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Implementing the new rules could mean reshaping the entire U.S. energy system.
The most generous, lucrative, and all-around lavish subsidy in President Joe Biden’s climate law, the Inflation Reduction Act, is the new tax credit for clean hydrogen production. Under the policy, a company can get a bounty of up to $3 for each kilogram of hydrogen made with clean electricity that it produces and sells. There are few legal limits to what a company can earn.
So it figures, then, that this subsidy has been the subject of maybe the most acrimonious, dramatic, hair-tearing fight over the law so far, one that saw snoozy lobbyists and power plant operators take out Spotify spots and full-page New York Times ads in order to make their point.
On Friday, the first phase of that battle ended — and the side supported by most environmental groups claimed a provisional victory. The Biden administration proposed strict rules governing the tax credit, designed to ensure that only zero-carbon electricity meeting rigorous standards can be used to make subsidized hydrogen. The rules, which some industry groups allege could stunt the field in its infancy, will have far-reaching consequences not only for hydrogen itself, but for how America’s power grid prepares for an age of abundant, zero-carbon electricity. It will create a system for organizing clean electricity that could soon determine how companies, consumers, and the federal government buy and sell that electricity — even when it has nothing to do with hydrogen.
But all of that is in the future. Now, to get the highest value of the tax credit, companies must — like other subsidies in the law — demonstrate that they paid a prevailing wage and took advantage of local apprenticeship programs.
They also must demonstrate that they used clean, zero-carbon electricity to power their electrolyzers, the energy-hungry machines that pull hydrogen out of water or other molecules. And defining clean electricity has proven to be an enormous challenge. However the Biden administration chose to define it, someone was going to be left out — or let in.
Consider just one hypothetical. Pretend you own a fancy new electrolyzer. If you buy power for it from a wind farm that’s already hooked up to the grid, then another power plant will have to replace the electrons that you’re now using. That marginal electricity will probably have to come from a coal or natural gas power plant, meaning that it will need to burn extra fuel, meaning it will release extra carbon pollution. Does that mean that the electricity that you bought is actually clean? And if not, do you still get the tax credit?
Earlier this year, climate groups proposed that any clean electricity used to make hydrogen had to meet three requirements: It had to come from a truly new source of power on the grid; it had to generate power at the same time that it was used; and it had to be produced on essentially the same grid where it was used. The Biden administration largely adopted those requirements in Friday’s proposal. On a briefing call with reporters ahead of the rule's release, Deputy Secretary of the Treasury Wally Adeyemo was effusive about the new rule’s benefits. “We’ve developed a structure that will drive innovation and create good-paying jobs in this emerging industry while strengthening our energy security and reducing emissions in hard-to-transition sectors of the economy,” he said.
Not everyone feels that way. Senator Joe Manchin, who provided a key vote for the IRA, told Bloomberg that the draft is “horrible” and promised that “we are fighting it.”
“It doesn’t do anything the bill does. They basically made it 10 times more stringent for hydrogen,” he said. The trade group for the nuclear industry has also expressed its “disappointment,” arguing, more or less correctly, that the proposal “effectively eliminates all existing clean energy from qualifying” for the credit.
But debate about the proposal has not quite run on green vs. industry lines. Air Products, the world’s largest hydrogen producer, has backed the administration’s approach, as have half a dozen other hydrogen companies. So has Synergetic, a hydrogen developer that recently left the trade group the American Clean Power Association to protest its laxer stance. “Consumer groups are behind these rules, and environmental justice has also come out to express support,” Rachel Fakhry, a policy director at the Natural Resource Defense Council, told me.
The excessive focus on the hydrogen tax credit has been, in one sense, surprising. If you care most about cutting carbon pollution in the near-term, the hydrogen tax credit is unlikely to be the most important part of the IRA. Other policies — such as the clean electricity tax credit, which could add vast amounts of new wind and solar to the grid, or new subsidies for electric vehicles — will likely reduce greenhouse gas pollution by far more in the next decade.
But a clean hydrogen industry could soon be crucial to the climate fight. Hydrogen could eventually be used to fuel medium- and heavy-duty trucks, which are responsible for roughly a quarter of the country’s transportation emissions.
It could also decarbonize the production of steel, chemicals, and fertilizer, all of which require fossil fuels today. These are a looming climate problem: By the middle of this decade, heavy industry will pollute the climate more than any other sector of the American economy, according to the Rhodium Group, an independent research firm.
Yet this does not explain why the hydrogen tax credit attracted so much attention. It became a big fight, in short, because it stood the biggest chance of backfiring. Because the tax credit is so generous, incentivizing hydrogen companies to use more and more power, it risked gobbling up too much electricity and distorting the country’s power markets. In the disaster-movie scenario, the tax credit could wind up like the federal government’s ethanol subsidies, which have cost billions while doing nothing to help the climate.
The hydrogen tax credit “has been the most challenging piece of policy that we’ve had to contend with,” John Podesta, the White House adviser in charge of implementing the IRA, told me on the sidelines of COP28 in Dubai earlier this month.
He described the administration as balancing between two extremes. On the one hand, overly strict rules could cause companies to invest more in so-called “blue hydrogen,” which is produced by separating natural gas and capturing the resulting carbon. Yet overly loose rules could cause emissions to balloon and power prices to soar.
“We could kind of blow it in either direction, I think,” he said.
This hasn’t always been seen as a problem. Since the IRA passed last year, the clean hydrogen tax credit has stood out for its extreme generosity, which goes far beyond what is contemplated by other tax credits in the law.
Once the Treasury Department decides that a hydrogen project qualifies for the tax credit, for instance, then that project can receive credits for the next 10 years. For five of those years, it can even get that money as a direct payment from the government, rather than as a tax cut. What’s more, projects can qualify for the tax credit as long as they begin construction by 2033. That means the tax credit will still be used well into the 2040s, even if Congress does not extend it.
Almost no other policy in the law spends federal dollars so lavishly or directly. Manchin, who negotiated the final text of the IRA with Senate Majority Leader Chuck Schumer, has long championed the hydrogen industry and seen it as a way to use fossil-fuel assets, such as pipelines, in the energy transition.
Soon after the IRA passed, however, climate advocates realized that this generosity could pose risks to the rest of the law. In the summer of 2022, Wilson Ricks, an engineering Ph.D. student at Princeton, was interning for the Department of Energy, studying how to measure the climate impact of hydrogen produced by electrolysis.
Ricks had already concluded that the “lifecycle” of the electricity used to make hydrogen mattered: If electricity from a nuclear power plant was sent to an electrolyzer instead of the power grid, thereby forcing a natural-gas plant to turn on and send power to the grid instead, then so-called “clean hydrogen” could actually result in more climate pollution than the traditional approach of using natural gas to make hydrogen.
Then the IRA passed, and “potentially hundreds of billions of dollars hinged on that question,” he told me. In January, Ricks and his colleagues at Princeton’s ZERO Lab published a study urging the Biden administration to adopt stringent guidelines for the tax credit. Without hourly matching, they concluded, the subsidy could wreak havoc in the country’s electricity markets.
Ricks wasn’t the only expert suddenly worried about what a giant new hydrogen subsidy could do to electricity markets. Nearly a year earlier, Taylor Sloane, an energy developer for the utility and power company AES, virtually predicted the hydrogen fight in a Medium post.
“The reason it matters that we get these rules right is that we don’t want to have an environmental backlash against green hydrogen in a few years demonstrating how it actually increases emissions,” he wrote. “Getting the rules right from the start will ensure more stable long-term growth of green hydrogen.”
Ultimately, the administration decided that nearly all clean electricity used to produce hydrogen must meet three requirements — largely inherited from the climate groups’ proposals. They also mirror hydrogen regulations already adopted in the European Union.
First, the electricity must come from a relatively new source of zero-carbon power, such as a wind or nuclear plant: You can’t use electrons that once would have powered homes or cars to power an electrolyzer.
Second, the electricity must be produced at roughly the same time that it is used to make hydrogen: You can’t buy cheap solar power at noon and claim that you’re using it to make hydrogen at midnight.
Finally, the electricity must have been made on the same power grid that the electrolyzer itself is using: You can’t buy wind power in Iowa and claim that you’re using it to make hydrogen in Massachusetts.
Today, no power company in the country has a way of certifying that its electricity meets all three requirements of the new hydrogen rule — and none has any way of selling it, either. So the rules also require local power grids to set up and sell “energy attribute certificates,” or EACs, which certify that a given kilowatt-hour of electricity was produced on a certain grid, at a certain time, and using a certain source of clean energy.
Utilities and grid managers have until 2028 to launch this new system; until then, hydrogen companies can keep using the existing system of renewable energy credits, or RECs, which certify only that zero-carbon electricity was generated during a certain year.
Although this new system of EACs may sound like so much bureaucratic legerdemain, it could eventually become more important than the hydrogen tax credit itself, because it could all but reshape how the country’s electricity systems work.
Right now, even though the availability of clean energy rises and falls throughout the day — solar panels make more power at noon than at midnight, for instance — there is no way to buy or sell claims to that power. By creating a systematic way to describe and sell an hour of clean electricity, EACs could actually create a market for 24/7 clean electricity.
The existence of that system could alter corporate sustainability pledges, climate-friendly government orders, and even how companies measure their own progress toward meeting their Paris Agreement goals. Even though hundreds of American companies say that they buy their electricity from zero-carbon sources, only Google, Microsoft, and a few other companies have committed to buying 24/7 clean electricity.
“I know the administration faced absurd amounts of pressure given how lucrative this is,” Ricks told me. “But it seems like they pretty much held firm and went with the science.”
That said, the proposal kicks two issues down the road. It asks companies whether it should allow any exceptions to the general rule requiring that clean electricity come from clean sources. Some nuclear power plant operators, for instance, have argued that electricity from a nuclear plant should count toward the credit if the plant would otherwise be slated to shut down.
That decision could shape other administration priorities. Two of the government’s seven proposed “hydrogen hubs,” new industrial facilities funded by the bipartisan infrastructure law, are planning to use nuclear power to generate clean hydrogen. Under the current rules, these hubs may not qualify for the generous hydrogen tax credit, even though they could still earn billions in other subsidies.
The proposal also asks for advice about how to count so-called renewable natural gas, which is captured methane released from cows or landfills. Some environmentalists worry that the rules for this technology, if poorly drafted, could allow companies to engage in aggressive carbon accounting that does not align with reality. But so far, the Biden administration seems to have little appetite for that approach.
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On a state legislative session, German Courts, and U.S. permitting personnel
Current conditions: The first named tropical storm of the year appears to be forming in the Pacific Ocean as Tropical Storm Alvin • Northern California braces for temperatures as high as 100 degrees Fahrenheit this weekend • It’s cloudy and cool in Manhattan, where Wednesday night the Court of International Trade threw out much of Trump’s tariff regime.
1. Texas anti-renewables bills won’t get crucial vote
A suite of bills in the Texas legislature that targeted the state’s booming renewable energy sector will not make it to the governor’s desk after the state’s House of Representatives declined to schedule votes on them before the Texas legislature’s biennial session ends on Monday, The Hill reported.
The Texas Senate had passed S.B. 819 in April, which would have mandated extra regulatory approval for large solar and wind projects, over and above what fossil fuels are required to seek. The Senate also passed S.B. 388, which would have essentially mandated that more than half of new generation in the state would be gas, and S.B. 715, which would have required existing wind and solar generation to have gas backup. Trade groups were “in freak-out mode,” my colleague Jael Holzman reported at the time, and the head of one renewables group testified that S.B. 819 alone would “kill” the industry.
2. D.C. energy veteran gets permitting gig
Emily Domenech, a former staffer for House Speakers Kevin McCarthy and Mike Johnson, will head the federal government’s Permitting Council, Politico reported Wednesday.
The Permitting Council was established as part of the Highway Bill in 2015 as the Federal Permitting Improvement Steering Council, and helps coordinate permitting for infrastructure projects that require multiple layers and stages of federal regulatory and environmental review.
Domenech also helped negotiate permitting reform provisions in the 2023 Fiscal Responsibility Act. More recently, she has been a senior vice president at the energy and environment public affairs firm Boundary Stone.
I spoke with Domenech last year after the presidential election for a story about how the clean energy industry could “learn to speak Republican.” In the past, she told me, “clean energy hasn’t focused on getting to know those representatives. When they’ve had ideas for bills or policies, they went to Democrats. They haven’t built a lot of personal relationships with members of Congress on the other side of the aisle.”
3. Climate lawsuit rejected, principle behind it affirmed
A Peruvian farmer’s lawsuit against the utility RWE for its contribution to the risk of glacial flooding was rejected by a German court, The New York Times reported Wednesday.
The farmer, Saúl Luciano Lliuya, had sued in Hamm Higher Regional Court, arguing that emissions from RWE increased glacial melting and threatened the inundation of his town of Huaraz.
RWE does not operate in Peru, but the suit argued that it was responsible for 0.5% of global emissions, and thus should be responsible for that portion of the cost of protecting the town from flooding, about $19,000. The judge dismissed the suit but “affirmed that German civil law could be used to hold companies accountable for the worldwide effects of their emissions,” the Times reported.
Lliuya’s lawyer hailed the decision, saying in a statement, “For the first time in history, a higher court in Europe has ruled that large emitters can be held responsible for the consequences of their greenhouse gas emissions.”
RWE warned that the decision could “have unforeseeable consequences for Germany as an industrial location, because ultimately claims could be asserted against any German company for damage caused by climate change anywhere in the world.”
4. Constitution revived
A fracking site in the Marcellus Shale. Spencer Platt/Getty Images
The Williams Companies is planning to start the process of permitting formerly dormant pipeline projects in New York state, the Wall Street Journal reported.
The two pipelines, the Constitution and Northeast Supply Enhancement, were canceled in 2020 and 2024, respectively, following intense environmental and local opposition.
The Northeast is adjacent to productive natural gas fields in the Marcellus Shale in Pennsylvania, but does not have fully built out infrastructure for shipping gas from Pennsylvania to New York and beyond. The Constitution pipeline would have run from Northeast Pennsylvania to Schoharie, New York, outside Albany. The Northeast Supply Enhancement would have augmented existing infrastructure that runs from Lancaster County, Pennsylvania through New Jersey, and would have included new pipelines under New York Bay to supply gas to New York City and Long Island.
The move to restart the projects comes after President Trump allowed work to restart on the Empire Wind 1 offshore wind project off the south coast of Long Island. While New York Governor Kathy Hochul never directly said there was quid pro quo for the pipeline, she did say in a statement at the time that she would “work with the Administration and private entities on new energy projects that meet the legal requirements under New York law.”
5. Fed scraps climate groups
The Federal Reserve has gotten rid of a number of working groups and internal organizations dedicated to climate change, Bloomberg reported Wednesday. These include the Supervision Climate Committee, founded in 2021, which the Fed said then would “further build the Federal Reserve’s capacity to understand the potential implications of climate change for financial institutions, infrastructure, and markets.” The other groups eliminated are the Financial Stability Climate Committee, the Climate Committee on Economic Activity, and the Climate Data Committee.
The central bank’s actions are part of a government wide push to de-emphasize climate change in policymaking and official communications. Days before President Trump’s second inauguration, the Fed said that it had withdrawn from the Network of Central Banks and Supervisors for Greening the Financial System. In a statement, the Fed said that the group had “increasingly broadened in scope, covering a wider range of issues that are outside of the Board's statutory mandate.”
The central bank will continue to “assess climate risk as part of its business-as-usual activities,” Bloomberg reported.
“Abruptly ending the energy tax credits would threaten America’s energy independence and the reliability of our grid - we urge the senate to enact legislation with a sensible wind down of 25D and 48e,” Tesla Energy’s Twitter account posted Wednesday night, in reference to tax credits for home purchases of solar and storage energy systems and investments in clean energy systems respectively. The post came hours after news broke that Tesla CEO Elon Musk would be leaving the Trump administration.
We’re too enmeshed in the global financial system for decarbonization to work 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.
It will take years, at least, to reconstitute the federal workforce — and that’s if it can be managed at all.
By anyone’s best guess, there are — or soon will be — 284,186 fewer federal employees and contractors than there were on January 19, 2025. While Voice of America and the U.S. Agency for International Development have had it the worst, the Trump administration’s ongoing reductions have spared few government agencies. Over 10% of the staff at the National Oceanic and Atmospheric Administration, including at critical weather stations and tsunami monitoring centers, have left or been pushed out. Layoffs, buyouts, and early retirements have reduced the Department of Energy’s workforce by another 13%.
The best-case scenario for the civil service at this point would be if the administration has an abrupt change of heart and pivots from the approach of government “efficiency” guru Elon Musk and Office of Management and Budget Director Russell Vought, who has said he wants government bureaucrats to be “traumatically affected” by the funding cuts and staff reductions. Short of that unlikelihood, its membership will have to wait out the three-and-a-half remaining years of President Trump’s term in the hopes that his successor will have a kinder opinion of the federal workforce.
But even that wouldn’t mean a simple fix. In my effort to learn how long it would take the federal workforce to recover from just the four-plus months of Trump administration cuts so far, no one I spoke to seemed to believe a future president could reverse the damage in a single four-year term. “It will be very difficult, if not impossible, to restore the kind of institutional knowledge that’s being lost,” Jacqueline Simon, policy director of the American Federation of Government Employees, the largest union of federal government workers, told me.
There are three main reasons why restaffing the government will be trickier than implementing a simple policy change. The first is that the government had already been strugglingto fill empty posts before Trump’s layoffs began. “For a considerable period of time, the biggest challenge for the federal government, in personnel terms, has been getting talented people into government quickly,” Don Moynihan, a professor at the Ford School of Public Policy at the University of Michigan, told me. “That was already a problem preceding the Trump administration, and they just made it a lot worse.”
Before Trump’s second term, an estimated 83% of “major federal departments and agencies” struggled with staff shortages, while 63% reported “gaps in the knowledge and skills of their employees,” according to research by the Partnership for Public Service, a nonprofit supporting the civil service. Even President Joe Biden, who’d promised to restore a “hollowed out” federal workforce after Trump 1.0, struggled at the task, ultimately growing the number of permanent employees by just 0.9% by March 2023. (He eventually saw 6% growth over his entire term; a bright spot was hiring for roles necessary for carrying out the Infrastructure Investment and Jobs Act.)
Still, as I’ve previously reported, many hard-to-fill roles in remote locations or that required specialized skills were empty when Trump came into office and ordered a hiring freeze.
The second challenge to rebuilding the federal workforce is that many employees who have left the government may not be able to — or may not want to — return to their previous roles. Staff who have taken early retirements will be permanently lost or have to return as rehired annuitants, which Simon of the American Federation of Government Employees noted has “a lot of disadvantages,” including, in some cases, earning less than the minimum wage. Other former employees, particularly in the sciences, may have been enticed abroad as part of the U.S. brain drain. Still others may have found enjoyable and fulfilling work at the state level, in nonprofits, or in the private sector, and have no interest in returning to government.
It certainly doesn’t help that the Trump administration has made the federal government a less competitive employer. Abigail Haddad, a data scientist for the Department of the Army and, until recently, the Department of Homeland Security’s AI Corps, wrote for Moynihan’s Substack,Can We Still Govern?, that she’d been hired for a fully remote job, only to be told “we would be fired if we did not immediately return to office 9 to 5, five days a week.” Rather than make a two-and-a-half-hour round-trip commute to “an office that was never mentioned when I took the job,” Haddad quit. “It was clear to me that the people making these decisions about my work conditions were not only unconcerned about my ability to be productive, but were actively hostile toward it,” she wrote.
The last obstacle to reversing the Trump administration’s cuts echoes Haddad’s experience — and is, in my view, the most worrisome of all. That is, the current landscape will almost certainly dissuade future generations from pursuing jobs in the government. “There will be some opportunities in states and nonprofits,” Simon noted. “But as far as an opportunity for public service in the federal government — they’ve made that an impossibility, at least for the next many years.”
Moynihan, the public policy professor, added that while it’s still early to predict what students will do, he’s heard worries in his classrooms about “what future job prospects look like, given the instability around the federal government.” But the crisis goes beyond just hiring concerns.
“There’s a whole generation of public servants who would say they were inspired to go into government because they heard John F. Kennedy say, ‘Ask not what your country can do for you — ask what you can do for your country,’” he said. “There is a genuine value in elected leaders calling on people to serve and presenting that service in noble terms.” Most people don’t join the public sector for the paycheck, after all — it’s for the “opportunity to do meaningful work, and for job stability and security,” Moynihan went on. The Trump administration has gutted the promises of both.
So then, how long would it take to restaff the government? Simon told me that since it was an executive order that directed the cuts, they could be functionally undone by another executive order, though the rehiring process itself “could take years.” Moynihan used the metaphor of a muscle, rather than a switch that gets turned on and off, to answer the same question. “The Trump administration is cutting a lot of muscle right now, and so the next president will not be able to simply, on day one, bring that back,” he told me. “They’ll have to be able to persuade people that the workspace is no longer going to be toxic, is going to be more secure, and will allow them to do meaningful work — and they’re going to face a fairly skeptical audience, given everything that’s going on.”
But that’s if things hold as they are. They could still get worse.
As the administration continues its attack on the civil service, it seems all but sure to be cueing up an eventual Supreme Court case over the legality of reclassifying federal employees so that they can be easily fired if they’re perceived as not loyal enough to the president. And if the court rules that the president can do so, “any sort of law that Congress might put in the future that constrains those powers is unconstitutional,” Moynihan said. In that scenario, the government would no longer be able to provide “any sort of long-term credible commitments to potential employees that four years down the line or eight years down the line, any new president could just rip up their workplace” or lay them off for arbitrary reasons.
The answer to how long it would take to restaff the federal government after Trump, then, takes on an entirely different tenor — it may never be the same again.