How Trump Could Preserve Biden's Renewable Energy Credits While Undermining His Landmark Climate Bill

 Any attempt to fully repeal the Inflation Reduction Act would need to pass both houses of Congress, where GOP lawmakers have been hesitant to entirely discredit its benefits.

Donald Trump at Mar-a-Lago on Palm Beach, Fla., on Monday. 

Dec. 20, 2024, 3:28 AM GMT+6

The fate of President Joe Biden’s landmark climate legislation, the Inflation Reduction Act (IRA), now lies with the incoming Republican-controlled White House, Senate, and House of Representatives.

At the White House level, President-elect Donald Trump has already nominated three key figures for his administration who could influence the IRA’s future, provided they are confirmed by the Senate. These include hedge fund executive Scott Bessent as Treasury Secretary, Liberty Energy CEO Chris Wright to lead the Department of Energy, and North Dakota Governor Doug Burgum for the Department of the Interior.

A full repeal of the IRA would require approval from both chambers of Congress, where Republican lawmakers have so far shown reluctance to fully discredit the law’s benefits. House Speaker Mike Johnson, R-La., stated in September that he would approach the IRA with “a scalpel and not a sledgehammer.”

This measured approach is understandable given that, by late October, roughly three-quarters of the clean energy investments funded by the IRA benefited districts that supported Trump in the 2020 election, according to a Washington Post analysis based on data from MIT and the Rhodium Group.

The actions of Trump’s prospective Cabinet members are also critical, as they hold significant power over how the IRA’s programs and incentives, such as tax credits and business loans, are interpreted and implemented, according to Tanuj Deora, former director for clean energy at the Biden administration’s Office of the Federal Chief Sustainability Officer.

Renewable Energy Tax Credits Likely to Remain Safe
Republicans’ priority in 2025 will likely be extending the expiring provisions of the Tax Cuts and Jobs Act of 2017. Trump aims to extend these tax cuts within his first 100 days in office, potentially costing $4.6 trillion over ten years, according to Congressional Budget Office estimates.

However, to offset the cost of these tax cuts, the IRA could be targeted for cost savings. Bessent has previously referred to the IRA as a “Doomsday machine for the deficit,” suggesting it could be dismantled to reduce spending.

Despite this, certain provisions of the IRA, particularly those supporting renewable energy, carbon capture, domestic manufacturing, and job transitions to the green economy, are likely to remain intact, according to Keith Martin, co-head of projects at Norton Rose Fulbright. However, experts predict that the IRA’s tax credit phase-out dates could be accelerated, and discussions are already underway within Trump’s transition team to dismantle the $7,500 consumer tax credit for electric vehicles.

Though most of the rules governing IRA tax credits are expected to be finalized by year’s end, concerns remain that funding could be rescinded, frozen, or redirected under a new administration. Julie McNamara, deputy policy director at the Union of Concerned Scientists, notes that while the Treasury could theoretically reverse course on interpretation, such changes would require substantial justification and could face legal challenges.

Business Loan Programs Under Threat
The immediate concern is the future of the Department of Energy’s Loan Programs Office (LPO), which funds green projects. While Wright has yet to publicly comment on the LPO, many Republicans have called for scaling it back or eliminating it. By November, private companies had submitted over $300 billion in funding requests to the LPO, which has supported companies like Tesla. The IRA expanded the LPO’s lending authority and eligibility criteria, prompting private sector concerns that they may rush projects through before a potential policy shift.

An 'All-of-the-Above' Energy Strategy
The growing demand for energy driven by sectors like AI data centers and domestic manufacturing calls for a diverse energy strategy, as noted by Frank Macchiarola, chief policy officer of the American Clean Power Association. This approach would align with Trump’s plans to reduce energy prices by 50% within his first year.

Trump’s potential Cabinet members, such as Burgum, who has supported various energy investments, and Wright, with his experience in both solar and oil and gas, suggest that the incoming administration may embrace a broad energy strategy. However, Deora warns that an “all-of-the-above” approach could undermine climate goals. While such a strategy might be appealing to industries concerned about a targeted attack on renewables, the real issue remains whether it leads to increased fossil fuel production, which could exacerbate climate change.

In summary, while the IRA faces significant uncertainty under a Republican-controlled government, key elements—particularly renewable energy tax credits—may survive in some form. However, business loan programs and the overall direction of U.S. energy policy could see major changes, potentially undermining the climate goals set by the IRA.