The incoming Republican trifecta is set to try to cut massive amounts of funding from President Joe Biden’s Inflation Reduction Act, which provided for hundreds of billions of dollars in spending on clean energy.
But support for some tax credits within industry and corners of the GOP likely means that significant parts of the law will be spared.
When Biden signed IRA into law in 2022, Democrats projected that it would provide $369 billion in spending to combat climate change and help transition the U.S. toward clean energy. Since then, the estimated cost of the IRA’s climate provisions has risen to more than $1 trillion, thanks to higher-than-expected take-up of the subsidies.
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President-elect Donald Trump has vowed to undo many of Biden’s climate initiatives and instead boost the fossil fuel industry.
At a rally in Phoenix last month, Trump said “I will sign Day One orders to end all Biden restrictions on energy production, terminate his insane electric vehicle mandate, cancel his natural gas export ban, reopen ANWR in Alaska — the biggest site, potentially anywhere in the world — and declare a national energy emergency.”
The IRA offers funds for clean energy initiatives, including tax credits for electric vehicles, renewable energy production, and clean energy manufacturing.
The question is: which green credits could be on the chopping block for the incoming administration? Here is a list of some notable credits the Trump administration could restrict, reverse, or leave untouched. The figures for funding come from the Congressional Budget Office’s estimates of revenue effects over the law’s period from 2022 to 2031.
Consumer-related credits
Electric Vehicles
The legislation includes several tax credits related to clean transportation and renewable fuel. The incoming Trump administration is likely to try to cut electric vehicle incentives. It has been reported that the Trump transition team plans to roll back the $7,500 tax credits offered under the IRA for those who purchase electric vehicles.
Trump’s pick to lead the Department of Government Efficiency, or “DOGE,” and Tesla CEO Elon Musk has vocally supported eliminating EV tax credits and other industry incentives. Tesla benefits from the credits, but would gain a competitive advantage over rivals if they were taken away.
“Take away the subsidies. It will only help Tesla,” Musk said on X in July. “Also, remove subsidies from all industries!”
The IRA also provides a tax credit for used electric vehicles or fuel cell vehicles. The consumer can be eligible for a credit equal to 30% of the sale price up to a maximum credit of $4,000.
Mona Dajani, a partner at Baker Botts, said the Trump transition team views the consumer EV credit as an “easy target” because of the Republican-controlled Congress. The incoming administration will then use the cost savings to help pay for legislation to extend the Trump tax cuts for individuals, which are set to expire at the end of this year.
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Still, Trump would face pushback from the industry for axing the subsidies. The Alliance for Automotive Innovation, a major automotive trade group, called on Trump to preserve the EV credits, arguing that they will help the U.S. remain competitive against China’s EV industry.
Other consumer-related credits
The IRA created credits to incentivize homeowners and commercial buildings to install energy-efficient improvements, such as heat pumps and lighting systems. Homeowners can also get credits to install clean energy equipment. For instance, the IRA provided an estimate of $22 billion for the Residential Clean Electricity Credit for homeowners who want to invest in solar, wind, geothermal, fuel cells or battery storage technology.
Consumer-related credits are the most vulnerable in the incoming administration, said Daniel Farber, an energy and environment law professor at University of California, Berkeley.
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“Consumer credits are more vulnerable because Republican legislators don’t see them as delivering direct benefits to their districts like more jobs or tangible benefits to Republican voters,” Farber said via email, adding that those in red districts might be less likely to purchase an EV.
Energy production for renewable sources
Electricity from renewable sources
The IRA also provides funding for the production of renewable energy sources like wind, solar, hydropower, and more. The Biden administration has set a target of reaching net-zero emissions by 2050, meaning that no more carbon would be added to the air than was extracted. Between 2022 and 2031, the IRA is estimated to provide nearly $51 billion for the production credits for Electricity Produced from Certain Renewable Resources.
However, renewable energy sources on the chopping block during the incoming administration may vary. Trump has made clear that he dislikes certain forms of renewable energy, but may be open to others. Trump has vocally opposed wind power, claiming that wind turbines kill whales by creating underwater vibrations and noise. The National Oceanic and Atmospheric Administration has said there is not scientific evidence for that claim.
Earlier this week, Trump vowed to halt the construction of windmills, comparing it to “garbage in a field.” He said offshore wind is the “most expensive energy ever,” one that only works if developers receive subsidies for construction and operation.
“We’re gonna try and have a policy where no windmills are being built,” Trump said at a press conference in Mar-A-Lago.
Trump’s pick to lead the Department of Energy, Chris Wright, the founder and CEO of Liberty Energy, an oilfield service firm, has questioned efforts to transition toward renewable energy, specifically solar and wind. Wright has argued that wind and solar energy raise electricity prices and destabilize the grid.
Nuclear energy credit
Under the IRA, an estimated $30 billion is available for the nuclear power production credit for electricity generated at qualified nuclear power facilities.
The credit could remain untouched under the Trump administration, which has previously supported the nuclear power industry through grants in the first term. In 2019, Trump also signed the Nuclear Energy Innovation and Modernization Act, which revises the licensing framework for advanced nuclear reactors.
Wright has expressed support for nuclear energy. He serves on the board of Oklo, a small modular reactor developer. Wright said he was a “huge nuclear fan,” arguing that nuclear power could work in any weather condition and generate significant power without taking up much land.
Some in the nuclear sector believe the incoming Trump administration will support the industry.
John Starkey, director of public policy at the American Nuclear Society, previously told the Washington Examiner he is “very optimistic.” He added, “I don’t see any reasons for Republicans not to pursue nuclear by any means necessary in this next Congress.”
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Clean Electricity Investment and Production Tax Credits
The Treasury Department finalized the Clean Electricity Investment and Production Tax Credits, also known as the technology-neutral credits, earlier this week. These credits offer tax credits for facilities producing and investing in renewable energy.
Technologies that qualify for the credits include wind, solar, hydropower, marine, hydrokinetic, geothermal, nuclear, and specific waste energy recovery properties could be eligible for the credit.
The IRA allocated more than $50 billion for tech-neutral tax investment and production credits. Renewable energy industries urge Republicans and the Trump administration not to repeal these credits.
“Attempts to revoke these rules will only make it easier for China to win the race for global solar market dominance while killing American jobs and much-needed economic opportunity,” said Abigail Ross Hopper, president and CEO of the Solar Energy Industries Association.
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“We urge lawmakers to protect these tax credits to drive job growth and continue to build out American-made clean energy,” Hopper added.
How the Trump administration will view the tech-neutral tax credits is uncertain.
However, Trump’s Secretary of Treasury nominee, Scott Bessent, has said the regulatory expansions to the IRA “will severely distort the supply side of the economy by crowding out investment in more productive sectors.”
Dajani, a partner at Baker Botts, said the argument against tech-neutral credits is that they are “duplicative” because many taxpayers are eligible for credits on technologies like solar, wind, and geothermal.
Manufacturing credits
Advanced Manufacturing Production Credit
The bill allocated about $30 billion for a credit to bolster domestic production and sale of qualifying solar and wind components. The IRA has several other tax credits allocating money for manufacturing renewable energy products, such as wind turbines, battery components, and critical minerals.
Farber said the “bitter irony” of the manufacturing credits, which will create new car and battery factories, is that Trump will likely claim credit for them.
He added, “Even if he doesn’t, people won’t necessarily remember that this was because of a law passed under Biden. They just know that the new factory just opened, and Trump was president.”
Farber added that manufacturing credits might be the least vulnerable type of credits because most of the funding is going toward GOP-led states.
Two years after the bill was passed, reports found that a significant number of IRA projects were in Republican-led districts and states in the South. E2, a national environmental business group, has said that 60% of the announced projects are in GOP congressional districts.
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How will IRA adjustments be made?
Republicans are likely to proceed carefully in cutting green tax credits. In August last year, 18 House Republicans sent a letter to House Speaker Mike Johnson warning him against a wholesale repeal of the subsidies, saying that doing so would upset markets.
“There’s so much momentum for clean energy, and there’s so much political will here in the U.S.,” Dajani said.
Still, Republicans are likely to revise credits as part of the major fiscal overhaul legislation expected early this year. They are likely to use revenues raised from axing credits to pay for extending the Trump tax cuts and other conservative priorities.
“I can definitely see a path where Republicans are saying, ‘look, we want to extend the Trump tax cuts, and in order to do so, we’re just going to cut certain provisions from the IRA to save money,” said Sanjay Patnaik, director of the Center on Regulation and Markets at the Brookings Institute.
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The Trump administration is also likely to alter green credits through the administrative process.
Many of the credits could be overhauled to make them more restrictive, meaning that less money would flow from the Treasury to wind and solar farms. Or, terms could be added to the credits to make them less likely to be claimed by foreign entities or advantage firms with ties to China.
“Trump is going to probably take a bit more aggressive measures on putting a hold on certain regulations or trying to slow the flow of money for those priorities that he doesn’t like,” Patnaik said.