The House Committee on Energy and Commerce has introduced a dangerous alternative. It would phase out the clean energy tax credits that the Biden administration’s Inflation Reduction Act brought in, with the first vote to repeal them slated for May 13, 2025. Of that, the proposal focuses on a $6.5 billion increase by repealing 11 climate-related provisions. These critics—including us—caution that these changes would cripple the burgeoning clean energy industry and local economies.
At the heart of the proposal is a fast phase-out of the wildly popular “technology-neutral” 45Y tax credits. These credits are intended to encourage investment in technologies that increase our production of clean energy, including nuclear and geothermal technologies. Before, this was unlimited, or had no expiration date. The Inflation Reduction Action has radically lowered the monetary value of these tax credits in the short-term. By 2031, they will all be gone.
The bill would gradually remove the 45Y tax credits. It further suggests rescinding unspent dollars from the $27 billion greenhouse gas reduction fund. This fund has been under scrutiny by EPA Administrator Lee Zeldin, raising questions about its effectiveness and potential for future investment in clean energy initiatives.
One of the most important elements of the proposal is their elimination of the transferability provisions due in large part to the 2022 Inflation Reduction Act. These provisions gave developers essential tools to sell or syndicate tax credits to raise capital for their construction projects. This powerful mechanism has been instrumental in powering thousands of clean energy projects around the country.
The potential impact of this legislation would be tremendous. Critics warn it would lead to the closure of hundreds of American factories, eliminate tens of thousands of jobs, and force electric bills to skyrocket for consumers nationwide. They warn that this proposed change would undermine the reliability of the electric grid. This would seriously undermine America’s position to compete with China in the clean energy race.
Abigail Ross Hopper, president of the Solar Energy Industries Association, expressed her disappointment. She is concerned that the legislation as currently proposed would be damaging to American businesses and consumers.
“This legislation will cause hundreds of American factories to close, eliminate tens of thousands of jobs, force electric bills to skyrocket for everyone, weaken the reliability of our electric grid, and eliminate our capacity to compete with China. This disruption would devastate local, red-state economies, with more than 75% of at-risk factories and investments concentrated in these communities.” – Abigail Ross Hopper
The regulatory re-writes were met with loud protest from legislators, industry members, and environmental activists. Supporters argue that by taking a knife to federal climate spending, more fiscal space can be generated elsewhere. Opponents point out that these cuts jeopardize important investments in clean energy infrastructure. Investments that will help this nation meet tomorrow’s energy needs.
Stakeholders across sectors—including the philanthropic community—are watching closely to see what happens next with this proposal. As we get closer to the scheduled vote in May 2025, debates are intensifying. Ending the most important of these clean energy tax credits would spell disaster for the associated local economies. It would further undermine our ability to address the existential threat of climate change.