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The U.S. is too enmeshed in the global financial system for the rest of the world to solve climate change without us.
The United States is now staring down the barrel of what amounts to a full repeal of the Inflation Reduction Act’s energy tax credits and loan authorities. Not even the House Republicans who vocally defended the law, in the end, voted against President Trump’s “One Big, Beautiful Bill.” To be sure, there’s no final outcome yet — leading Republican senators don’t seem satisfied with the bill headed their way, and energy sector lobbyists are ready to push harder. But the fact that House Republicans were willing to walk away from billions of dollars of public spending for their districts and perhaps $1 trillion worth of economic growth is a flashing red sign that Trump’s politics have capsized the once-watertight argument that the IRA would be too important to American businesses and communities to be destroyed.
The Biden Administration touted the IRA as the United States’ marquee investment not just in reducing emissions and promoting economic development, but also in bringing back American manufacturing to compete against China in the market for advanced technologies. The Trump administration takes this apparent conflict with China seriously ― the threat of economic decoupling looms large ― but seems to have no desire to compete the way the Biden administration did. Rather than commit to the solar, wind, battery, grid, and electric vehicle investments that are laying the foundation for a manufacturing revival, the Trump administration has doubled down on the conjoined ideas that America should be self-sufficient and should play to its strengths: critical minerals, nuclear, natural gas, and even coal. Never mind that Trump’s tariff policy and his party’s deep cuts to energy-related spending will stop these plans, too, in their tracks. “Energy dominance” has always been a smokescreen ― of fossil fuels, by fossil fuels, for fossil fuels.
While Republicans attempt to shut down America’s entire scientific research apparatus, the rest of the world moves on. The demise of the Inflation Reduction Act would decisively surrender the global market for all types of commercialized clean energy sources (and nuclear energy, too) to Chinese companies. Chinese companies already dominate the input sectors for these technologies, whether it’s processing and refining mineral products such as polysilicon, gallium, and graphite, or producing infrastructure commodities such as steel and aluminum. The end of Biden’s climate and infrastructure laws will also leave the American car industry in the dust, as the rest of the world shifts gears toward purchasing more efficient and cheaper electric vehicles ― particularly Chinese brands such as BYD. (Ford’s CEO drives a Xiaomi electric vehicle and “doesn’t want to give it up.”) Consider it a sign of the times that Ethiopia recently banned the import of gas-powered vehicles. Electrification is in, combustion is burnt out.
It’s not just China that benefits. In November, the Net Zero Industrial Policy Lab at Johns Hopkins estimated that the repeal of the IRA leaves up to $80 billion in clean technology manufacturing investment opportunities for other countries to seize between now and 2032, the law’s intended sunset year. Those countries aren’t just the likely (read: wealthier) suspects such as Japan, South Korea, or the European Union. The abdication of U.S. leadership would also boost electric vehicle and battery manufacturing capacity in Morocco, Mexico, India, Indonesia, and elsewhere across Southeast Asia; solar power-related manufacturing further across Southeast Asia; and wind power-related manufacturing in Brazil, Mexico, South Africa, India, and Canada.
These countries won’t just benefit from investors looking to build outside the United States. A Trump-induced fall in American imports of these technologies and their inputs may also drive some degree of global disinflation, insofar as these countries can secure input goods no longer flowing into the American market at cheaper prices. The writing has been on the wall since the early Biden administration that failing to invest meant investing in failure. This is what the Trump administration is poised to do, to the detriment of American technological capabilities and standards of living.
Just because the United States might be dropping out of the race for global decarbonization, however, does not mean that the rest of the world can choose to ignore the United States in return. The Trump administration can still play spoiler with every other country’s efforts to decarbonize ― even China’s ― for one overarching reason: the mighty dollar. The United States may be hemorrhaging the political capital that coordinating the energy transition requires, but it still controls the currency of decarbonization itself.
It’s hard to overstate how central the management of the U.S. dollar is to the management of global decarbonization. Let’s sketch out some of the key dynamics. First, the dollar is the world’s primary trade currency. Because most global trade is denominated and invoiced in dollars, fluctuations in the value of the dollar relative to the value of other currencies will affect the price of importing both essential commodities and capital goods in other countries. Any volatility in the prices of oil, critical minerals, food, or machinery ― including the inputs to energy systems ― is most likely measured in a currency that every other country needs to earn through trade or borrow from investors. Efforts to denominate commodity trade in other currencies, such as the Chinese renminbi, are not likely to scale up rapidly, however, thanks to the network effect of the dollar system: Market actors will only ditch the dollar if most of their counterparties do.
Second, then, the dollar is the world’s dominating financial currency. Countries seeking foreign investment must issue debt at rates and on terms that foreign investors, many of whom measure their returns in dollars, judge as safe relative to the returns on U.S. Treasury bonds, conventionally the world’s premier “safe asset.” How the U.S. Federal Reserve moves interest rates influences how every other central bank does; higher rates in the U.S. usually push up Treasury bond yields and, as other central banks also raise rates or stockpile dollars, make borrowing for investment and for refinancing debt more expensive across the whole world ― particularly for large-scale energy and adaptation infrastructure projects. The U.S. Federal Reserve also manages the dollar swap lines and repurchase (or “repo”) facilities that provide dollar liquidity to the rest of the world during a financial crisis, as in the Great Recession and the subsequent Eurozone financial crisis, or a sudden dollar cash shortage, as in 2019.
Finally, the United States maintains a comprehensive sanctions regime that operates through cross-border dollar payments systems and “clearing-house” facilities such as SWIFT, which processes interbank payments, and CHIPS, which handles over 90% of all dollar-denominated transactions globally. When the United States wants to cut target companies and whole countries out of the dollar financial system, it prevents SWIFT from processing targeted entities’ cross-border transactions and U.S.-based financial institutions from accepting them.
The Obama administration and first Trump administration used U.S. control over SWIFT and CHIPS to administer sanctions against Iran, and the Biden administration did the same to Russia. The U.S. Departments of Treasury and Commerce also administer what’s known as a “secondary sanctions” regime that imposes these financial penalties on unrelated third-parties that violate initial sanctions. And the Department of Commerce enforces export controls that restrict technology transfer to foreign targets. The Biden administration combined these authorities to limit the ability of both U.S. and foreign companies to export certain technologies to targeted Chinese companies.
Perhaps ironically, some of these dynamics don’t bite the way they used to during the Biden administration, when the dollar was expensive relative to other currencies. Trump’s inflationary and growth-destroying budget, trigger-happy tariffs, and neglect of the fracking sector have driven a sharp depreciation in the dollar and destabilized the market for U.S. Treasury debt. Some cuts to U.S. interest rates are likely given the elevated probability of a recession. All of these factors ― undeniably a bad look for the United States ― should support emerging market financial conditions by lowering the cost of commodity imports, raising the attractiveness of sovereign debt to foreign investors, and help stave off potential debt crises.
But easier global financial conditions in the short term do not diminish the threat the Trump administration continues to pose to global economic stability. The danger that the Trump administration expands the American sanctions regime implemented via the global dollar invoicing system and export controls remains undiminished. What’s more, the tension between the president and Federal Reserve Chair Jerome Powell should alert foreign central banks that their access to the American dollar liquidity facilities is ultimately contingent on the Federal Reserve’s independence from Trump’s influence. During the first Trump administration, the European Union and China alike started strategizing how to derisk their dependence on the dollar; U.S. policymakers should not be surprised if those governments are now dusting off those playbooks.
The dollar’s dominance is in part an effect of the gargantuan size of the U.S. consumer market. Trump’s tariff threats had governments across the world scrambling to cut deals with the United States to preserve their market access ― including by promising to purchase U.S. natural gas.
The view outside the U.S. seems to be that there is no easy replacement for the U.S. consumer. As the Australian Strategic Policy Institute put it, “US household spending in 2023 reached $19 trillion, double the level of the European Union and almost three times that of China. … there are no obvious markets to replace [U.S. consumers].” Indian journalist M. Rajshekhar notes that China, too, needs external markets to absorb its products, and that it cannot count on other Global South countries to let Chinese goods flood their markets. Americans are the motor that keeps the global economy spinning.
The inability to sell goods to the United States is a threat to decarbonization abroad not just because it gives Trump an avenue to hawk natural gas, but also because U.S. consumer spending provides the world with a source of the dollars with which decarbonization is financed in the first place. And to the extent that the IRA would have supported U.S. consumer demand for clean energy technologies and electric vehicles, its de facto repeal ― while a source of potential disinflation for Global South producers ― snuffs out a key demand signal for the production of inputs to those sectors across the Global South.
Where the Global South’s clean energy transition is concerned, natural gas unfortunately remains an important alternative to coal in the absence of widespread renewable energy deployment. The U.S. is the world’s largest exporter of liquified natural gas, the use of which has doubled since 2009 as global demand for the fuel rose sharply. Countries across Europe and Asia depend on U.S. gas for domestic power and industrial uses ― particularly after Russia’s invasion of Ukraine. Large energy importing countries like India increasingly rely on gas to meet energy demand spikes. Over the longer term, industry leaders expect LNG demand to rise 60% by 2040, particularly on the back of persistent Asian demand. Although planned U.S. LNG export capacity is already on track to double between now and 2028, the Trump administration is supporting the buildout of even more capacity to meet this expected global demand.
Becoming dependent on “molecules of U.S. freedom” for industrial growth and for transitioning off of coal may once have seemed like a smart decision across emerging markets, particularly when prices were lower. But it has now left dependent Global South countries uniquely vulnerable to energy import price and power market shocks caused by erratic U.S. policy and volatile (dollar-denominated) natural gas prices. Will the gas-dependent countries in Europe and Asia be able to access enough Chinese imports, invest sufficiently in local clean technology, and kick their LNG fix in time to meet their emissions reduction goals? Europe might; for the rest, this question is one worth following over the coming years.
The truth is that the United States has always had a unique opportunity to weaponize these aspects of dollar dominance in the interest of playing global spoilsport. As Chen Chris Gong, a researcher at the Potsdam Institute for Climate Impact Research, argues in her forthcoming (not yet peer-reviewed) paper on “The geoeconomics of transitioning to the post-fossil world,” Global South countries have an urgent reason to decarbonize built into their politics, whether their governments recognize it or not. So long as much of the Global South is dependent on imported fossil fuels for energy, “local people’s livelihood and firms’ survival are made vulnerable to compound cycles of dollar capital flow and cycles of basic commodity trade.” If the Global South cannot fully avoid the United States, their governments can at least sidestep it. Countries powered by clean energy, importing less fuel, and generating their own power are far more insulated from the dollar cycle and the dollar system, simple as that.
In contrast, as Gong highlights, the only incentives for the United States to pursue decarbonization come from the pressure of competing with China ― a competition that Republicans, for all their bluster, may not actually want to win ― or the pressure of mass consumer demand for a clean economy ― for which Democrats are not exactly fighting tooth and nail ― and the profits both promise. It’s darkly funny that the Inflation Reduction Act’s defenders are seizing on these exact reasons in their attempts to protect the law in the Senate when neither sufficiently moved House Republicans to reconsider.
For posterity, then, we should add another reason, even if it won’t convince Republicans to change tack: The looming repeal of the Inflation Reduction Act portends a future where Trump and his Republican party happily use their control over the global economy to drag the rest of the world down with the United States. “Energy dominance” may always have been formless bluster, but the United States’ financial dominance remains sharp enough to cut ― if not global emissions, then global standards of living.
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A renewable energy project can only start construction if it can get connected to the grid.
The clock is ticking for clean energy developers. With the signing of the One Big Beautiful Bill Act, wind and solar developers have to start construction (whatever that means) in the next 12 months and be operating no later than the end of 2027 to qualify for federal tax credits.
But projects can only get built if they can get connected to the grid. Those decisions are often out of the hands of state, local, or even federal policymakers, and are instead left up to utilities, independent system operators, or regional trading organizations, which then have to study things like the transmission infrastructure needed for the project before they can grant a project permission to link up.
This process, from requesting interconnection to commercial operation, used to take two years on average as of 2008; by 2023, it took almost five years, according to the National Renewable Energy Laboratory. This creates what we call the interconnection queue, where likely thousands of gigawatts of proposed projects are languishing, unable to start construction. The inability to quickly process these requests adds to the already hefty burden of state, local, and federal permitting and siting — and could mean that developers will be locked out of tax credits regardless of how quickly they move.
There’s no better example of the tension between clean energy goals and the process of getting projects into service than the Mid-Atlantic, home to the 13-state electricity market known as PJM Interconnection. Many states in the region have mandates to substantially decarbonize their electricity systems, whereas PJM is actively seeking to bring new gas-fired generation onto the grid in order to meet its skyrocketing projections of future demand.
This mismatch between current supply and present-and-future demand has led to the price for “capacity” in PJM — i.e. what the grid operator has greed to pay in exchange for the ability to call on generators when they’re most needed — jumping by over $10 billion, leading to utility bill hikes across the system.
“There is definitely tension,” Abe Silverman, a senior research scholar at Johns Hopkins University and former general counsel for New Jersey’s utility regulator, told me.
While Silverman doesn’t think that PJM is “philosophically” opposed to adding new resources, including renewables, to the grid, “they don’t have urgency you might want them to have. It’s a banal problem of administrative competency rather than an agenda to stymie new resources coming on the grid.”
PJM is in the midst of a multiyear project to overhaul its interconnection queue. According to a spokesperson, there are around 44,500 megawatts of proposed projects that have interconnection agreements and could move on to construction. Of these, about I calculated that about 39,000 megawatts are solar, wind, or storage. Another 63,000 megawatts of projects are in the interconnection queue without an agreement, and will be processed by the end of next year, the spokesperson said, likely making it impossible for wind and solar projects to be “placed in service” by 2028.
Even among the projects with agreements, “there probably will be some winnowing of that down,” Mark Repsher, a partner at PA Consulting Group, told me. “My guess is, of that 44,000 megawatts that have interconnection agreements, they may have other challenges getting online in the next two years.”
PJM has attempted to place the blame for project delays largely at the feet of siting, permitting, and operations challenges.
“Some [projects] are moving to construction, but others are feeling the headwinds of siting and permitting challenges and supply chain backlogs,” PJM’s executive vice president of operations, planning, and security Aftab Khan said in a June statement giving an update on interconnection reforms.
And on high prices, PJM has been increasingly open about blaming “premature” retirements of fossil fuel power plants.
In May, PJM said in a statement in response to a Department of Energy order to keep a dual-fuel oil and natural gas plant in Pennsylvania open that it “has repeatedly documented and voiced its concerns over the growing risk of a supply and demand imbalance driven by the confluence of generator retirements and demand growth. Such an imbalance could have serious ramifications for reliability and affordability for consumers.”
Just days earlier, in a statement ahead of a Federal Energy Regulatory Commission conference, PJM CEO Manu Asthana had fretted about “growing resource adequacy concerns” based on demand growth, the cost of building new generation, and, in a direct shot at federal and state policies that encouraged renewables and discouraged fossil fuels, “premature, primarily policy-driven retirements of resources continue to outpace the development of new generation.”
The Trump administration has echoed these worries for the whole nation’s electrical grid, writing in a report issued this week that “if current retirement schedules and incremental additions remain unchanged, most regions will face unacceptable reliability risks.” So has the North American Electric Reliability Corporation, which argued in a 2024 report that most of the U.S. and Canada “faces mounting resource adequacy challenges over the next 10 years as surging demand growth continues and thermal generators announce plans for retirement.”
State officials and clean energy advocates have instead placed the blame for higher costs and impending reliability gaps on PJM’s struggles to connect projects, how the electricity market is designed, and the operator’s perceived coolness towards renewables.
Pennsylvania Governor Josh Shapiro told The New York Times in June that the state should “re-examine” its membership in PJM following last year’s steep price hikes. In February, Virginia Governor Glenn Youngkin wrote a letter calling for Asthana to be fired. (He will leave the transmission organization by the end of the year, although PJM says the decision was made before Youngkin’s letter.)
That conflict will likely only escalate as developers rush to start projects — which they can only do if they can get an interconnection services agreement from PJM.
In contrast to Silverman, Tyson Slocum, director of Public Citizen’s energy program, told me that “PJM, internally and operationally, believes that renewables are a drag on the grid and that dispatchable generation, particularly fossil fuels and nuclear, are essential.”
In May, for instance, PJM announced that it had selected 51 projects for its “Reliability Resource Initiative,” a one-time special process for adding generation to the grid over the next five to six years. The winning bids overwhelmingly involved expanding existing gas-fired plants or building new ones.
The main barrier to getting the projects built that have already worked their way through the queue, Repsher told me, is “primarily permitting.” But even with new barriers thrown up by the OBBBA, “there’s going to be appetite for these, these projects,” thanks to high demand, Repsher said. “It’s really just navigating all the logistical hurdles.”
Some leaders of PJM states are working on the permitting and deployment side of the equation while also criticizing the electricity market. Pennsylvania’s Shapiro has proposed legislation that would set up a centralized state entity to handle siting for energy projects. Maryland Governor Wes Moore signed legislation in May that would accelerate permitting for energy projects, including preempting local regulations for siting solar.
New Jersey, on the other hand, is procuring storage projects directly.
The state has a mandate stemming from its Clean Energy Act of 2018 to add 2,000 megawatts of energy storage by 2030. In June, New Jersey’s utility regulator started a process to procure at least half of that through utility-scale projects, funded through an existing utility-bill-surcharge.
New Jersey regulators described energy storage as “the most significant source of near-term capacity,” citing specifically the fact that storage makes up the “bulk” of proposed energy capacity in New Jersey with interconnection approval from PJM.
While the regulator issued its order before OBBBA passed, the focus on storage ended up being advantageous. The bill treats energy storage far more generously than wind and solar, meaning that New Jersey could potentially expand its generation capacity with projects that are more likely to pencil due to continued access to tax credits. The state is also explicitly working around the interconnection queue, not raging against it: “PJM interconnection delays do not pose a significant obstacle to a Phase 1 transmission-scale storage procurement target of 1,000 MW,” the order said.
In the end, PJM and the states may be stuck together, and their best hope could be finding some way to work together — and they may not have any other choice.
“A well-functioning RTO is the best way to achieve both low rates for consumers and carbon emissions reductions,” Evan Vaughan, the executive director of MAREC Action, a trade group representing Mid-Atlantic solar, wind, and storage developers, told me. “I think governors in PJM understand that, and I think that they’re pushing on PJM.”
“I would characterize the passage of this bill as adding fuel to the fire that was already under states and developers — and even energy offtakers — to get more projects deployed in the region.”
On Neil Jacobs’ confirmation hearing, OBBBA costs, and Saudi Aramco
Current conditions: Temperatures are climbing toward 100 degrees Fahrenheit in central and eastern Texas, complicating recovery efforts after the floods • More than 10,000 people have been evacuated in southwestern China due to flooding from the remnants of Typhoon Danas • Mebane, North Carolina, has less than two days of drinking water left after its water treatment plant sustained damage from Tropical Storm Chantal.
Neil Jacobs, President Trump’s nominee to head the National Oceanic and Atmospheric Administration, fielded questions from the Senate Commerce, Science, and Transportation Committee on Wednesday about how to prevent future catastrophes like the Texas floods, Politico reports. “If confirmed, I want to ensure that staffing weather service offices is a top priority,” Jacobs said, even as the administration has cut more than 2,000 staff positions this year. Jacobs also told senators that he supports the president’s 2026 budget, which would further cut $2.2 billion from NOAA, including funding for the maintenance of weather models that accurately forecast the Texas storms. During the hearing, Jacobs acknowledged that humans have an “influence” on the climate, and said he’d direct NOAA to embrace “new technologies” and partner with industry “to advance global observing systems.”
Jacobs previously served as the acting NOAA administrator from 2019 through the end of Trump’s first term, and is perhaps best remembered for his role in the “Sharpiegate” press conference, in which he modified a map of Hurricane Dorian’s storm track to match Trump’s mistaken claim that it would hit southern Alabama. The NOAA Science Council subsequently investigated Jacobs and found he had violated the organization’s scientific integrity policy.
The Republican budget reconciliation bill could increase household energy costs by $170 per year by 2035 and $353 per year by 2040, according to a new analysis by Evergreen Action, a climate policy group. “Biden-era provisions, now cut by the GOP spending plan, were making it more affordable for families to install solar panels to lower utility bills,” the report found. The law also cut building energy efficiency credits that had helped Americans reduce their bills by an estimated $1,250 per year. Instead, the One Big Beautiful Bill Act will increase wholesale electricity prices almost 75% by 2035, as well as eliminate 760,000 jobs by the end of the decade. Separately, an analysis by the nonpartisan think tank Center for American Progress found that the OBBBA could increase average electricity costs by $110 per household as soon as next year, and up to $200 annually in some states.
EIA
Saudi Arabia’s state-owned oil company Saudi Aramco is in talks with Commonwealth LNG in Louisiana to buy liquified natural gas, Reuters reports. The discussion is reportedly for 2 million tons per year of the facility’s 9.4 million-ton annual export capacity, which would help “cement Aramco’s push into the global LNG market as it accelerates efforts to diversify beyond crude oil exports” and be the “strongest signal yet that Aramco intends to take a material position in the U.S. LNG sector,” OilPrice.com notes. LNG demand is expected to grow 50% globally by 2030, but as my colleague Emily Pontecorvo has reported, President Trump’s tariffs could make it harder for LNG projects still in early development, like Commonwealth, to succeed. “For the moment, U.S. LNG is still interesting,” Anne-Sophie Corbeau, a research scholar focused on natural gas at Columbia University’s Center on Global Energy Policy, told Emily. “But if costs increase too much, maybe people will start to wonder.”
Ford confirmed this week that its $3 billion electric vehicle battery plant in Michigan will still qualify for federal tax credits due to eleventh-hour tweaks to the bill’s language, The New York Times reports. Though Ford had said it would build its factory regardless of what happened to the credits, the company’s executive chairman had previously called them “crucial” to the construction of the facility and the employment of the 1,700 people expected to work there. Ford’s battery plant is located in Michigan’s Calhoun County, which Trump won by a margin of 56%. The last-minute tweaks to save the credits to the benefit of Ford “suggest that at least some Republican lawmakers were aware that cuts in the bill would strike their constituents the hardest,” the Times writes.
Italy and Spain are on track to shutter their last remaining mainland coal power plants in the next several months, marking “a major milestone in Europe’s transition to a predominantly renewables-based power system by 2035,” Beyond Fossil Fuels reported Wednesday. To date, 15 European countries now have coal-free grids following Ireland’s move away from coal in 2025.
Italy is set to complete its transition from coal by the end of the summer with the closure of its last two plants, in keeping with the government’s 2017 phase-out target of 2025. Two coal plants in Sardinia will remain operational until 2028 due to complications with an undersea grid connection cable. In Spain, the nation’s largest coal plant will be entirely converted to fossil gas by the end of the year, while two smaller plants are also on track to shut down in the immediate future. Once they do, Spain’s only coal-power plant will be in the Balearic Islands, with an expected phase-out date of 2030.
“Climate change makes this a battle with a ratchet. There are some things you just can’t come back from. The ratchet has clicked, and there is no return. So it is urgent — it is time for us all to wake up and fight.” — Senator Sheldon Whitehouse of Rhode Island in his 300th climate speech on the Senate floor Wednesday night.
Some of the Loan Programs Office’s signature programs are hollowed-out shells.
With a stroke of President Trump’s Sharpie, the One Big Beautiful Bill Act is now law, stripping the Department of Energy’s Loan Programs Office of much of its lending power. The law rescinds unobligated credit subsidies for a number of the office’s key programs, including portions of the $3.6 billion allocated to the Loan Guarantee Program, $5 billion for the Energy Infrastructure Reinvestment Program, $3 billion for the Advanced Technology Vehicle Manufacturing Program, and $75 million for the Tribal Energy Loan Guarantee Program.
Just three years ago, the Inflation Reduction Act supercharged LPO, originally established in 2005 to help stand up innovative new clean energy technologies that weren’t yet considered bankable for the private sector, expanding its lending authority to roughly $400 billion. While OBBBA leaves much of the office’s theoretical lending authority intact, eliminating credit subsidies means that it no longer really has the tools to make use of those dollars.
Credit subsidies represent the expected cost to the government of providing a loan or a loan guarantee — including the possibility of a default — and thus how much money Congress must set aside to cover these potential losses. So by axing these subsidies, Congress is effectively limiting the amount of lending that the LPO can undertake, given that many third-party lenders would be reluctant to finance riskier, more novel, or larger projects in the absence of federal credit support.
“The LPO is statutorily allowed to take loans on its books to finance these projects in these categories, but it has no credit subsidy by which to take the risk required to do so,” Advait Arun, senior associate of energy finance at the Center for Public Enterprise and a Heatmap contributor, told me.
The particular programs that have been eliminated support new and improved energy technologies, clean energy infrastructure, fuel efficient vehicles, and help native communities access energy project financing. The long-running Loan Guarantee Program and the advanced vehicles program in particular are behind some of the best known LPO efforts, supporting companies such as Tesla, Ford, and NextEra Energy, and projects such as Georgia’s Vogtle nuclear reactors, the Thacker Pass lithium mine, and Shepherd’s Flat, one of the world’s largest wind farms.
The Loan Guarantees Program is “the big Kahuna,” Arun told me. “This is the longest-standing program of the LPO. So to see this defunded is like, you’re decapitating the LPO’s crown jewel.”
The program only has about $11 million left over in credit subsidies, consisting of funding that it received prior to the IRA’s appropriations. That won’t be enough to make any meaningful loans, Arun said, and is more likely to be used to “keep a skeleton crew online” for any remaining administrative tasks.
Then there’s the Energy Infrastructure Reinvestment Program, which the IRA stood up with a whopping $250 billion in lending authority to transition and transform existing fossil fuel infrastructure for clean energy purposes. Now, OBBBA has axed the program’s remaining $5 billion in credit subsidies and replaced it with $1 billion in new subsidies for projects that “retool, repower, repurpose, or replace” existing energy infrastructure, with a focus on expanding capacity and output as opposed to decarbonizing the economy. It also refashioned the program as the predictably-named “Energy Dominance Financing” initiative.
The new-old program — which the law extended through 2028 — no longer requires LPO-funded infrastructure to reduce or sequester emissions, broadening the office’s lending authority to include support for fossil fuel and critical minerals projects. It also adds language encouraging the LPO to “support or enable the provision of known or forecastable electric supply,” which Arun fears is a “backend way of penalizing the addition of renewable energy” on previously developed land.
“Under the Trump administration’s direction, [the LPO] can use that term, ‘known and forecastable,’ to actually just say, well, guess what? Renewables are not known or forecastable because they are intermittent due to the weather,” Arun told me. So while government and private industry were once excited about, say, turning sites originally developed for coal mining or coal ash disposal into solar and battery facilities, those days are probably over.
Carbon capture in particular stands to suffer from this reprogramming, Arun said, explaining that while the Biden LPO saw potential in adding carbon capture to natural gas and coal plants, its current incarnation will no longer allocate funding in any meaningful amount “because reducing emissions is no longer part of the LPO’s mandate.” Some policymakers and clean energy developers had also hoped that excess renewable energy would make it economically feasible to power the production of hydrogen fuel with renewable energy. But with this law — and really each passing day under Trump — a mass buildout of solar and wind seems less and less likely, making it doubtful that green hydrogen will move down the cost curve.
As bleak as this looks, it’s better than it could have been. There was no guarantee that Trump would keep the LPO around at all. Even in this denuded state, the office can still fund the expansion of existing nuclear projects, and perhaps even the buildout of transmission lines or battery projects on brownfield sites, Arun said, depending on how LPO’s leadership ends up interpreting what it means to “increase the capacity output of operating infrastructure.”
But in many ways, what happened with the LPO looks like another instance of the Trump administration picking winners and losers: Yes to clean, firm energy and fossil fuels, no to solar, wind, and electric vehicles.
Take the Advanced Technology Vehicle Manufacturing Program, for example. OBBBA nixed both its credit subsidies and its tens of billions of dollars in lending authority. That’s hardly a surprise, given that the Bush administration created the program in 2007 explicitly to support the domestic development and manufacture of fuel-efficient vehicles and components. But it means that unlike the LPO programs for which lending authority still stands, even if Congress wanted to, it could not redesign the advanced vehicles program to serve a more Trump-aligned purpose. Safer, I suppose, to cut off any opening for funding EVs and hybrids.
The latest LPO rescissions add to the growing list of reasons the private sector has to be wary of the consistently inconsistent landscape for federal funding, Arun told me. He worries that slashing the LPO’s authority at the same time as there’s so much uncertainty around tax credit eligibility will lead some companies to forgo federal funding opportunities altogether.
“We’ll see if private developers even want to play around with the LPO,” Arun told me, “given the uncertainty around the rest of the federal landscape here.”