executives from 36 countries and territories who are working in organizations that are actively investing in the energy transition. Key findings reveal:

The commitment to energy transition remains robust across diverse sectors: Most respondents (72 percent) say that, despite geopolitical volatility and fluctuating interest rates, investment in energy transition assets is rapidly increasing.
Sixty-four percent are engaging in a variety of energy efficient opportunities: They include renewable and low-carbon energy (56 percent); energy storage and infrastructure (54 percent); and transportation and related infrastructure (51 percent).
While investment is robust, regulatory and policy risks are cited as the top concerns: 78 percent of respondents indicated they were facing challenges amid unpredictable government policies and shifting regulations that can stall long-term investment plans and disrupt capital flows.
The vast majority of respondents believe that collaboration is crucial in managing risk: 94 percent of investors are seeking collaborative partnerships that share resources and expertise to navigate financial, regulatory and operational complexities during energy transition projects.

In this article, we examine investment trends unfolding globally and key tax considerations that should be top of mind when investing.

Energy transition investment trends and tax considerations around the globe

As noted, our latest findings reveal the wide diversity of energy transition investment opportunities that exist beyond traditional energy verticals, including business services, industrials, technology and infrastructure. Here is a brief overview of investment trends that can be seen globally regarding major players, investor objectives, tax policies and government incentives:

Major energy transition investors in the US, beyond traditional energy players, include leading oil and infrastructure organizations, sovereign wealth funds and private-equity firms. Their focus includes modern, energy efficient wind, solar and battery technologies as well as storage and carbon sequestration. Investment objectives are diverse, blending financial returns with portfolio diversification.

The One Big Beautiful Bill Act (OBBBA), signed July 4, 2025, significantly alters this landscape by rolling back certain Inflation Reduction Act (IRA) incentives. It accelerates phase outs of clean electricity production (Section 45Y) and investment (Section 48E) tax credits for wind and solar projects that do not begin construction by July 4, 2026, or are not placed in service by the end of 2027; terminates consumer and EV credits; and imposes stringent foreign entity restrictions, disrupting supply chains.

Clean hydrogen credits (Section 45V) end for projects post-2027, though nuclear, geothermal and certain clean fuels retain support. These changes may reduce wind, solar and storage deployments — thereby impacting electricity costs. Historical energy players seeking diversification may pivot to preserved sectors. However, supply chain costs and policy uncertainty could undermine US manufacturing and cede global leadership in energy transition to other global players such as those in Europe and China. Corporate demand and competitive clean energy costs may mitigate some impacts, yet investors face a complex landscape balancing short-term gains with long-term risks.

Leading the active and growing investment trend in the UK are major oil companies diversifying into renewables and new technologies; foreign investors, particularly from Southeast Asia and Europe; and a mix of strategic investors focused on game-changing technology and intellectual property. Large industrial emitters are also turning their attention to energy transition investments.

Interest among financial and corporate investors is also on the rise amid a decline in risk over the last decade. While financial returns are key drivers among investors, also in play to varying degrees are portfolio diversification, energy security, risk management and stakeholder pressures. UK tax incentives are limited; however, this does not appear to be dampening interest on the investment front. The UK’s regulatory framework is encouraging activity, and, in many cases, investors are pursuing strategic partnerships in the hope of maximizing outcomes and returns.

The investment trend in Germany includes major German and European energy companies focusing on the nation’s renewable energy and battery energy storage systems (BESS) sector. With investments across the value chain to enhance efficiency — including energy generation, storage, trading and beyond. Financial returns are a key driver of investment, but many organizations are also looking to enhance energy security and become climate neutral. Germany aims to meet 80 percent of its electricity demand from renewable sources by 2030 — it currently stands at just under 60 percent.²

Like the UK, tax-related credits, subsidies and incentives are limited in Germany. In July 2025, a law came into force to promote investment and increase competitiveness via tax incentives such as accelerated depreciation, a gradual reduction in corporation tax, and extended subsidies for electromobility. Also in July 2025, legislation was passed to implement the EU Renewable Energy Directive (RED III), which significantly speeds up the approval process for renewable energy projects via new digital processes, binding deadlines and special acceleration zones for wind power and storage. Repowering of aging wind technologies will also be simplified, with deadlines ranging from one month to two years, depending on the project.

The future environment looks promising, as investment in green energy to enhance efficiency and security is expected to remain robust and continue to rise.

The investment landscape in China, which has the highest level of greenhouse gas (GHG) emissions in the world, is broad and diverse, encompassing state-owned businesses, privately owned domestic companies, multinationals and financial investors. Investments are targeting a spectrum of opportunities in areas such as green technologies, renewable and low-carbon energy capabilities, energy storage and grid infrastructure. The mature electric vehicle (EV) and renewables sectors, in particular, are attracting significant interest and government support. Several major automakers, are making significant investments in electric vehicle production, as well as EV charging industry, in China.

Driving investments are the government’s energy transition policies as well as financial returns. China offers numerous incentives to invest through its tax policies, including a reduced corporate tax rate for high-tech companies and tax incentives for research and development (R&D) spending. There is also among investors a growing trend toward strategic partnerships and joint ventures that aim to share technologies, resources and risks during China’s unprecedented energy transition journey.

With government targets of 82 percent renewable energy generation by 2030 and net zero by 2050, investment opportunities are significant. Foreign capital is the primary source of energy transition investment, comprising private capital, sovereign wealth funds. Domestic investors continue to be an important source of investment capital as a means of offsetting their carbon footprint and increase access to clean energy sources and technologies. Interest in clean energy technologies such as onshore wind and solar power, is on the rise, along with battery storage technologies and the network infrastructure required to enable the transition. Offshore wind and pumped hydro energy storage are also emerging as significant opportunities, but are expected to require further government support to unlock the investment opportunity

Increasingly active in the energy transition space are foreign pension funds, and managed investment funds. While foreign investment is significant, tax policy related to foreign investors has become increasingly uncertain with recently enacted changes to Australia’s debt deduction (thin capitalization) regime and the proposed extension of foreign resident capital gains tax rules.

The evolving tax landscape has prompted investors in multiple energy projects, particularly foreign investors, to revisit the assumptions underpinning the financial outcomes for existing and proposed investments. Overall, however, Australia’s investment opportunities are both numerous and attractive.

Approximately 88 percent of Denmark’s energy generation comes from renewable energy sources, coming mostly from wind.³ While progress on the energy transition has been significant to date, ongoing innovation remains in sharp focus. It is expected that Denmark meet 100 percent of its power demand with renewables⁴ and Denmark plan to reduce GHG emissions by 70 percent by 2030; and reach carbon neutrality by 2045.⁵

Pension funds are among the key domestic players, and they are being encouraged by their stakeholders to drive progress on the energy transition front. Beyond domestic investment, foreign activity and interest remain robust among countries and regions such as North Sea, US, Australia, Japan, Taiwan and Canada. Investments in the US have seen some turmoil related e.g. to tariff negotiations and the intermediate stop-work order related to Ørsted Revolution Wind farm. Beyond financial returns, as a key driver of investment, government subsidies and incentives are playing a significant role. The Danish government has allocated €3.7 billion (US$3.9 billion) in financing for offshore wind support, while total subsidies could reach up to €7.4 billion (US$7.8 billion) under the scheme, which is based on a two-sided Contract for Difference (CfD).⁶

The energy transition remains in sharp focus in Canada with new policies emerging to encourage progress and investment, primarily in the renewable sector and including clean electricity via solar and wind, as well as hydrogen, nuclear, and carbon capture utilization and storage (CCUS) technologies. Beyond government programs encouraging investment, a range of factors is driving activity to varying degrees. This includes, in addition to financial returns, energy security, stakeholder pressure, risk management and portfolio diversification.

Multiple tax credits, subsidies and related incentives are playing a significant role in driving investment as the federal government looks to reduce emissions by 40 percent by 2030.⁷ Canada has launched its Net-Zero Challenge, encouraging businesses to develop and implement effective plans to transition their facilities and operations to net-zero emissions by 2050.⁸ The government has also enacted four new refundable investment tax credits to attract investment in clean energy projects.

Tax leaders: Keep five key areas in focus as investment accelerates

A broad range of forces, including public policy, market dynamics, technological advancements and financial innovations, continue to drive energy transition investment. Here are five key themes and approaches that today’s tax leaders should be considering based on the findings of our research report:

Government policy and regulatory environment

Tax leaders should closely monitor and understand the evolving government policies and regulatory frameworks that impact energy transition investments. This includes staying informed about subsidies, tax incentives, carbon pricing and mandates for clean energy use. Stable and predictable policy environments are crucial to making informed investment decisions and ensuring long-term profitability.
Partnerships and collaborative approaches

Emphasize the importance of forming strategic partnerships to share risks, resources and expertise. Collaborative approaches, such as public-private partnerships (PPPs) and partnerships with financial investors, can help mitigate risks and enhance the success of energy transition projects. Tax leaders should facilitate and support these partnerships to optimize tax benefits and compliance.
Investment in energy efficiency and renewable energy

Focus on the most attractive areas for investment, such as energy efficiency/electrification, renewable/low-carbon energy, and energy storage and grid infrastructure. Tax leaders should ensure that their organizations are taking advantage of available tax credits and incentives for these investments to maximize financial returns and support sustainability goals.
Managing regulatory and policy risks

Recognize that regulatory or policy risks are the primary barriers to investing in energy transition assets. Tax leaders should develop strategies to manage these risks, such as engaging with policymakers, participating in industry advocacy groups and staying updated on regulatory changes. A proactive approach can help mitigate uncertainties and ensure compliance with evolving regulations.
Global perspective and emerging markets

While East Asia, Europe and North America are the primary focus regions for energy transition investment, tax leaders should also consider the potential advantages of targeting emerging markets. These regions can offer outsized returns and first mover advantages. Understanding the risks and opportunities in these markets, with the help of local expertise, can lead to strong economic returns and a diversified investment portfolio.

Looking ahead

While the future remains uncertain regarding the scope and impact of emerging tax policies across the globe, today’s tax leaders can be assured that the energy transition will continue to have a critical effect across a broad spectrum of industries as the world experiences one of the most significant investment megatrends in history.

Energy transition investment beyond traditional energy verticals is likely to remain robust and on the rise amid evolving public policy, market dynamics, technological advancements and financial innovations — and forward-looking tax leaders should be encouraged to embrace today’s emerging and unprecedented opportunities without delay as the rapid pace of change accelerates.