Federal tax incentives enacted through US President Joe Biden's signature 2022 climate law could survive in some fashion during a second Donald Trump administration, but their ultimate fate could depend on a Republican majority in Congress.
While details of president-elect Trump's plans will unfold in the coming months, the Inflation Reduction Act (IRA), which established tax incentives for clean electricity and the related supply chain, is very much up for review, according to panelists during a post-election webinar hosted by US law firm Bracewell.
Beyond the presumed policy shift, the Biden administration is still working to finalize guidance for some of the IRA's incentives, such as production and investment tax credits for clean energy, and regulators have yet to outline other provisions in the law beyond cursory notices. The confluence of those factors could chill renewable energy development, at least in the near term.
"Investors stand the risk of being whipsawed to some degree in terms of not having the comfort they need to make a billion-dollar investments on new clean energy facilities," Bracewell tax policy lead Tim Urban said.
In addition, an expected 2025 tax bill could move around several trillions of dollars, "and some of that bill could either end up being IRA fixes or IRA repeals or curtailments," he said.
Much will depend on whether Republicans retain a majority in the House of Representatives, which would give them control of Congress after they regained a Senate majority on Tuesday. That would open the door for budget reconciliation — the same process through which Democrats passed the IRA in 2022 — and allow Republicans to make changes to the law with a simple majority vote rather than the 60 typically required to bypass the Senate's filibuster rules. In other words, Republicans would not have to reach across the aisle to compromise with Democrats.
While some Republicans have objected to outright ending the IRA, they have not yet faced the "horse trading" and intraparty pressure that accompanies negotiations around major legislation, according to Urban.
"I'm still optimistic that that much, if not all the IRA may be salvageable, but I think there's a lot of work to be done," he said.
Project developers have signaled a similar outlook, noting that renewable energy expanded during the first Trump administration, despite investment in newer sectors like offshore wind flagging ahead of the 2024 election. Even for offshore wind, they expect a slower pace of development rather than a complete abandonment of the industry by the US. The biggest change could come from competing priorities, with Trump's policies potentially making the all-in cost of resources like natural gas more attractive than renewables.
Even without details, Trump's desire to see oil and gas producers "drill, baby, drill", and his first term in the Oval Office offer some broad insight into how his policies could manifest.
"One hallmark of the first Trump administration was to not pick winners and losers on technologies or type of energy," said United States Energy Association chief executive Mark Menezes, who served as US deputy secretary of energy in 2020-21.
That meant making sure nuclear could be treated equally with other sources and "renewables weren't forced on a particular group if they didn't want to have renewable power, for example," he said.
The incoming administration is likely to pursue a "rather aggressive approach to fossil fuel expansion", with a raft of "immediate" executive orders to support that goal, according to Scott Segal, co-chair of Bracewell's policy resolution group.
But the IRA will likely be handled with a "scalpel" rather than a "sledgehammer", he said.
