BURSTCongressional Republicans’ phase-out of the tax credits for climate friendly energy sources are expected to decimate the incentives and raise U.S. emissions.
While the GOP’s “big beautiful bill,” which faces an uncertain future and a key committee vote Friday, proposes to phase out the credits over several years, analysts say the legislation’s fine print effectively cuts them entirely.
“What's in the text now is about as bad as it could be and is likely to cause a lot of project cancellations, and that has knock-on effects on the economy, on people's energy bills and so on," said Robbie Orvis, senior director of modeling and analysis at climate policy think tank Energy Innovation
“It's pretty rough in terms of the outlook for clean energy,” Orvis added.
One of the most significant provisions in Democrats’ 2022 Inflation Reduction Act was “technology neutral” tax credits that provide significant subsidies to any energy source that can get its planet-warming emissions below a certain threshold.
The Republican bill winds down those credits, along with a separate one that specifically benefits nuclear energy, over the next six years or so.
But it also adds new restrictions on who can claim those credits.
The most significant of those is language that says that projects that start construction more than one year after the bill’s passage cannot qualify for the credit if they have any components, subcomponents or minerals that are built, mined or processed in China.
China is a major hub for minerals processing, and it may be difficult for companies to find ones that are not refined there, especially on such a tight timeline.
Derrick Flakoll, senior policy associate at BNEF, said that in effect, these requirements are similar to “a full cutoff for projects from mid-2026” because of “the ubiquity of Chinese critical minerals, Chinese intellectual property, Chinese batteries, polysilicon for solar [and] permanent magnets for offshore wind.”
Constantino Nicolaou, CEO of manufacturing and installation company Panelclaw, told reporters during a solar industry press briefing that these requirements are “unworkable.”
“It is so complicated for a manufacturer, it is so complicated for a developer, it's so complicated for a financier,” Nicolaou said, particularly pointing to the subcomponent and mineral restrictions.
The solar industry is lobbying heavily for changes to be made to this provision and others. Representatives from the Solar Energy Industries Association and its member companies have met with 21 congressional offices this week.
Meanwhile, the GOP bill also kills something called “transferability” that makes it easier for projects to get financing.
Supporters of the credits also say the timeline is particularly short because in the legislation the credit can only be claimed based on when projects actually start producing energy rather than when their construction begins.
Initial analyses of the credits are coming to similar conclusions. Modeler Rhodium Group found that the changes to the tax code under the GOP plan are “likely to be similar to the impact of a full repeal of the energy tax credits.”
"There's been a couple years of investments already made, stuff that's already come onto the grid, electric vehicles that have already been bought. This doesn't step away from those, but it does mean that going forward, you wouldn't see the benefits of those tax credits,” said Ben King, associate director of Rhodium Group’s Energy & Climate practice.
The group’s analysis found that such changes could raise household energy bills by up to 7 percent in 2035 and could also drastically raise U.S. planet-warming emissions. The group’s baseline scenario puts U.S. emissions between 31 percent and 50 percent lower in 2035 than where they were in 2005, while the policies proposed in the bill would bring emissions down by only between 23 and 39 percent.
King said that in practice, the change in emissions that year is about equivalent to the current emissions of Florida, Ohio and Pennsylvania combined.
Overall, Chris Seipel, vice chairman of Wood Mackenzie’s Power & Renewables group, described the bill as “a sledgehammer disguised as a scalpel,” in an email to The Hill.
Meanwhile, lawmakers in both the sledgehammer and the scalpel camps are criticizing the package as not going far enough and going too far, respectively.
Thirteen Republicans asked House Leadership for more flexibility in a statement on Wednesday, while the Freedom Caucus’s Chip Roy (R-Texas) lamented on social media that the bill “delays IRA subsidy repeal until after Trump.”
Roy has said he will vote against the budget package in its current form, and GOP senators are already signaling that it faces stiff headwinds should it survive the House and make it to the upper chamber.