The incoming Republican-controlled White House, Senate, and House of Representatives will determine the fate of President Joe Biden’s historic climate legislation, the Inflation Reduction Act.
In the White House, President-elect Donald Trump has already proposed three candidates for positions in his cabinet that, if approved by the Senate, will probably play a significant role in the future of the IRA: executive in a hedge fundTreasury Secretary Scott Bessentas of an oilfield services firmChris Wright, the CEO of Liberty Energy, will head the Department of Energy, while Doug Burgum, the governor of North Dakota, will head the Interior Department.
Both chambers of Congress would need to approve any total repeal of the IRA, and Republican politicians have so far been hesitant to fully discount the law’s advantages. In September, House Speaker Mike Johnson, a Republican from Louisiana, told CNBC that he would deal with the IRA with a scalpel rather than a sledgehammer.
This strategy has a solid justification: According to a Washington Post analysis of data from the Massachusetts Institute of Technology and the clean energy think tank Rhodium Group, as of late October, approximately three quarters of the clean energy investments made with IRA funds benefited congressional districts that supported Trump in the 2020 presidential election.
According to Tanuj Deora, a former director for renewable energy at the Biden administration’s Office of the Federal Chief Sustainability Officer, the actions of prospective Trump Cabinet members will also have a significant impact on the future of the enormous law. The agencies have significant control over how the IRA’s programs and incentives, such as tax credits and business loans, are interpreted and applied.
Renewable energy tax credits are likely safe
Extending the Tax Cuts and Jobs Act of 2017’s expiring provisions is a top issue for Republicans in 2025. The goal of Trump’s first 100 days in office next year is to extend the tax cuts.
The Congressional Budget Office predicts that this extension would cost $4.6 trillion over the course of the 10-year budget window.
According to Keith Martin, co-head of projects at the law and lobbying firm Norton Rose Fulbright, Trump also pledged an additional seven to eight trillion in tax relief in the final weeks of the [presidential] campaign.
But there must be a way to pay for all of this, and analysts suggest that the IRA’s provisions are the best bet for possible cost savings. Bessent referred to the IRA as the “Doomsday machine” for the deficit in an October interview with the Financial Times, implying that Trump would eliminate it in order to reduce spending.
A variety of tailored tax incentives are included in the IRA with the goal of promoting sustainable technology and energy production nationwide.
According to Martin, the renewable energy tax credits—particularly those for carbon capture technology, local manufacturing, and the shift to a green economy—are popular with Republicans and are probably secure from any attempts to repeal them.
However, analysts anticipate that the existing IRA tax credit phase-out dates will be increased, and the Trump transition team is already in discussions to eliminate a $7,500 consumer tax credit for electric vehicles entirely.
By the end of the year, the majority of the final regulations controlling the IRA tax credit’s implementation will either be finished or anticipated to be so.
According to Julie McNamara, deputy policy director of the Union of Concerned Scientists, there is still a great deal of concern that the remaining funds might be revoked, frozen, or distributed in ways that correspond with a change in the administration’s goals.
Though it would take time and require justification and defense if challenged in court, a future Treasury might theoretically change its meaning and implementation, she acknowledged.
Business loan programs are in trouble
The future of the Department of Energy’s Loan Programs Office (LPO), which finances green projects, is the more pressing issue, according to experts. Although Wright has not yet expressed a position on the LPO, a number of Republicans have advocated for its reduction or elimination.
Private businesses were applying to the LPO for more than $300 billion in investment as of November. Beneficiaries of the loan program have includedTesla, whose CEOElon Muskis co-heading Trump s outside advisory council, the so-called Department of Government Efficiency.
The Inflation Reduction Act expanded the LPO s lending authority and eligibility requirements for projects.
I think that a lot of the private sector is very concerned about the loan program, said Claire Broido-Johnson, co-founder and president of Sunrock Distributed Generation, a financier and developer of commercial-scale solar projects. Everybody s trying to slam as many projects as they possibly can into this process before the administration changes.
An ‘all-of-the-above’ energy strategy
“The United States is facing a significant challenge in meeting a growing demand for energy due to the boom in AI data centers, domestic manufacturing, and electrification,” stated Frank Macchiarola, chief policy officer of the American Clean Power Association, which represents renewable energy interests in Washington.
This demand can only be met by an all-of-the-above energy policy, Martin says, especially if Trump is planning to reduce energy prices by 50% within his first year,as he promised.
Trump s potential Cabinet officials in the energy space are consistent with that message, according to both Macchiarola and Deora.
Burgum has a fairly clear history of supporting energy investments of all kinds, and considering the urgent need for more energy infrastructure of all kinds, it is difficult to imagine that someone with his experience, business acumen, and governance skills would attempt to impede the rapid deployment of any reasonable technology, according to Deora.
North Dakota is one of theleadingstates in wind energy, utilizing the source for more than one-third of the state s electricity.
As for Wright, although he hasdeniedthe existence of a climate crisis, he worked in the solar industry as well as oil and gas, according to Trump sstatementannouncing his nomination.
He s not necessarily against any technology, he s just going to be for certain technologies, Deora said.
Ultimately, an all-of-the-above approach to energy would effectively defeat the purpose of climate policy, even though it might sound reassuring to sectors that would be negatively impacted by a targeted attack on renewables.
Climate change isn t about how many solar panels we put up. Climate change is how much carbon dioxide and methane that we do not admit, said Deora.
The concern isn t about whether we keep business and keep solar developers happy. This is really about, are we going to produce more fossil fuels?
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