The Inflation Reduction Act (IRA), signed into law by President Biden in 2022, represents a seismic shift in U.S. energy policy, heralding the largest public investment in renewable energy in American history. With over 20 tax incentives aimed at bolstering renewable energy and manufacturing, the IRA has ignited a firestorm of debate among politicians, particularly among Republicans who have been vocal in their opposition. Yet, the prospect of outright repeal seems increasingly unlikely, even if a Republican candidate, such as Donald Trump, were to reclaim the White House in the upcoming November election.
The mechanics of repealing the IRA are complex. It would necessitate congressional action, requiring Republicans to maintain control of the House and secure at least 50 Senate votes, with the vice president casting the deciding vote in the event of a tie. However, this scenario is fraught with complications, including the necessity to overcome a Democratic filibuster. The budget reconciliation process, which allowed the IRA to pass originally, is typically a once-a-year opportunity, making it a tall order for Republicans to muster unanimous support for repeal or significant amendments.
Interestingly, there’s a growing sentiment among some Republican lawmakers that the IRA, while “deeply flawed,” has spurred innovation and job creation in their districts. In a striking letter from August 2024, 18 Republican House members expressed their reluctance to support a full repeal, acknowledging the economic benefits derived from renewable energy tax credits. This suggests that not all Republicans are on the same page when it comes to dismantling the IRA, especially since more funding has flowed into Republican districts than Democratic ones.
Moreover, public opinion seems to favor the IRA among Republican voters. A recent poll revealed that 78% of self-identified Trump supporters back the renewable energy tax credits. This alignment between voter sentiment and local economic benefits creates a conundrum for Republican leaders who might otherwise seek to dismantle the IRA.
Trump himself has expressed a somewhat tepid endorsement of renewable energy, particularly solar. His family’s financial interests in the solar industry, through investments made by his son-in-law, Jared Kushner, could also play a role in shaping his administration’s stance on renewable energy. It seems he may tread carefully around solar initiatives, especially rooftop solar, to avoid alienating a segment of his voter base.
While a full repeal of the IRA appears unlikely, a Trump administration could resort to executive actions that complicate the development and financing of renewable energy projects. For instance, he could direct the Department of the Interior to deny approvals for renewable projects on federal lands, as seen with the Lava Ridge wind project, which has already faced opposition from local Republican politicians. Similarly, he could halt offshore wind projects, a priority he has indicated he would address on his first day back in office.
The reallocation of grant funding poses another potential avenue for disruption. Trump has suggested he would seek to restore presidential authority to withhold congressionally authorized funding, but the constraints of the 1974 Impoundment Control Act limit the executive branch’s power in this regard. With much of the IRA’s grant money already allocated, the window for significant reallocation may be closing fast.
Additionally, Trump could target IRS guidance that facilitates access to IRA tax credits. While revoking final regulations is a lengthy process, the administration can more easily withdraw sub-regulatory guidance. Such moves could create uncertainty for renewable projects, particularly those reliant on specific tax credit regimes.
The landscape of U.S. renewable energy policy is at a crossroads. With the IRA having catalyzed significant investment and innovation, the challenge will be balancing political agendas with the economic realities faced by constituents. The actions taken in the coming months could either bolster the momentum of the renewable energy sector or throw a wrench in its progress. The stakes couldn’t be higher, as the energy transition continues to unfold against a backdrop of shifting political dynamics.
