You’re out of free articles.
Log in
To continue reading, log in to your account.
Create a Free Account
To unlock more free articles, please create a free account.
Sign In or Create an Account.
By continuing, you agree to the Terms of Service and acknowledge our Privacy Policy
Welcome to Heatmap
Thank you for registering with Heatmap. Climate change is one of the greatest challenges of our lives, a force reshaping our economy, our politics, and our culture. We hope to be your trusted, friendly, and insightful guide to that transformation. Please enjoy your free articles. You can check your profile here .
subscribe to get Unlimited access
Offer for a Heatmap News Unlimited Access subscription; please note that your subscription will renew automatically unless you cancel prior to renewal. Cancellation takes effect at the end of your current billing period. We will let you know in advance of any price changes. Taxes may apply. Offer terms are subject to change.
Subscribe to get unlimited Access
Hey, you are out of free articles but you are only a few clicks away from full access. Subscribe below and take advantage of our introductory offer.
subscribe to get Unlimited access
Offer for a Heatmap News Unlimited Access subscription; please note that your subscription will renew automatically unless you cancel prior to renewal. Cancellation takes effect at the end of your current billing period. We will let you know in advance of any price changes. Taxes may apply. Offer terms are subject to change.
Create Your Account
Please Enter Your Password
Forgot your password?
Please enter the email address you use for your account so we can send you a link to reset your password:
Let’s play out what could happen as the House Ways and Means Committee does its work.
One of the most important fights over the Inflation Reduction Act’s survival has finally arrived. But it’s not playing out in the open. It’s happening behind the closed doors of a powerful House committee in charge of tax policy.
The House Ways and Means Committee is writing its version of Republicans’ budget reconciliation bill, the centerpiece of President Donald Trump’s legislative agenda. The committee could release that text as soon as mid-May. And other than a few broad outlines — the text will extend Trump’s tax cuts for the wealthy, and it will increase the deficit by no more than $2.8 trillion — nobody has any idea what it will say.
Whatever the final text, though, will give us the first real sense of how likely the Inflation Reduction Act’s tax credits are to survive in the Trump tax bill. After months of speculation and tea leaf-reading, the House Ways and Means Committee’s draft will represent an opening position of sorts for Republican leadership — and illustrate just how close to repeal the majority is willing to get.
The committee could take a scorched-earth approach, cutting essentially every IRA tax credit in order to force members to fight to get policies back into the final bill. Or it could reform some tax credits so significantly that it effectively repeals the IRA, even if many policies remain on the books.
It could also reform some credits — such as the electric vehicle and clean electricity tax credits — while leaving most others untouched.
The most important suggestion of what will be in the final version came on Thursday in a new letter addressed to Jason Smith, the Ways and Means Committee chairman, and signed by 38 House Republicans. The letter demands the IRA’s full repeal — essentially heralding a potential new “anti-IRA” caucus within the GOP.
“We are deeply concerned that President Trump’s commitment to restoring American energy dominance and ending what he calls the ’‘green new scam’ is being undermined by parochial interests and short-sighted political calculations,” the letter says.
The letter writers focus their ire on subsidies for “wind and biofuel[s] … carbon capture and hydrogen … [and] solar and electric vehicles” that they say form the backbone of the bill.
So far, House Republicans have largely written letters about the IRA to call for its preservation. Last summer, 18 House Republicans wrote to Speaker of the House Mike Johnson to ask him to move gingerly around any “repeal or reform” of the tax credits should Republicans win the November election.
“We must reverse the policies which refine American families while protecting and refining those that are making our country more energy independent and America more energy secure,” the letter said.
Since then, the number of pro-IRA voices in the GOP has risen. Last month, 21 House Republicans wrote to Johnson again in support of the law. But their language was slightly changed, advising that any reforms proceed in a “targeted and pragmatic fashion.” They did, however, oppose “premature credit phase outs” or restrictions on transferability.
Speaking earlier this week at a Semafor event, the Illinois Republican and Ways and Means member Darin LaHood imagined phasing out some of the energy tax credits earlier.
“The approach we’'re looking at now is how you have an appropriate ramp-down [of IRA tax credits] that allows for businesses and companies to continue to be active in this space, but also saves money," LaHood said.
He added that there is a “bullseye” on the clean energy law, and said that “we’ll see” whether any of its provisions are preserved.
Whatever form the final law takes, this legislative vehicle will likely determine the fate of the IRA’s energy tax credits and other climate spending. Trump has lambasted the IRA, and some Republicans believe that its tax credits should be repealed to pay for their tax cuts for wealthy earners.
Ways and Means will not automatically control the final product. Ultimately, they will have to reconcile their version of the text with what’s written by their counterpart, the Senate Finance Committee. Other committees will oversee the IRA’s environmental grants and loans. (My colleague Emily Pontecorvo wrote about the first markup — from the House Transportation and Infrastructure Committee — on Tuesday.) But the Senate has a more forgiving budget target than the House does, which means the Ways and Means Committee is where the IRA could go to die. That’s because it oversees tax policy — and therefore manages the IRA’s all-important tax credits.
The committee also has a spending problem. The legislative process Republicans have chosen to pass their budget bill, known as reconciliation, begins with establishing binding spending limits for committees in both the House and the Senate. That process wrapped up last month.
Under the guidelines passed by the House earlier this year, the Ways and Means Committee can expand the deficit by as much as $4.5 trillion. But simply extending the 2017 tax cuts’ expiring provisions will cost $4.4 trillion — and the committee wants to do more besides, including expanding the deductions that people can claim for their local and state taxes. The committee will struggle to pay for everything it wants to do — and it could look to repealing parts of the IRA to fix it.
It doesn’t help that Representative Jason Smith of Missouri, the Ways and Means chairman, has called the IRA “welfare for the wealthy and well-connected.”
The committee’s conservative bent — and the fact that GOP lawmakers broadly want to stay on track to pass a bill by the end of the summer — mean that the IRA tax cuts are especially vulnerable during this period.
Most of the IRA’s tax credits are due to sunset in 2032. But one measure — a technology-neutral credit to support new clean electricity generation — could run for much longer than that.
Under the law as it stands today, that credit is supposed to last until the United States eliminates much of the greenhouse gas emissions produced by its power grid as compared to 2022 levels. Even if the credit remains in place, that could take another 30 or 40 years to happen, by one estimate — making the tech-neutral tax credit one of the most important climate policies in the law. The IRA’s power sector policies are responsible for more than 80% of the law’s emissions-reducing impact.
That also makes it among the most expensive policies in the law. When Republicans talk about ending tax credits early, the tech-neutral tax credit is an obvious target. Two lawmakers from North Dakota — Representative Julie Fedorchak and Senator Kevin Cramer — are working on language to phase out some tax credits in five years, Axios Pro has reported.
That would shut down the credit by 2030. But ending the credit by then could reshape what kind of energy technologies the law supports. Republicans tend not to see all zero-carbon electricity equally — while they often champion nuclear and advanced geothermal generation, many look less favorably on wind and solar power.
But by terminating the tech-neutral tax credit at the end of the decade, Republicans could help essentially the very technologies they don’t want. There are no new nuclear or geothermal projects in the development pipeline across the country, and new ones are unlikely to crop up until the late 2020s at the earliest. Under the law, energy projects must be “placed in service” by the time a tax credit expires, meaning that virtually no new nuclear or geothermal projects could qualify.
New nuclear projects will face especially serious trouble if the Trump administration guts the Department of Energy’s in-house bank, the Loan Programs Office, as now seems likely.
At the same time, there are plenty of new solar and battery projects planned across the country. Developers of these projects could rush to get them into service before a potential 2029 sunset date. The industry even has experience hurrying projects to completion: It often had to do so during the 2010s, when the solar investment tax credit faced repeated expirations.
Other Republicans have suggested terminating the law’s transferability clause. Under the IRA as it stands today, companies can sell their tax credits to other firms that can better use the subsidy. Depending on how it’s implemented, that reform could hurt the IRA by reducing the value of its tax credits, because companies will have to adopt more complicated financial structures in order to claim a given subsidy. Historically, solar and wind developers have more experience adopting these arcane structures than the nuclear or geothermal industries, which have fewer projects under their belt.
Speaking at a Heatmap event on Thursday, Republican Senator John Curtis of Utah said he was still hopeful that the IRA would survive without significant cuts.
“I don’t think that makes it through the House,” he said when asked if the Ways and Means Committee could slash the IRA tax credits outright. “There’s a lot of insecurities in the Republican Party about not cutting and about where the boundaries are.”
We’ll have a much better sense of where those boundaries are soon.
Editor’s note: Updates to reflect Ways and Means delaying its markup.
Log in
To continue reading, log in to your account.
Create a Free Account
To unlock more free articles, please create a free account.
House Republicans have bet that nothing bad will happen to America’s economic position or energy supply. The evidence suggests that’s a big risk.
When President Barack Obama signed the Budget Control Act in August of 2011, he did not do so happily. The bill averted the debt ceiling crisis that had threatened to derail his presidency, but it did so at a high cost: It forced Congress either to agree to big near-term deficit cuts, or to accept strict spending limits over the years to come.
It was, as Bloomberg commentator Conor Sen put it this week, the wrong bill for the wrong moment. It suppressed federal spending as America climbed out of the Great Recession, making the early 2010s economic recovery longer than it would have been otherwise. When Trump came into office, he ended the automatic spending limits — and helped to usher in the best labor market that America has seen since the 1990s.
On Thursday, the Republican majority in the House of Representatives passed their megabill — which is dubbed, for now, the “One Big, Beautiful Bill Act” — through the reconciliation process. They did so happily. But much like Obama’s sequestration, this bill is the wrong one for the wrong moment. It would add $3.3 trillion to the federal deficit over the next 10 years. The bill’s next stop is the Senate, where it could change significantly. But if this bill is enacted, it will jack up America’s energy and environmental risks — for relatively little benefit.
It has become somewhat passé for advocates to talk about climate change, as The New York Times observed this week. “We’re no longer talking about the environment,” Chad Farrell, the founder of Encore Renewable Energy, told the paper. “We’re talking dollars and cents.”
Maybe that’s because saying that something “is bad for the climate” only makes it a more appealing target for national Republicans at the moment, who are still reveling in the frisson of their post-Trump victory. But one day the environment will matter again to Americans — and this bill would, in fact, hurt the environment. It will mark a new chapter in American politics: Once, this country had a comprehensive climate law on the books. Then Trump and Republicans junked it.
The Republican megabill will make climate change worse. Within a year or two, the U.S. will be pumping out half a megaton more carbon pollution per year than it would in a world where the IRA remains on the books, according to energy modelers at Princeton University. Within a decade, it will raise American carbon pollution by a megaton each year. That is a significant increase. For comparison, the United States is responsible for about 5.2 megatons of greenhouse gas pollution each year. No matter what happens, American emissions are likely to fall somewhat between now and 2035 — but, still, we are talking about adding at least an extra year’s worth of emissions over the next decade. (Full disclosure: I co-host a podcast, Shift Key, with Jesse Jenkins, the lead author of that Princeton study.)
What does America get for this increase in air pollution? After all, it’s possible to imagine situations where such a surge could bring economic benefits. In this case, though, we don’t get very much at all. Repealing the tax credits will slash $1 trillion from GDP over the next decade, according to the nonpartisan group Energy Innovation. Texas will be particularly hard hit — it could lose up to $100 billion in energy investment. Across the country, household energy costs will rise 2% to 7% by 2035, on top of any normal market-driven volatility, according to the energy research firm the Rhodium Group. The country will become more reliant on foreign oil imports, yet domestic oil production will budge up by less than 1%.
In other words, in exchange for more pollution, Americans will get less economic growth but higher energy costs. The country’s capital stock will be smaller than it would be otherwise, and Americans will work longer hours, according to the Tax Foundation.
But this numbers-driven approach actually understates the risk of repealing the IRA’s tax credits. The House megabill raises two big risks to the economy, as I see it — risks that are moresignificant than the result of any one energy or economic model.
The first is that this bill — its policy changes and its fiscal impact — will represent a double hit to the capacity of America’s energy system. The Inflation Reduction Act’s energy tax credits were designed to lower pollution and reduce energy costs by bringing more zero-carbon electricity supply onto the U.S. power grid. The law didn’t discriminate about what kind of energy it encouraged — it could be solar, geothermal, or nuclear — as long as it met certain emissions thresholds.
This turned out to be an accidentally well-timed intervention in the U.S. energy supply. The advent of artificial intelligence and a spurt of factory building has meant that, in the past few years, U.S. electricity demand has begun to rise for the first time since the 1990s. At the same time, the country’s ability to build new natural gas plants has come under increasing strain. The IRA’s energy tax credits have helped make this situation slightly less harrowing by providing more incentives to boost electricity supply.
Republicans are now trying to remove these tax bonuses in order to finance tax cuts for high-earning households. But removing the IRA alone won’t pay for the tax credits, so they will also have to borrow trillions of dollars. This is already straining bond markets, driving up interest rates for Americans. Indeed, a U.S. Treasury auction earlier this week saw weak demand for $16 billion in bonds, driving stocks and the dollar down while spiking treasury yields.
Higher interest rates will make it more expensive to build any kind of new power plant. At a moment of maximum stress on the grid, the U.S. is going to pull away tax bonuses for new electricity supply and make it more expensive to do any kind of investment in the power system. This will hit wind, solar, and batteries hard; because renewables don’t have to pay for fuel, their cost variability is largely driven by financing. But higher interest rates will also make it harder to build new natural gas plants. Trump’s trade barriers and tariff chaos will further drive up the cost of new energy investment.
Republicans aren’t totally oblivious to this hazard. The House Natural Resource Committee’s permitting reform proposal could reduce some costs of new energy development and encourage greater power capacity — assuming, that is, that the proposal survives the Senate’s byzantine reconciliation rules. But even then, significant risk exists for runaway energy cost chaos. Over the next three years, America’s liquified natural gas export capacity is set to more than double. Trump officials have assumed that America will simply be able to drill for more natural gas to offset a rise in exports, but what if higher interest rates and tariff charges forbid a rise in capacity? A power price shock is not off the table.
So that’s risk No. 1. The second risk is arguably of greater strategic import. As part of their megabill, House Republicans have stripped virtually every demand-side subsidy for electric vehicles from the bill, including a $7,500 tax credit for personal EV purchases. At the same time, Senate Republicans and the Trump administration have gutted state and federal rules meant to encourage electric vehicle sales.
Republicans have kept, for now, some of the supply-side subsidies for manufacturing EVs and batteries. But without the paired demand-side incentives, American EV sales will fall. (The Princeton energy team projects an up to 40% decline in EV sales nationwide.) This will reduce the economic rationale for much of the current buildout in electric vehicle manufacturing and capacity happening across the country — it could potentially put every new EV and battery factory meant to come online after this year out of the money.
This will weaken the country’s economic competitiveness. Batteries are a strategic energy technology, and they will undergird many of the most important general and military technologies of the next several decades. (If you can make an EV, you can make an autonomous drone.) The Trump administration has realized that the United States and its allies need a durable mineral supply chain that can at least parallel China’s. But they seem unwilling to help any of the industries that will actually usethose minerals.
Does this mean that Republicans will kill America’s electric vehicle industry? Not necessarily. But they will dent its growth, strength, and expansion. They will make it weaker and more vulnerable to external interference. And they will increase the risks that the United States simply gives up on ever understanding battery technology and doubles down on internal combustion vehicles — a technology that, like coal-powered naval ships, is destined to lose.
It is, in other words, risky. But that is par for the course for this bill. It is risky to make the power grid so exposed to natural gas price volatility. It is risky to jack up the federal deficit during peacetime for so little gain. It is risky to cede so much demand for U.S.-sourced critical minerals. It is risky to raise interest rates in an era of higher trade barriers, uncertain supply shocks, and geopolitical instability.
This is what worries me most about the Republican megabill: It takes America’s flawed but fixable energy policy and replaces it with, well, a longshot parlay bet that nothing particularly bad will happen anytime soon. Will the Senate take such a bet? Now we find out.
And more of the week’s top conflicts around renewable energy
1. Worcester County, Massachusetts – The town of Oakham is piping mad about battery energy storage.
2. Worcester County, Maryland – A different drama is going down in a different Worcester County on Maryland’s eastern shore, where fishing communities are rejecting financial compensation from U.S. Wind tied to MarWin, its offshore project.
3. Lackawanna County, Pennsylvania – A Pivot Energy solar project is moving ahead with getting its conditional use permit in the small town of Ransom, but is dealing with considerable consternation from residents next door.
4. Cumberland County, North Carolina – It’s hard out here for a 5-megawatt solar project, apparently.
5. Barren County, Kentucky – Remember the Geenex solar project getting in the fight with a National Park? The county now formally has a restrictive ordinance on solar… that will allow projects to move through permitting.
6. Stark County, Ohio – Stark Solar is no more, thanks to the Ohio Public Siting Board.
7. Cheboygan County, Michigan – A large EDP Renewables solar project called the Northern Waters Solar Park is entering the community relations phase and – stop me if you’ve heard this before – it’s getting grumbles from locals.
8. Adams County, Illinois – A Summit Ridge Energy solar project located near the proposal in the town of Ursa we’ve been covering is moving forward without needing to pay the city taxes, due to the project being just outside city limits.
9. Cottonwood County, Minnesota – National Grid Renewables has paused work on the Plum Creek wind farm despite having received key permits to build, a sign that economic headwinds may be more powerful than your average NIMBY these days.
10. Oklahoma County, Oklahoma – Turns out you can’t kill wind in Oklahoma that easily.
11. Washoe County, Nevada – Trump’s Bureau of Land Management has opened another solar project in the desert up for public comment.
12. Shasta County, California – The California Energy Commission this week held a public hearing on the ConnectGen Fountain Wind project, which we previously told you already has gotten a negative reaction from the panel’s staff.
A conversation with Heather Cooper, a tax attorney at McDermott Will & Emery, about the construction rules in the tax bill.
This week I had the privilege of speaking with Heather Cooper, a tax attorney at McDermott Will & Emery who is consulting with renewables developers on how to handle the likelihood of an Inflation Reduction Act repeal in Congress. As you are probably well aware, the legislation that passed the House earlier this week would all but demolish the IRA’s electricity investment and production tax credits that have supercharged solar and wind development in the U.S., including a sharp cut-off for qualifying that requires beginning construction by a date shortly after the bill’s enactment.
I wanted to talk to Heather about whether there was any way for developers to creatively move forward and qualify for the construction aspect of the credits’ design. Here’s an abridged version of our conversation, which happened shortly after the legislation passed the House Thursday morning.
How would this repeal affect projects that are already in the pipeline?
Projects in the pipeline are likely going to be safe harbored or grandfathered from these repeals, assuming they’ve gone far enough into their development to meet certain tax rules.
For projects that are less far along in the pipeline and haven’t had any outlays or expenditures yet, those developers right now are scrambling and I’ve gotten probably about 100 emails from my clients today asking me questions about what they can do to establish construction has begun on their project.
If they don’t satisfy those construction rules under the tax bill, they will be completely ineligible for the energy generating credits — the investment tax credit and production tax credit. A pretty significant impact.
What are the questions your clients are asking you?
I’m being asked how these credits are being repealed, if there’s any grandfathering, and how it’s impacting transferability. Also, they’re asking if these rules are tied to construction or placing in service or tax years generally. But also, it seems like people are asking what folks need to do to technically begin construction.
How much will this repeal affect fights between developers and opposition? I spoke to an attorney who told me this repeal could empower NIMBYs, for example.
I don’t know if it empowers them as much as NIMBYs will have less to worry about. If these projects are no longer economical, if these are no longer efficient to build, then the projects just won’t get built. NIMBYs and opponents will be happy.
I don’t think anything about the particular structure of the repeal, though, is empowering opponents. It is what it is.
Like, you can begin construction by entering into procurement contracts for equipment to build your facility so if you’re building a project you can enter into a contract today to get modules, warehouse those modules, and then use those modules to cause one or more projects as having begun construction based on when they were purchased.
If a developer today is able to enter into those contracts, that’ll be outside the scope of anything an opponent would have anything to do with.
Are we expecting people to make decisions before the Senate has acted on this bill or are people in a holding pattern?
When the election happened in November I had increased interest in clients who were concerned about a worst-case scenario like this, that credits would be repealed at or around the time of enactment. We had clients betting not that this would happen but [there was still] a 1% chance or a 5% chance. And folks asked then, how do we re-up thinking about how to begin construction on projects as a precautionary measure.
A lot of my clients were thinking about the worst case scenario beforehand. This is probably just escalating their thinking.
I don’t think people have a lot of time to think about what to do, though, given the 60-day cut off after enactment.
What is the silver lining here? Is there any? If I were to talk to a developer right now, is there an on the bright side here?
The short answer is no. Maybe it makes power projects a lot more expensive and American energy a lot more expensive and therefore those building power projects can make more money from their existing projects? That’s whether they’re renewable or otherwise. Other than higher power costs – for consumers, regular old taxpayers – there’s not really a bright side.
So, what you’re saying is, you don’t have any good news?
The good news is the Senate is still out there and needs to review this. There are a few senators who’ve expressed strong support of these credits – I’m not super optimistic, but four senators tend to have a bit more sway than congresspeople do.