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The technology-neutral investment and production tax credits will save consumers money, the Treasury Department says.
The Biden administration rolled out the pièce de résistance of its Inflation Reduction Act tax credits on Tuesday, publishing the final rules for its overhaul of the clean energy subsidies at the heart of both the bill and United States alternative energy policy going back decades.
The final rules, which largely match proposed ones published in May, define what sources of energy are eligible for production and investment tax credits, known as 45Y and 48E — not, as before, by writing a list of qualifying energy technologies specified by Congress, but rather by lumping together all zero-emissions energy sources into one big group of winners and then letting developers choose which credit they want to use.
The tax credits cover “wind, solar, hydropower, marine and hydrokinetic, geothermal, nuclear,” according to a Treasury Department release, as well as “certain waste energy recovery property” (heat from buildings), and sets out a process for determining how combustion-dependent sources such as biogas, biomass, and natural gas derived from sources like cow manure could qualify. And unlike the tax credits they replaced, which had fixed time periods they were in effect, the tech neutral credits either begin phasing out in 2032 or when electricity sector greenhouse gas emissions are a quarter of their 2022 level, whichever comes second.
It’s not lost on anyone at Treasury or in the Biden administration that with Trump set to take office again in less than two weeks, these rules will be cast into doubt almost as soon as they’re rolled out. The administration is thus making an effort to cast the tax credits as a money-saving proposition for energy consumers — especially households — and a spur for investment across the country.
On Monday, the power market forecasting firm Aurora Energy Research released an analysis finding that scrapping certain IRA provisions, including the technology neutral credits, would “result in $336 billion less investment, 237 gigawatts less clean energy generation capacity, and at least 97,000 net fewer American jobs by 2040.” But what will likely catch the attention of policymakers is its conclusion that “consumers could see monthly household energy bills rise by an average of 10%, with states like Texas facing an increase of up to 22% compared to a scenario with continued tax credit support.”
Deputy Secretary of the Treasury Wally Adeyemo emphasized America’s energy competitiveness on a call with reporters Monday about the final rules. “The tech neutral ITC and PTC” — that is, investment tax credit and production tax credit — “will drive innovation by creating conditions for new zero-emission technologies to develop over time,” Adeyemo said. These policies together constitute an “energy moon shot,” he added, “because they reward innovation and innovative technologies developed in America to drive down energy costs while creating good paying jobs.”
Whether these arguments will convince to the Trump administration we will soon find out. While some Republicans have lined up in support of Inflation Reduction Act tax credits that have led to jobs in their districts, the incoming economic braintrust has taken a dim view of the bill, and Congress will be on the hunt for any spare dollar they can find to offset the costs of extending the 2017 Tax Cuts and Jobs Act. Trump’s incoming chair of the Council of Economic Advisors, Stephen Miran, has described the IRA, along with other Biden industrial policy initiatives like the Bipartisan Infrastructure Law and the CHIPS Act, as “tilting at windmills to boost politically favored sectors that can survive only with permanent subsidization.” Trump’s designee for the Secretary of Treasury, Scott Bessent, has said the IRA “will severely distort the supply side of the economy by crowding out investment in more productive sectors.”
While specific technologies have long been popular with specific Republicans — see “wind” and “Chuck Grassley” — lumping together the technologies along with a variety of bonuses designed to achieve Democratic policy goals around serving specific communities or workers could put the entire edifice of clean energy support at risk.
A few weeks ago, the Treasury released final rules governing the old tax credits, which were also updated under the IRA. Projects would qualify for 48E and 45Y for projects placed into service this year or later, while those that began construction before the end of the year could still qualify for the old credits. Many analysts think that even if the IRA were adjusted or repealed, an administrative process could be put in place to protect credits for projects that have already started.
In any case, in just 13 days, we’ll start getting answers, or at least putting the theories to the test.
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On a major energy acquisition, carbon cycle cash, and a cheaper EV
Current conditions: Hurricane Imelda hit Bermuda as a Category 2 storm • Storm Amy, the first named UK storm of the season, will bring heavy rains and wind to Scotland, England, and Wales on Friday • Sudan’s Ministry of Agriculture declared a state of emergency this week after the Nile River rose to record levels.
The Department of Energy said on Wednesday that it is terminating 321 grants supporting 223 projects, cutting a total of more than $7.5 billion in funding for clean energy projects. While the Department has not yet specified what the awards were, Office of Management and Budget Director Russ Vought posted to social media yesterday that the canceled projects were located across 16 Democrat-led states. An administration official told Bloomberg that at least two of the projects in question were hydrogen “hubs” under development in California and the Pacific Northwest. The cuts come on top of $13 billion in climate funds that had not yet been dedicated to specific projects that the Department of Energy said it would “return” in late September, as instructed by the reconciliation bill.
The Department of Energy has left the recipients of billions in obligated funds for climate projects in limbo since Trump took office. Secretary of Energy Chris Wright said the agency was “reviewing” the awards in May. He testified in Congress that his office would make a decision about many of them by the end of the summer, but this week’s terminations — amid the government shutdown — are the first announcement the agency has made since an initial batch of cuts at the end of May.
The Trump administration said Wednesday that it is putting $18 billion in funding for New York City transit projects on hold while it investigates violations of a rule barring diversity considerations in hiring that the Department of Transportation published on Tuesday. “The timing is, shall we say, noteworthy,” my colleague Matthew Zeitlin wrote on Wednesday, “not least because the Democrats’ two top congressional negotiators — Representative Hakeem Jeffries and Senator Chuck Schumer — are both from New York.” In a statement, Secretary of Transportation Sean Duffy blamed those two lawmakers for the shutdown, lamenting that thanks to them, “USDOT’s review of New York’s unconstitutional practices will take more time.”
Blackrock-owned Global Infrastructure Partners, an investment fund, is in talks to buy energy developer AES for more than $38 billion in “what would be one of the largest infrastructure takeovers of all time,” according to the Financial Times. AES owns utilities in Ohio and Indiana in addition to owning both conventional and renewable energy generation projects across the globe. The company is also the top supplier of renewable energy to corporate buyers in the world. AES stock jumped nearly 17% on Wednesday on the news.
A new report from the Union of Concerned Scientists found that residential customers in seven states that are part of the PJM Interconnection, an electricity market that covers the Mid-Atlantic and parts of the Midwest, are paying nearly $4.4 billion for transmission upgrades intended to deliver electricity to data centers. The finding is not a big surprise — PJM’s own Market Monitor has acknowledged that data center load growth is the primary factor driving up rates. But the report specifically analyzes the amount the whole ratebase is shelling out for transmission projects that only benefit a single customer. It recommends that the Federal Energy Regulatory Commission create a new customer class for such customers and require them to shoulder the cost alone.
Trump has slashed millions in grants for climate science research and plans to cut the federal government’s climate science funding and staff dramatically in next year’s budget. Stepping in to replace some of that lost cash is Schmidt Sciences, a philanthropy founded by former Google CEO Eric Schmidt. Schmidt announced Thursday that it’s committing up to $45 million over five years for research to advance understanding of some of the least-studied parts of the global carbon cycle. For example, one project will measure how much carbon dioxide the Southern Ocean absorbs from the atmosphere with the help of robotic sailboats that can collect data year-round, including during times when it’s too dangerous for research ships to operate.
The 2026 Ioniq 5 Limited. Image courtesy of Hyundai
Hyundai is cutting the price tag on its 2026 Ioniq 5 by nearly $10,000, and will continue to offer $7,500 off the 2025 model — equivalent to the now-expired federal tax credit. The 2026 Ioniq 5 base model will start at just $35,000, making it one of the cheapest EVs available in the U.S.
Some of the industry’s biggest names are joining forces to keep the momentum moving forward.
Climate tech funding has slowed in the face of federal government pushback — but it has certainly not stopped. As the administration has cranked up its hostilities against everything from electric vehicles to wind turbines, companies and investors are responding by getting strategic, forming new coalitions to map, fund, and shape progress in the absence of public support.
Last month I covered the launch of the Climate Tech Atlas, an interdisciplinary effort that includes venture capitalists, nonprofits, and academics working to map out the most salient climate tech opportunities and help guide external research and funding in the sector. There’s also the All Aboard Coalition, which unites big name investors to help plug the missing middle finance gap. Sector-specific investment vehicles are popping up too, like the Oneworld BEV fund, a partnership between major airlines in the Oneworld Alliance and Breakthrough Energy Ventures to advance the commercialization of sustainable aviation fuels. All three of these new initiatives were announced in September alone.
“We are in a unique moment right now,” Carmichael Roberts, a managing partner at BEV told me via email. “Over the past decade, the climate tech ecosystem has made enormous progress driving innovation across every sector of the economy. That puts us in the position to step back and ask first, what areas are still crying out for urgent innovation?”
This year has also seen a number of climate tech companies struggle at key points in their attempts to scale. Sodium-ion battery company Natron Energy shut down in September, while direct air capture leader Climeworks laid off 22% of its staff in May, citing “current macroeconomic uncertainty” and “shifting policy priorities where climate tech is seeing reduced momentum.” Another direct air capture company, Noya, shuttered this August, while the battery recycling company Li-Cycle filed for bankruptcy in May.
Other startups pursuing emerging technologies — from carbon capture to long-duration battery storage, advanced geothermal, and next-generation nuclear — are looking to avoid the same fate. But while federal funding from places such as the Department of Energy’s Office of Clean Energy Demonstrations and the Loan Programs Office once provided an avenue for financing capital-intensive demonstration plants, the Trump administration is now retracting funding, going so far as to cancel contracts with projects previously approved under Biden.
The Oneworld fund, announced in mid-September, is BEV’s first to focus on a specific theme and its first to be backed by an industry coalition. Members of the Oneworld Alliance — which include Alaska Airlines, American Airlines, British Airways, and Cathay Pacific — had already committed to using SAF for 10% of their fuel by 2030, while also “playing an active role in the development of SAF at commercial scale.” Now, with alliance members serving as limited partners in the venture fund, they’ll benefit from the technical and commercial expertise of one of the sector’s most influential VC firms.
When I asked the BEV team to what degree the current political and economic uncertainties were making partnerships like this more valuable, Eric Toone, another BEV managing partner, responded with a refrain I’ve become familiar with — that the firm only backs technologies that “can ultimately compete on their own merits.” Yet it’s undeniable that the federal government tore up its decarbonization agenda at a moment when many climate tech firms’ investments are almost ready for deployment, a stage when government support can make all the difference.
“Many promising SAF technologies already exist, but they are stuck between lab success and commercial scale,” Roberts told me. “This is the moment when they most need capital, technical rigor, and committed offtake to bridge that gap.” While the Trump administration did maintain and extend the tax credit for clean fuels, it also reduced the maximum credit amount for SAF from $1.75 per gallon to $1, while private funding for SAF production and distribution infrastructure remains inadequate.
Given this landscape and the urgency airlines face in meeting their clean fuel targets, Toone told me the firm is open to backing companies “that are further along than what a typical BEV fund might pursue.” And while sustainable fuels are the first technology to benefit from this type of thematic focus, Roberts said that BEV is already eyeing other sectors where it plans to apply this same funding model.
As of early September, the firm is also part of the All Aboard Coalition. This elite group of venture firms is aiming to raise a $300 million fund by the end of October that will match investments in later-stage venture rounds, filling a gap known in climate tech circles as the “missing middle.” Assembled by Chris Anderson, an entrepreneur and primary convener of the TED Talks conference — which has featured many inspiring climate visionaries — the group includes 14 members such as Khosla Ventures, Prelude Ventures, DCVC, Gigascale Capital, and Energy Impact Partners.
“One of the consequences of being in the front row seat at TED all these years is you get persuaded of certain things,” he told me. “And I definitely got persuaded that climate is the outstanding, major problem we really have to fix.”
The bulk of the capital for the coalition will come from outside investors, though some members will contribute as well, Anderson told me. The goal is to incentivize these hotshots to co-invest with each other, providing a one-to-one funding match if they do so.
“First-of-a-kind rounds seem out of reach for a lot of people in the chain,” Anderson explained, referring to the network of investors that must come together to help a company fund expensive new infrastructure. At this stage, its tech has progressed beyond the capital-light, early-stage rounds but is still considered too risky for traditional infrastructure investors to take on. Companies might be seeking $100 million or more from venture firms that are used to writing checks for orders of magnitude less. “Really the purpose of the fund is to create a collective belief that there is a pathway to getting these companies funded. If you have that collective belief, then it’s much easier for a lead investor to step forward and to pull a few other people in.”
Anderson acknowledged that a $300 million fund will not go “nearly far enough.”
“It’s a starter fund. It’s a proof of concept,” he told me. “The world needs to make a couple hundred of these bets at some point.”
Other coalitions, such as the Climate Tech Atlas, are working to steer the sector towards the best bets. This group — which also includes Breakthrough Energy Ventures, alongside others such as the nonprofit investment platform Elemental Impact, the consulting firm McKinsey, and Stanford University’s Doerr School of Sustainability — has mapped out the technological milestones it sees as the clearest pathways to decarbonization. The aim is to help investors, founders, policymakers and academics alike direct their energies towards the most relevant and investable opportunities, regardless of political headwinds.
“The scale at which the government participates in the development of these new technologies — or puts a thumb on the scale for technologies in particular — will vary,” Sonia Aggarwal, CEO of the policy firm Energy Innovation, which is also a member of the alliance, told me. “But certainly that has no real bearing on the fundamental fact that innovators are out there right now thinking about these grand challenges, and there are exciting new ideas for technologies that can get to that commercial scale in the coming years.”
And indeed, sometimes the most promising ideas can take shape in moments of deep uncertainty. Some of the biggest success stories of recent tech history — Uber, Airbnb, WhatsApp, and Square — all got their start during the 2008 financial crisis or its aftermath. “Some of the strongest companies and founders are building in uncertain times,” Dawn Lippert, founder and CEO of Elemental Impact, told me. “That’s very much what we see right now.”
These groups are far from the only private-sector actors coming together to help navigate industry headwinds. When the Environmental Protection Agency withdrew support for the most widely used U.S.-based carbon accounting model for estimating scope 3 emissions, leading emissions accounting platform Watershed partnered with Stanford University’s Sustainable Solutions Lab to launch an initiative that ensures continued access. And recognizing the difficulty that early stage climate tech startups face in securing insurance, the nonprofit GreenRE Coalition and the philanthropic funder Trellis Climate partnered to create a new type of bond tailored to the needs of climate tech startups.
Whether it will all be enough to accelerate or even sustain much-needed momentum in climate tech funding is impossible to predict. But at least the private sector seems to agree that, in this moment, good old teamwork is worth one heck of a try.
His administration has zeroed in on $18 billion of projects that just so happen to be in Chuck Schumer and Hakeem Jeffries’ hometown.
The shutdown punishment has begun, and it’s aimed at New York City.
Russ Vought, the director of the Office of Management and Budget announced Wednesday on X that “roughly $18 billion in New York City infrastructure projects have been put on hold to ensure funding is not flowing based on unconstitutional DEI principles.” That includes funding for the Second Avenue Subway extension and the Gateway Program, a proposed rail tunnel connecting New York City and New Jersey.
While Vought did not refer to the government shutdown specifically in his announcement, the timing is, shall we say, noteworthy, not least because the Democrats’ two top congressional negotiators — Representative Hakeem Jeffries and Senator Chuck Schumer — are both from New York. Secretary of Transportation Sean Duffy later made the link explicit, clarifying in a statement that the real issue with the two projects was a recently released rule — as in, published on Tuesday — “barring race- and sex-based contracting requirements from federal grants.”
There would be a review of the two projects “to determine whether any unconstitutional practices are occurring,” Duffy said, and “until USDOT’s quick administrative review is complete, project reimbursements cannot be processed.” Those reviews “will take more time” thanks to the shutdown, he wrote, reaching his denouement, as “without a budget, the Department has been forced to furlough the civil rights staff responsible for conducting this review.”
The politics behind this gambit are obvious. President Trump has consistently threatened to withhold funding from states, cities, and institutions controlled by or connected to his political opponents.
“I think they very much understand the political dynamics of trying to make an example of New York. They understand where Chuck Schumer lives,” Jackson Moore-Otto, transportation fellow at the Center for Public Enterprise, told me.
The White House wasn’t exactly running away from the political implications of the denial of funding on Wednesday.Vice President J.D. Vance arched a metaphorical eyebrow during a press conference, saying that “I'm sure that Russ is heartbroken about the fact that he is unable to give certain things to certain constituencies.”
Trump has also specifically threatened federal funding for New York City if Democratic nominee Zohran Mamdani wins the upcoming mayoral election.
Duffy himself could not have been any more obvious about what he is trying to achieve by slowing down this funding. “This is another unfortunate casualty of radical Democrats’ reckless decision to hold the federal government hostage to give illegal immigrants benefits,” his statement said, while also specifically calling out the two Democratic congressional leaders, saying that the delayed review was “thanks to the Chuck Schumer and Hakeem Jefferies [sic] shutdown.”
The legality of this — and its legitimate connection to the shutdown — is not so clear.
“It’s pure political maneuvering if you read the statement closely,” David Super, a law professor at Georgetown, told me. “They’re trying to blame the shutdown for slowing their review, but they’re also effectively saying that they’re considering New York in violation of their standards.”
Super also flagged several constitutional and legal issues with the action.
“The funding allocated through laborious means to the Hudson tunnel and Second Avenue Subway is a property right that entities in New York have,” he told me. “The idea that that can be interfered with because someone wants to do an investigation is a blatant violation of due process.”
While it is possible that purported civil rights violations could lead to funding being blocked, “that would have to be established through procedure, not suspicions that they’re doing something wrong,” Super said.
The new rule Duffy referenced addresses a specific set of programs established under the Small Business Act that are designed to give organizations controlled by “socially and economically disadvantaged individuals,” i.e. “women and members of certain racial and ethnic groups,” a shot at winning government contracts.
The DOT argues that under these programs, “two similarly situated small business owners may face different standards for entering the program, based solely on their race, ethnicity, or sex,” and that the rules and legislation defining them violate equal protection as set out in recent federal court decisions and Trump executive orders.
The rule that Duffy cites as justification for his actions is itself constitutionally suspect, Super said. “The Administrative Procedure Act requires public comment on new rules, subject to limited exceptions,” which this did not have.
The slapdash way the rule has been rolled out could open up the DOT to lawsuits, whether from the Metropolitan Transit Authority, which oversees the New York City subway, or another entity involved with the Hudson tunnel project.
“Courts throughout history have insisted public comment is important,” Super said. The DOT is “violating procedures for issuing this policy and violating due process in the way they apply it.”
Moore-Otto also pointed out that the DOT release makes no specific claim that these projects are violating the rule.
“What they’re saying, it appears to me, is, New York might be doing this thing that we’ve just decided is illegal and we’re going to cut off your funding and it’s going to take longer because our lawyers aren’t being paid,” he said.
And there are broader issues around infrastructure policy at play beyond the obvious political gamesmanship, Moore-Otto pointed out. Duffy’s announcement links the supposedly unconstitutional women and minority contracting practices to the high costs that plague American infrastructure projects, saying they’re a “waste of taxpayer resources.”
But, Moore-Otto argued, what really ails U.S. infrastructure projects are extensive administrative reviews and the start-stop nature of project development.
“I think people would broadly agree the U.S. takes too much time and money to deliver infrastructure projects, and they are trying to invoke this as a pretext,” Moore-Otto said. “What strikes me as noteworthy is that when we look at why the U.S. does, in fact, take so long and use so much money building, while the rest of the world builds faster and cheaper, is that there’s a lot of stopping and starting of these infrastructure projects.”
“Assuming it’s a prolonged delay, it’s going to probably drive up costs — even though they’re saying it is a cost saving measure,” Moore-Otto added. “I think that should not be lost on anybody.”