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As Republicans’ budget priorities stack up, the numbers are starting to turn against America’s landmark climate law.
Since Donald Trump was reelected president, the climate community has retained a kind of fragile optimism about the Inflation Reduction Act, the historic climate law enacted in 2022 that Trump has vowed to repeal. The oft-repeated mantra is that the IRA is stimulating billions of dollars in investment in red districts, so why would Republicans want to put that at risk? Even if parts of the legislation were killed, surely some of it would remain intact.
But recent events have shifted the calculus. The ballooning price tag of Trump’s tax cut wishlist and preliminary budget negotiations on the Hill are pointing toward a budgetary showdown in which many of the law’s benefits could become fiscal casualties. D.C. veterans, including former GOP Hill staff, say that even the most bipartisan parts of the IRA could be sacrificed.
The reason has to do with the rules of budget reconciliation, the process Republicans in the House and Senate will use to carry out Trump’s agenda over the next several months and the same process Democrats used to pass the Inflation Reduction Act. One of Trump’s biggest legislative priorities is extending the 2017 Tax Cuts and Jobs Act, much of which expires at the end of this year. He also wants to make good on campaign promises to eliminate taxes on tips, overtime pay, and Social Security, and remove the cap on the state and local tax liability deductions.
To do this through the normal legislative process would subject the bill to a potential filibuster in the Senate, which would require 60 votes to override, a margin Senate Republicans lack. Budget reconciliation, however, requires only a simple majority. But there’s a catch: The bill can only contain policies that modify federal spending or revenues. It cannot contain a single provision that doesn’t pertain to the federal budget. And before lawmakers can decide what policies to put in it, they must agree on how much the bill will affect the federal budget. Once they set that topline number, they can’t change it.
“Reconciliation math is at least as important as the merits of reconciliation policies,” Alex Flint, executive director of the Alliance for Market Solutions, told Heatmap. Flint was previously a Republican staff director on the Senate Energy and Natural Resources Committee and top government affairs executive at the Nuclear Energy Institute. “I think a lot of people with specific interests in the tax code fail to look at the scale of the issue that tax writers have to deal with,” he said, adding that whether IRA money has been spent in a given district will probably be a “second or third order factor” in that representative’s vote.
Congress is still at the beginning of the reconciliation process. The next step is for the House and Senate to negotiate a topline number and issue instructions to the committees that will write the final bill on the levels of spending they’re allowed to include. That’s where the punishing math for the IRA comes in. The Congressional Budget Office, as well as third-party groups like the Tax Foundation and the Penn Wharton Budget Model, have estimated that an extension of the 2017 tax cuts would cost between $3.7 and $4.5 trillion through 2034. If all of Trump’s additional proposed tax cuts were enacted, the cost would jump to $6.8 trillion, according to Penn Wharton.
The dollar amount assigned to each committee is a ceiling, and it’s calculated on a net basis. So if the Ways and Means committee, which oversees tax legislation, is assigned a $4.5 trillion deficit ceiling, as it was in the version of the reconciliation instructions that recently passed the House, it’s going to have to find several trillion dollars worth of spending programs to cut. Fully repealing the Inflation Reduction Act’s green energy tax credits — which, according to new modeling from the nonpartisan Tax Foundation, would raise about $850 billion — will start to look harder to avoid.
In a recent talk hosted by the American Enterprise Institute, Jason Smith, a representative from Missouri and Chairman of the Ways and Means Committee, indicated that his party was committed to achieving Trump’s entire agenda through reconciliation. “These are items that he campaigned on, and these are items that will be addressed in any tax package that we move forward on,” he said.
Tax credits related to electric vehicles and green buildings are already almost certainly on the chopping block, but cutting those would raise just $300 billion, according to the Tax Foundation. Lawmakers have other options to achieve significant deficit reductions without fully eliminating the IRA, however. The Tax Foundation’s analysis found that Congress could preserve the nuclear power production tax credit and the carbon capture tax credit — two IRA provisions many Republicans support — as well as a stripped-down version of the renewable energy production tax credit and still raise a respectable $750 billion.
Alex Brill, a former Republican chief economist to the Ways and Means Committee and current fellow at the American Enterprise Institute, told Heatmap that we might see efforts to “rightsize” or “reform” certain tax credits rather than repeal them. Lawmakers could keep the clean electricity tax credits in place for a few more years as an apparent compromise, for example, but phase them out in 2029 or 2030, which is when the Congressional Budget Office estimates they’ll start to be more heavily utilized, and therefore more expensive.
“There’s this possibility that they may be looking at the timing and the duration of some of these provisions,” Brill said.
The IRA prescribes no end date for those credits, which as of now will stay in place until U.S. electricity emissions fall to 25% of their 2022 levels. Jason Clark, the former chief strategist at the American Clean Power Association, told Jael in October that an earlier phase-out would drastically undercut U.S. renewables deployment. “I don’t think a lot of folks appreciate just how long-range some of this planning is — how long it takes to permit something, how long it takes to figure out the interconnection queue. Companies aren’t just thinking, what are we going to build this year? They’re thinking, what will be put online in 2035? So if the government changes the stability of that, companies start to pull back.”
There is another scenario on the table that could save a significant chunk of the IRA, but it would come with its own nontrivial drawbacks.
Republican leaders in the Senate are trying to change the baseline against which all of these budget calculations are made. They argue that the tax cut extensions should be viewed as avoiding a tax increase, not enacting a new tax cut. By this logic, the extensions don’t cost anything, and $6.8 trillion in total tax cuts looks more like $2.8 trillion. That would give Republicans more room to increase spending on a range of other priorities, including defense and immigration enforcement, without having to make tough trade-offs.
This has never been done before, and to call it controversial would be an understatement. Deficit hawks on both sides of the aisle oppose the maneuver, calling it a “gimmick” and “magic math.” A recent Politico article declared that moving to a current policy baseline approach would “break the Senate, upend the federal budget process and explode the national debt.”
Before Republicans can move ahead, they need guidance from the Senate Parliamentarian, an advisor to the Senate tasked with interpreting the rules that govern the body. If the Parliamentarian doesn’t approve, the Senate is technically allowed to ignore or fire her. But this would create a new political firestorm.
Flint said that however this baseline debate plays out will tell us how much danger the IRA is facing. Brill had a slightly different perspective. He said he would expect Congress to set the topline budget resolution numbers lower if it moves ahead with this fuzzy math. But he agreed that assuming the IRA will be saved by its Republican beneficiaries fails to see the whole picture.
“They will be looking at the revenue consequences of changes, and they’ll be looking at the efficiency of these policies,” Brill said. “Are they operating as intended? Are they the size and scope and scale that seem reasonable and appropriate to lawmakers? I think they’re going to be thinking about this in a lot of different dimensions.”
While some oil and gas majors such as Exxon and Occidental have lobbied the Trump administration to keep at least some of the IRA in place, other fossil fuel industry players are trying to convince lawmakers that the clean energy tax credits do more harm than good. More than two dozen energy executives penned a letter to House and Senate leaders last week asking for a full repeal, arguing that the subsidies encourage “less efficient production,” raise costs for consumers, and increase the national debt.
But renewable energy researchers at the Rhodium Group and Energy Innovation published modeling last week making the opposite case. Rhodium found that rollbacks of power plant and vehicle emissions rules, combined with repeal of the IRA tax credits, would increase annual household energy costs by $111 to $184 in 2030, compared to keeping the law as it is. The modelers also found that energy spending throughout the industrial sector would increase by $8 billion to $14 billion from 2030 to 2035. Energy Innovation, which also modeled repeal of key tax credits, found this would lead to higher energy bills, as well as nearly 800,000 job losses in 2030.
Some D.C. figureheads are still bullish that full repeal of the IRA is unlikely. Xan Fishman, senior managing director of the energy program at the Bipartisan Policy Center, told Heatmap he’s heard the argument that Republicans’ magic math could help the IRA, but he’s not sure there’s much there, there. “I do think that there’s strong momentum for keeping the tax credits, and honestly, I think that’s true regardless of whatever budgetary baseline they use,” he said.
Earlier this month, 21 House Republicans came out in bold, public defense of the law. This likely does not reflect the level of support latent in the party, however. Fishman said that many of the tax credits in the law historically had bipartisan support, before the Inflation Reduction Act “painted them with a partisan brush.”
“I think at the end of the day, that is actually really relevant — the fact that so many members have co-sponsored or sponsored some version of these tax credits in the past,” Fishman said.
It’s too soon to judge whether Republican support for the IRA means anything, Josh Freed, senior vice president of the climate and energy program at Third Way, told Heatmap. “IRA is uncertain until the dust settles,” he said. “It is hard to know what trade-offs are going to be asked for by the authors and by different factions within the Republican caucus until decisions on whether there needs to be pay-fors, and how much, are made.”
The timeline for when the Republican caucus will make those decisions — and set the rules of the game — is hard to predict. In that talk hosted by the American Enterprise Institute, Congressman Smith said the plan was to get the final reconciliation bill on Trump’s desk before Memorial Day.
Editor’s note: This story has been updated to correct the emissions reduction target for the clean electricity tax credit in the IRA.
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On GM eating the tariffs, California’s utility bills, and open-sourcing climate models
Current conditions: U.S. government forecasters are projecting hurricane season to ramp up in the coming weeks, with as many as nine tropical storms forming in the Caribbean by November • Southern Arizona is facing temperatures of up to 114 degrees Fahrenheit • Northeast India is experiencing extremely heavy rainfall of more than 8 inches in 24 hours.
Secretary of Energy Chris Wright said his agency is preparing to rewrite previously published National Climate Assessments, which have already been removed from government websites. In an interview with CNN’s Kaitlan Collins, Wright said the analyses “weren’t fair in broad-based assessments of climate change.” He added: “We’re reviewing them, and we will come out with updated reports on those and with comments on those reports.”
The former chief executive of the fracking company Liberty Energy, Wright once eschewed the outright rejection of climate science that other Trump administration officials espouse. But as the Environmental Protection Agency works to withdraw the legal finding that gave the federal government the right to regulate planet-heating emissions under the Clean Air Act, Wright has ratcheted up his rhetoric. Earlier this week, he claimed that “ceaseless repeating from the media, politicians and activists claiming that climate change is making weather more dangerous and severe is just nonsense.” In response, my colleague Robinson Meyer noted on X: “This is a new and big turn from Secretary Wright. I’ve been pretty careful to never call him a climate change denier because while his claims about the science have been incredibly opinionated, I could see the ‘true’ thing he was trying to say. But this is just brazenly wrong.”
Days after the Department of the Interior revoked a designation opening millions of acres off the United States’ shores to offshore wind, the agency on Thursday launched “a full review of offshore wind energy regulations to ensure alignment” with “America’s energy priorities under President Donald J. Trump.” The review aims to examine “financial assurance requirements and decommissioning cost estimates for offshore wind projects, to ensure federal regulations do not provide preferential treatment to unreliable, foreign-controlled energy sources over dependable, American-made energy,” according to the press release announcing the move.
This is just the latest in a series of actions the administration has taken targeting renewables, particularly wind. For more on Trump’s all-out war against America's biggest source of non-emitting energy, here’s my colleague Jael Holzman.
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The Chevrolet Bolt.Bill Pugliano/Getty Images
General Motors is preparing to import batteries from Chinese giant CATL despite steep tariffs imposed by Trump. The automaker is buying the batteries to power the second-generation Chevrolet Bolt electric vehicle, in what The Wall Street Journal described as “a supply-chain Band-Aid for a company that touts extensive investments in U.S. battery manufacturing.”
The imports are meant to hold GM over for two years until the Detroit giant and its Korean partner LG Energy Solution can complete work on U.S. manufacturing sites to provide a domestic source of lower-cost batteries, according to Journal reporter Christopher Otts. GM’s EV sales surged in July following the introduction of the electric version of the popular Chevrolet Equinox SUV, in one of the brightest spots for the American EV market this summer.
California lawmakers are proposing a radical solution to curb rising electricity rates. Bills moving through the state’s legislature would use money raised from state bonds to help pay for the hugely expensive process of expanding the power grid and upgrading its equipment to better withstand wildfires, Canary Media’s Jeff St. John reported. The legislation would force the state’s big three utilities to accept public financing for a portion of the tens of billions of dollars they plan to spend on the power lines. The proposals come as steep rate hikes across the country become a political hot button ahead of next year’s midterm elections. As Robinson put it, “when you look across the power system, virtually every trend is setting us up for electricity price spikes.”
The sustainability data company Watershed announced a new partnership this morning with the Stanford Sustainable Solutions Lab to preserve the EPA’s model for carbon accounting. Dubbed “Cornerstone,” the project “will be a hub for open access” to software designed to assess Scope 3 emissions, the planet-heating pollution that comes from indirect downstream activities in a supply chain. “By combining the most trusted environmental data models and keeping them open to the world, we hope to help companies and organizations build and maintain momentum on sustainability,” Watershed’s co-founder Christian Anderson said in a statement. Wesley Ingwersen, the former EPA lead and architect behind the federal model, will serve as the initiative’s technical director.
The British government’s decision in May to hand back sovereignty over the Chagos Island to Mauritius more than two centuries after seizing the Indian Ocean archipelago and forcing out its residents to make way for a military base created a political uproar in the United Kingdom earlier this year. But British rule over the island chain yielded at least one major benefit beyond military defense. A new study found that the supersized Marine Protected Area the U.K. established in 2010 protected large ocean animals throughout much of their lifecycle. Scientists tracked sea turtles, manta rays and seabirds in the nearly 250,000-square-mile sanctuary. In total, 95% of tracking locations showed the area “is large enough to protect these wandering animals” which travel far to forage, breed and migrate. By contrast, the study from Exeter and Heriot-Watt universities found that seabirds in marine areas with smaller than 40,000 square miles “would be less well protected.”
Congressional Democrats will have to trust the administration to allow renewables projects through. That may be too big an ask.
How do you do a bipartisan permitting deal if the Republicans running the government don’t want to permit anything Democrats like?
The typical model for a run at permitting reform is that a handful of Republicans and Democrats come together and draw up a plan that would benefit renewable developers, transmission developers, and the fossil fuel industry by placing some kind of limit on the scope and extent of federally-mandated environmental reviews. Last year’s Energy Permitting Reform Act, for instance, co-sponsored by Republican John Barrasso and Independent Joe Manchin, included time limits on environmental reviews, mandatory oil and gas lease sales, siting authority for interstate transmission, and legal clarity for mining projects. That passed through the Senate Energy and Natural Resources Committee but got no further.
During a House hearing in July, California Representative Scott Peters, a Democrat, bragged that a bill he’d introduced with Republican Dusty Johnson to help digitize permitting had won support from both the Natural Resources Defense Council and the American Petroleum Institute — two advocacy groups not typically speaking in harmony. (He’s not the only one taking a crack at permitting reform, though: Another bipartisan House effort sponsored by House Natural Resources Committee chairman Bruce Westerman and moderate Maine Democrat Jared Golden would limit when National Environmental Policy Act-mandated reviews happen, install time limits for making claims, and restrict judicial oversight of the NEPA process.)
But unless Democrats trust the Trump administration to actually allow renewables projects to go forward, his proposal could be dead on arrival. Since the signing of the One Big Beautiful Bill Act on July 4, the executive branch has been on the warpath against renewables, especially wind. With the Trump administration’s blessing, OBBBA restricted tax credits for renewable projects, both by accelerating the phaseout timeline for the credits (projects have until July of next year to start construction, or until the end of 2027 to be placed in service) and by imposing harsh new restrictions on developers’ business relationships with China or Chinese companies. Mere days after he signed the final bill into law, Trump directed the Internal Revenue Service to write tougher guidance governing what it means to start construction, potentially narrowing the window to qualify still further.
“I think all of this fuzz coming out of the Trump administration makes trust among Democrats a lot harder to achieve,” Peters told me this week.
In recent weeks, Trump’s Department of the Interior has issued memos calling for political reviews of effectively all new renewables permits and instituting strict new land use requirements that will be all but impossible for wind developments to meet. His Department of Transportation, meanwhile, insinuated that the department under the previous administration had ignored safety concerns related to radio frequencies while instituting onerous new setback requirements for renewables development near roadways.
Peters acknowledged that bipartisan permitting reform may be a heavy lift for his fellow Democrats — “a lot of Democrats didn’t come to Congress to make permitting oil and gas easier,” he told me — but that considering the high proportion of planned projects that are non-emitting, it would still be worth it to make all projects move faster.
That said, he conceded that his argument “loses a lot of force” if none of those planned non-emitting projects that happen to be solar or wind can get their federal permits approved. “How can I even make a deal on energy unless I get some assurance that will be honored by the President?” Peters told me.
Other energy and climate experts broadly supportive of investment-led approaches to combatting climate change still think that Democrats should push on with a permitting deal.
“All of this raises the importance of a bipartisan Congressional permitting reform bill that contains executive branch discretion to deny routine permits for American energy resources,” Princeton professor and Heatmap contributor Jesse Jenkins posted on X. “Seems like there's a lot of reasons for both sides to ensure America's approach to siting energy resources doesn't keep ping-ponging back and forth every four years.”
But permitting reform supporters are aware of the awkward situation the president’s unilateral actions against renewables puts the whole enterprise in.
“The administration’s recent measures are suboptimal policy and no doubt worsen the odds of enacting a technology-neutral permitting reform deal,” Pavan Venkatakrishnan, an infrastructure fellow at the Institute for Progress, told me.
At the same time, he argued that Democrats should still try to seek a deal, pointing to the high demand for electrons of any type. Not even the Trump administration can entirely choke off demand for renewables, so permitting reform could still be worth doing to ensure that as much as can evade the administration’s booby traps can eventually get built.
“Projects remain at the mercy of a burdensome regulatory regime,” Venkatakrishnan said. “Democrats should remain committed to an ambitious permitting deal — the best way to reduce deployment timelines and costs for all technologies, including solar-and-storage.”
Venkatakrishnan also suggested that Democrats could, in a bipartisan deal, seek to roll back some of the executive branch actions, including the Interior memo subjecting wind and solar to heightened review or the executive order on the definition of “begin construction.” There would be a precedent for such an action — the 2024 Manchin-Barrasso permitting reform bill attempted to scrap the pause on liquified natural gas approvals that the Biden administration had implemented. But then of course, that didn’t ever become law. (Manchin and congressional Republicans were able to clear the way to permitting a specific project, the Mountain Valley Pipeline in a larger bipartisan deal.)
What could unlock a deal, Yogin Kothari, a former congressional staffer and the chief strategy officer of the SEMA Coalition, a domestic solar manufacturing group, told me, would be the Trump administration getting actively involved. “The administration is probably going to have to lead,” Kothari said. “It’s going to be up to folks in the administration to go to the Hill and say, We do need this, and this is what it’s going to mean, and we’re going to implement this in good faith.”
This would require a delicate balancing act — the Trump administration would have to think there’s enough in a deal for their favored energy and infrastructure projects to make it worth perhaps rolling back some of their anti-renewables campaign.
“The administration is going to have to convince Democrats that it’s not permitting reform just for a subset of industries,” i.e. oil, gas, and coal, “but it is really technology neutral permanent reform,” Kothari said. “On the Senate side, it comes down to whether seven Senate Democrats feel like they can trust the admin to actually implement things in a way that is helpful across the board for energy dominance.”
One reason the administration itself may have to make commitments is because Congressional Democrats may not trust Republicans to stand behind legislation they support and vote for, Peters told me.
“Obviously we’d have to get some face-to-face understanding that if we make a deal, they’re going to live by the deal,” he said.
Peters pointed to the handful of Republicans who successfully negotiated for a longer runway for renewable tax credits, only to see Trump move almost immediately to tighten up eligibility for those tax credits as reason enough for skepticism. He also cited the cuts to previously agreed-upon spending that the Trump administration pushed through Congress on a party line vote as evidence that existing law and deals aren’t necessarily stable in Trump’s Washington.
“If we do a deal — Republicans and Democrats in Congress, the House and Senate, get together and make an agreement — we have to have assurance that the President will back us,” Peters told me.
No bipartisan deal is ever easy to come by, but then historically, “everybody lives by it,” he said. “I think that may be changing under this administration, and I think it makes everything tougher.”
And more of the week’s most important conflicts around renewable energy.
1. Sussex County, Delaware – The Trump administration has confirmed it will revisit permitting decisions for the MarWin offshore wind project off the coast of Maryland, potentially putting the proposal in jeopardy unless blue states and the courts intervene.
2. Northwest Iowa – Locals fighting a wind project spanning multiple counties in northern Iowa are opposing legislation that purports to make renewable development easier in the state.
3. Pima County, Arizona – Down goes another solar-powered data center, this time in Arizona.
4. San Diego County, California – A battery storage developer has withdrawn plans to build in the southern California city of La Mesa amidst a broadening post-Moss Landing backlash over fire concerns.
5. Logan and McIntosh Counties, North Dakota – These days, it’s worth noting when a wind project even gets approved.
6. Hamilton County, Indiana – This county is now denying an Aypa battery storage facility north of Indianapolis despite growing power concerns in the region.