Republicans in the U.S. House of Representatives have put forward a massive spending package that would roll back tax incentives for renewable energy projects introduced under Biden. If the bill passes the Senate and goes to President Donald Trump for his signature, it could deal a major blow to renewable energy, new nuclear technology, and clean energy production across the United States.
The elimination of the tax credits would repeal a significant portion of the 2022 Tax Cuts and Jobs Act, which Democrats have touted as the largest investment in climate initiatives and clean energy. The loss of these tax credits would slow efforts to create enough new energy sources to meet growing demand for electricity, as well as previous commitments the U.S. has made internationally to help stem the climate crisis.
Based on the previous bill, C2ES and research firm Greenline Insights estimated that restrictions on which projects would be eligible for tax credits would cost hundreds of billions of dollars in lost GDP. The updated bill, published overnight and passed early this morning, could lead to even greater losses if the Senate passes it unchanged.
In particular, the bill stipulates that projects must start construction within 60 days of its adoption and be commissioned by the end of 2028 to be eligible for clean energy tax credits.
This will effectively make it impossible for new projects to be implemented, given the long time required to obtain permits and financing before construction can begin. During a speech on the Senate floor this morning, Senate Minority Leader Chuck Schumer (D-NY) called the provision a “kill switch for clean jobs.”
“This is one of the most destructive things added to this bill at the last minute, sneaked in in the dark of night. And we in the Senate – and I hope our Republican colleagues will join us in this – will fight this every step of the way,” he said.
The bill appears to include an exemption for nuclear power, which some GOP members, including Energy Secretary Chris Wright, have ties to. Wright arranged to meet with Republican lawmakers on Wednesday evening to discuss the tax breaks, Politico reports. Subsequently, the bill states that new nuclear reactors would not have to begin construction until 2028 to be eligible for the incentives. But even though the requirements for new nuclear projects are not as strict, the draft law still sets unrealistic goals. Next-generation nuclear reactors are not expected to be ready for commercial use until the 2030s.
The bill also repeals the IRA policy that allowed renewable energy projects to transfer credits to each other, dealing another economic blow to non-nuclear developers. It disqualifies projects owned by or receiving “material assistance from prohibited foreign entities.” According to clean energy advocates and industry experts, these restrictions are essentially unworkable given that clean energy supply chains are still concentrated in China, and that this could hinder developers with investors from other countries. According to preliminary estimates by Greenline Insights and C2ES, restrictions on foreign participation alone could result in a loss of $237 billion in GDP.
Ironically, Republican areas have benefited the most from the IRA incentives for new solar and wind farms and factories. Investments have been concentrated in rural areas, and 73 percent of manufacturing capacity for clean energy components is located in red states, according to a recent industry report by the American Clean Energy Association.
“Texas, in particular, will be affected by this package of laws as written,” Townsend says. An analysis by his organization found that Texas would lose the most jobs – more than 170,000 – due to the restrictions on tax credits originally proposed in the bill.
Fortunately, solar and wind power are in many cases already cheaper sources of electricity than fossil fuels and have been growing steadily in the United States for decades thanks to falling costs. Of course, developers now have to face new challenges related to Trump’s tariff regime. But the industry has managed to make progress – it now provides more than 20 percent of the U.S. electricity – despite the fact that, prior to the passage of the IRA, which codified incentives in a way that provided greater long-term certainty for the industry, it had been receiving on- and off-peak credits for years.
However, the tax incentives provided by the IRA were supposed to help spur a sharp increase in the production of carbon-free energy needed to stop the climate crisis. According to an independent analysis, it was expected that by the end of the decade, greenhouse gas emissions in the United States would be reduced by about 40 percent from peak levels. This brings the country close to the goal that former President Joe Biden committed to under the 2015 Paris Agreement to reduce pollution by at least 50 percent by 2030. And since the United States has historically been responsible for more greenhouse gas emissions than any other country, the decisions Congress is making now have implications for the planet.
Trump, of course, has called climate change a hoax, despite mountains of evidence that fossil fuel emissions are exacerbating floods, storms, droughts, fires, and other climate disasters.
The Senate will now have to consider the entire so-called “big, beautiful Trump bill.” It also includes proposals to extend and expand the income tax cuts, increase military spending, fund mass deportations, impose new restrictions on Medicaid and food assistance programs, and more. Although the Republican-controlled Senate is likely to support Trump’s agenda, there is still time for the bill to evolve.
