House Republicans’ plan to terminate or phase out clean energy tax credits from the Democrats’ 2022 climate law is even more aggressive than what many K Street lobbyists and renewable energy advocates had been bracing for.
Legislation released Monday by the Ways and Means Committee — up for markup Tuesday afternoon — is one piece of the GOP’s work to extend the 2017 tax cuts, enhance defense and boost domestic energy production.
While far from becoming law, the committee’s product drew quick condemnation from environmentalists, renewable energy industries and other advocates who have been pressing Republicans to protect Inflation Reduction Act incentives in a megabill intended to bypass the Senate filibuster.
“This is what full repeal looks like in practice,” said Adrian Deveny, a former energy staffer to Minority Leader Chuck Schumer (D-N.Y.). “It’s just obscured by lots of complicated legislative language to effectuate it.”
The plan would get rid of tax credits for electric vehicles buyers and hydrogen producers by the end of the year. It would phase out incentives for advanced manufacturing and nuclear power production. And it would end the practice known as “transferability,” which allows project sponsors to transfer the credit to a third party and is often used in finance agreements.
Spared from the knife were incentives for biofuels and sustainable aviation fuels; in fact, they were extended by four years with lower emission qualifications.
The legislation also includes new domestic sourcing requirements intended to disqualify companies tied to China and other foreign adversaries from accessing the incentives.
Republican leaders have struggled to appease warring factions within the party and deliver a bill to President Donald Trump’s desk by this summer — indeed one hard-line House Republican said the cuts to green credits didn’t go far enough.
But those leaders have also said they had intended to take a “scalpel” rather than a “sledgehammer” to the IRA. Right now, the wielders of the sledgehammer have won out.
House Ways and Means Chair Jason Smith (R-Mo.) said on social media that his text would take Republicans “one step closer to putting One Big, Beautiful Bill” before Trump.
Most environmental groups were aghast at the proposals. Ben Jealous, CEO of the Sierra Club, pointed to a provision that would strip organizations of their tax-exempt status if the administration determined they supported terrorist organizations.
“Allowing any administration to label an American organization it disagrees with or simply does not like as ‘terrorists’ is not just wrong, it is unamerican,” Jealous said in a statement.
Some renewable energy advocates invoked Republican rhetoric in criticizing the legislation. “The Ways and Means bill is at odds with American energy dominance,” said Jason Grumet, CEO of the American Clean Power Association.
While he argued that the bill would raise energy costs, “force American factories to shut their doors, and threaten American jobs,” he said he stood ready to work with Republicans.
“It is possible to phase out incentives for clean energy investment, production, and manufacturing without harming American consumers or businesses — and we stand ready to help,” he said.
Republicans might need help on a host of issues. A few dozen moderates — though many of whom are not on the Ways and Means Committee — have been signaling their interest in protecting some of the IRA credits.
But it remains to be seen how they will respond should the package clear committee. Complicating matters is the intraparty fight over state and local income tax deductions, or SALT, which could upend the entire effort.
Other hurdles remain in the Senate. Sen. John Curtis (R-Utah), who carved out a climate lane when he was in the House, demurred Monday when asked about the proposal. The same was true for Sen. Bill Cassidy (R-La.), who said he had not seen the text. Neither voted for the IRA in 2022.
Sen. Ed Markey (D-Mass.) was not as quiet. He chided Republicans, saying they were ceding the clean energy economy to China.
“The Inflation Reduction Act is the single largest clean energy and climate investment in our history, and we will not let Trump, Big Oil, and Republicans roll back our gains and deny our communities and young people the chance at a livable future,” he said in a press release.
‘Pulling the rug out’
One piece of the fine print could be a big deal for projects. Moving forward, new projects accessing the technology-neutral credits likely would not get built in time to be “placed in service”— or when they begin selling electricity to the grid — and meet the phase-out deadline. Current law uses phaseout dates based on when construction begins.
“Some projects that have already started development and gotten financing on the basis of a commenced construction tax structure,” Deveny added. “So this is pulling the rug out from under the industry.”
Other advocates noted the credits have spurred more than $400 billion in investment since the IRA passed nearly three years ago — including many in Republican-held congressional districts.
The electric vehicle industry put a finer point on it. “Businesses throughout the auto industry, from critical mineral and material developers to battery manufacturers and automakers, are making investments supported by the certainty offered by our federal government,” said the Zero-Emission Transportation Association’s Executive Director Albert Gore in a press release.
“In turn, these investments are creating new economic opportunities in local communities, from Reno, Nevada, to Casa Grande, Arizona, to Savannah, Georgia.”
New ad push
Tax credit advocates are making an eleventh-hour push to put new pressure on House Republicans who they believe could be convinced to take a tougher stand.
Unlocking Advanced Energy — an initiative run by the energy industry association Advanced Energy United — is rolling out a six-figure ad buy this week targeting five Republican-led districts with tens or hundreds of millions of dollars in planned private-sector investments that would benefit from the IRA.
The digital-only campaign, details of which were shared first with POLITICO’s E&E News, would target constituents in the districts of Reps. Juan Ciscomani (R-Ariz.), Gabe Evans (R-Colo.), Beth Van Duyne (R-Texas), Vern Buchanan (R-Fla.) and Ryan Mackenzie (R-Pa.).
Some of the ads state that advanced energy manufacturing is growing thanks in part to climate law credits, and they assert that those districts’ Republican representatives can help keep that momentum going.
While clean energy advocates rang the alarm bells, some conservatives were mad it did not just ax the climate law entirely.
“Does the bill fully repeal the IRA to stop the devastatingly bad projects being implemented in my district (battery, solar farms, etc..)?” Rep. Chip Roy (R-Texas) wrote in a long post outlining his many concerns with the bill. “NO, it phases those out, which will cause a race to construction (among other problems), and leaves many in place we should not.”
But Rep. Julie Fedorchak (R-N.D.) — who has argued solar and wind energy are no longer nascent industries in need of such generous subsidies from the federal government — applauded the plan.
“I’m glad my colleagues on the Ways and Means Committee are advancing this reform to responsibly phase out these tax credits,” she said. “Retiring these tax credits will save taxpayers billions of dollars, strengthen our grid, and help deliver on the promise of the One Big Beautiful bill to make America stronger, safer, and more competitive.”
Reporter Andres Picon contributed.
