Sign In or Create an Account.

By continuing, you agree to the Terms of Service and acknowledge our Privacy Policy

Politics

What the Republican Budget Plan Means for the IRA

Much may depend on the Senate’s tolerance for fuzzy math.

The Capitol.
Heatmap Illustration/Getty Images

House Republicans passed a budget blueprint Thursday morning that lays the groundwork for the party to begin drafting legislation to enact President Trump’s agenda. Now the fight over the Inflation Reduction Act’s clean energy tax credits begins in earnest.

The blueprint is merely a set of instructions for writing the eventual budget bill, laying out topline numbers for tax cuts and spending reductions — it doesn’t contain any actual policies. Trump’s biggest priorities are to extend the tax cuts he enacted in 2017, pass new tax cuts on tips and overtime pay, and to boost spending on immigration control and defense.

The resolution that Republicans passed allows for all of the above. In total, it enables Congress to craft a bill that would increase the national debt over the next decade by more than $5 trillion.

The good news for the IRA tax credits is that the framework only requires lawmakers to craft legislation that would produce $4 billion in savings — a relatively small amount that doesn't exert much pressure on cutting the tax credits. The bad news is that Senate Republicans have given their word to budget hawks in the House that they will aim to cut much more than that — at least $1.5 trillion in spending. House Republicans, for their part, are eager to do at least $2 trillion in deficit reductions.

According to a “menu” of budget proposals that made its way around the Hill earlier this year, Republicans estimate they could save anywhere from $3 billion to $800 billion by repealing IRA tax credits, depending on how many and which ones are cut.

Lawmakers could also go after other climate-related policies, like cutting grant programs from the Department of Energy and Environmental Protection Agency. “Most of the funds have been obligated,” meaning they’re legally committed to grantees, “so there’s not much left to rescind,” Alex McDonough, a lobbyist with Pioneer Public Affairs, told me in an email. “We’ll see what they do with a possible rescission package, but even that would be a drop in the bucket compared to the trillions they want for offsetting tax cuts.”

Lobbyists on Capitol Hill and other experts I’ve spoken with over the past two weeks disagree about how much the numbers matter when it comes to whether and how much of the IRA will be repealed. Some felt the budget math would take priority, while others told me that if any of the tax credits were killed or saved, it would be for political reasons over anything else.

Though the biggest political target seems to be the electric vehicle tax credits, “anything with a price tag is at least somewhat vulnerable,” McDonough said. Lawmakers could also opt to make certain credits more difficult to access or phase them out earlier rather than fully repeal them.

McDonough also said the lobbying that companies and trade groups have been doing around the manufacturing and clean electricity tax credits appeared to be working, and will ratchet up even more in May. “Appealing to ‘all of the above’ and ‘energy dominance’ is working because everyone knows how badly we need new generation to meet rapidly rising demand and a lot of the clean energy resources happen to be the quickest to deploy,” he said. “Utilities want it too, which is also very important.”

On Thursday, Republican Senators Lisa Murkowski of Alaska and John Curtis of Utah sent a letter to their party’s leadership asking them to preserve tax credits that spur manufacturing, reduce energy costs for consumers, and give certainty to businesses that have already made investments in the U.S. based on the credits. Thom Tillis of North Carolina and Jerry Moran of Kansas also signed the letter. It was the first major show of support for the tax credits in the Senate, following a similar letter signed by 21 Republicans in the House.

Republicans are trying to enact Trump’s agenda using a special process called budget reconciliation, which will enable them to pass it with a simple 51-vote majority rather than the 60 votes required to overcome a filibuster. The party currently has 53 seats, so four Republicans coming out in favor of preserving IRA tax credits is a good sign for the law. Similarly, the Republicans have a seven-seat majority in the House, and so those 21 who like the IRA could have quite a bit of influence.

But the other big open question for the future of the IRA — and frankly, for the future of the Senate — is whether Republicans will proceed with the fuzzy math they are using to calculate the cost of the bill. When the Congressional Budget Office scores the extension of Trump's 2017 tax cuts, it will use what's called a "current law baseline," and estimate that they will cost the government more than $3 trillion dollars over the next ten years. Senate Republicans, however, have asserted that extending the 2017 tax cuts is free and will have no impact on the deficit, using a different scoring method called a “current policy baseline.”

The reason this matters for the IRA is that the budget reconciliation process has strict rules. If lawmakers were forced to recognize the true cost of the tax cut extensions in drafting the budget bill, they would have to make several trillion dollars’ worth of additional spending cuts in order to align with the blueprint they passed this week. In that scenario, it’s hard to see how any of the IRA could survive.

But if Republicans unify around this fuzzy math and carry it all the way to the final vote on the bill, which would be unprecedented, they could face a showdown with Democrats, who will say the bill doesn’t comply with the reconciliation rules. In that scenario, they’ll be faced with a choice either to go back to the drawing board or take the nuclear option — essentially changing how the Senate operates.

“There will be a majority vote on whether the Senate wants to change its precedents going forward, forever, and basically open up reconciliation to whatever policies the majority wants to enact going forward,” Charlie Ellsworth, another lobbyist for Pioneer Public Affairs, told me.

Expect to hear a lot more about this debate over the cost of the tax cuts once lawmakers return to Washington on April 28 after a two-week recess. Republicans have said they want to get the budget bill to Trump’s desk by Memorial Day. McDonough doesn’t think that’s in the cards, and expects it to happen by the August recess at best. But he expects the House Ways and Means committee to push out a first version of the bill in May, so we’ll see what the first proposal is for the fate of the IRA tax credits then.

You’re out of free articles.

Subscribe today to experience Heatmap’s expert analysis 
of climate change, clean energy, and sustainability.
To continue reading
Create a free account or sign in to unlock more free articles.
or
Please enter an email address
By continuing, you agree to the Terms of Service and acknowledge our Privacy Policy
Hotspots

Judge, Siding With Trump, Saves Solar From NEPA

And more on the week’s biggest conflicts around renewable energy projects.

The United States.
Heatmap Illustration/Getty Images

1. Jackson County, Kansas – A judge has rejected a Hail Mary lawsuit to kill a single solar farm over it benefiting from the Inflation Reduction Act, siding with arguments from a somewhat unexpected source — the Trump administration’s Justice Department — which argued that projects qualifying for tax credits do not require federal environmental reviews.

  • We previously reported that this lawsuit filed by frustrated Kansans targeted implementation of the IRA when it first was filed in February. That was true then, but afterwards an amended complaint was filed that focused entirely on the solar farm at the heart of the case: NextEra’s Jeffrey Solar. The case focuses now on whether Jeffrey benefiting from IRA credits means it should’ve gotten reviewed under the National Environmental Policy Act.
  • Perhaps surprisingly to some, the Trump Justice Department argued against these NEPA reviews – a posture that jibes with the administration’s approach to streamlining the overall environmental analysis process but works in favor of companies using IRA credits.
  • In a ruling that came down on Tuesday, District Judge Holly Teeter ruled the landowners lacked standing to sue because “there is a mismatch between their environmental concerns tied to construction of the Jeffrey Solar Project and the tax credits and regulations,” and they did not “plausibly allege the substantial federal control and responsibility necessary to trigger NEPA review.”
  • “Plaintiffs’ claims, arguments, and requested relief have been difficult to analyze,” Teeter wrote in her opinion. “They are trying to use the procedural requirements of NEPA as a roadblock because they do not like what Congress has chosen to incentivize and what regulations Jackson County is considering. But those challenges must be made to the legislative branch, not to the judiciary.”

2. Portage County, Wisconsin – The largest solar project in the Badger State is now one step closer to construction after settling with environmentalists concerned about impacts to the Greater Prairie Chicken, an imperiled bird species beloved in wildlife conservation circles.

Keep reading...Show less
Yellow
Spotlight

Renewables Swept Up in Data Center Backlash

Just look at Virginia.

A data center.
Heatmap Illustration/Getty Images

Solar and wind projects are getting swept up in the blowback to data center construction, presenting a risk to renewable energy companies who are hoping to ride the rise of AI in an otherwise difficult moment for the industry.

The American data center boom is going to demand an enormous amount of electricity and renewables developers believe much of it will come from solar and wind. But while these types of energy generation may be more easily constructed than, say, a fossil power plant, it doesn’t necessarily mean a connection to a data center will make a renewable project more popular. Not to mention data centers in rural areas face complaints that overlap with prominent arguments against solar and wind – like noise and impacts to water and farmland – which is leading to unfavorable outcomes for renewable energy developers more broadly when a community turns against a data center.

Keep reading...Show less
Yellow
Energy

Where Clean Energy Goes From Here

The One Big Beautiful Bill Act is one signature away from becoming law and drastically changing the economics of renewables development in the U.S. That doesn’t mean decarbonization is over, experts told Heatmap, but it certainly doesn’t help.

The Big Beautiful Bill and clean energy.
Heatmap Illustration/Getty Images

What do we do now?

That’s the question people across the climate change and clean energy communities are asking themselves now that Congress has passed the One Big Beautiful Bill Act, which would slash most of the tax credits and subsidies for clean energy established under the Inflation Reduction Act.

Keep reading...Show less
Blue