Trump could preserve Biden's renewable energy tax credits while still undermining his climate change legislation.

Trump could preserve Biden's renewable energy tax credits while still undermining his climate change legislation.
Trump could preserve Biden's renewable energy tax credits while still undermining his climate change legislation.
  • The three potential Cabinet members nominated by President-elect Donald Trump are likely to play a crucial role in shaping the future of the Biden-era Inflation Reduction Act, should they be confirmed by the Senate.
  • Republicans generally support the renewable energy tax credits in the IRA.
  • An "all-of-the-above" energy policy would undermine the objective of the IRA.

The future of President Biden's climate bill, the Inflation Reduction Act, rests with the Republican-controlled White House, Senate, and House of Representatives.

Three individuals who are expected to play a crucial role in shaping the future of the IRA in President-elect Donald Trump's administration have been nominated by him at the White House level: Scott Bessent, a hedge fund executive, to serve as Treasury Secretary; Chris Wright, CEO of an oilfield services company, to lead the Department of Energy; and North Dakota Gov. Doug Burgum to head the Interior Department.

The IRA would need to be completely repealed by both chambers of Congress, but Republican lawmakers have been hesitant to do so due to the law's benefits. House Speaker Mike Johnson, R-La., has stated that he would approach the IRA with caution and not completely eliminate it.

According to a Washington Post analysis of data from the Massachusetts Institute of Technology and the clean energy think tank Rhodium Group, as of late October, roughly three quarters of the clean energy investments made with IRA funds benefitted congressional districts that backed Trump in the 2020 presidential election.

The future Trump Cabinet members' actions will significantly impact the future of the IRA's programs and incentives, such as tax credits and business loans, according to Tanuj Deora, a former director for clean energy at the Biden administration's Office of the Federal Chief Sustainability Officer.

Renewable energy tax credits are likely safe

Republicans prioritize extending the expiring provisions of the Tax Cuts and Jobs Act of 2017 in 2025. Trump aims to extend the tax cuts within his first 100 days in office next year.

According to estimates from the Congressional Budget Office, this extension would cost $4.6 trillion over the 10-year budget window.

During the last few weeks of the presidential campaign, Trump pledged another seven to eight trillion in tax breaks, as stated by Keith Martin, co-head of projects at Norton Rose Fulbright.

Experts suggest that the IRA may be the most likely source of cost-savings for funding the current initiatives, but Bessent, in an interview with the Financial Times last October, referred to the IRA as the "Doomsday machine for the deficit," implying that Trump could potentially dismantle it to reduce spending.

Clean technology and energy production are encouraged nationwide through the IRA's array of targeted tax incentives.

Renewable energy tax credits, particularly those for carbon capture technologies, domestic manufacturing, and the green economy job transition, are likely to be well-liked by Republicans and safe from potential repeal efforts, according to Martin.

The Trump transition team is in talks to dismantle the $7,500 consumer tax credit for electric vehicles, and experts predict that the phase-out dates for the IRA tax credits may be accelerated.

The final rules for implementing IRA tax credits are expected to be finalized by the end of the year.

Julie McNamara, deputy policy director of the Union of Concerned Scientists, expressed concern that the remaining money could be rescinded, frozen, or "awarded in ways that are aligned with a shift in priorities" in a new administration.

If a future Treasury were to reverse course on interpretation and implementation, it would require a significant amount of time and justification, and could potentially face legal challenges.

Business loan programs are in trouble

The immediate concern of experts is the future of the Department of Energy's Loan Programs Office (LPO), which finances green projects. While Wright has not yet expressed an opinion on the LPO, several Republicans have suggested reducing or eliminating it entirely.

In November, private companies submitted more than $300 billion in funding applications to the LPO. Among the beneficiaries of the loan program is SpaceX, whose CEO Elon Musk is a member of Trump's outside advisory council, known as the Department of Government Efficiency.

The LPO's lending authority and eligibility requirements for projects were broadened by the Inflation Reduction Act.

"Claire Broido-Johnson, co-founder and president of Sunrock Distributed Generation, stated that the private sector is highly concerned about the loan program. She explained that there is a rush to complete as many projects as possible before the administration changes."

An 'all-of-the-above' energy strategy

The growing demand for energy in the U.S. presents a significant challenge due to the boom in AI data centers, domestic manufacturing, and electrification, according to Frank Macchiarola, chief policy officer of the American Clean Power Association.

Martin asserts that the fulfillment of this demand can only be achieved through an "all-of-the-above" energy policy, particularly if Trump intends to reduce energy prices by 50% in his first year, as he has pledged.

According to Macchiarola and Deora, Trump's potential Cabinet officials in the energy space align with his message.

Deora stated that Burgum's background, business competence, and governance competence make it difficult to believe that he would try to hinder the deployment of any reasonable technology for energy infrastructure development.

One-third of North Dakota's electricity comes from wind energy, making it one of the leading states in this field.

Although Wright denies the existence of a climate crisis, he has worked in both the solar and oil and gas industries, as per Trump's statement announcing his nomination.

Deora stated that he is not opposed to all technology, but rather he will support specific technologies.

A comprehensive strategy that includes all forms of energy would undermine the objective of climate policy, despite providing comfort to industries that would be adversely affected by a focused assault on clean energy sources.

"Climate change is not just about installing solar panels; it's about reducing carbon dioxide and methane emissions," said Deora.

"The issue isn't with maintaining the satisfaction of both business and solar developers. Instead, it's about whether we will increase the production of fossil fuels."

by Ece Yildirim

Politics