Early this morning, House Republicans passed their so-called ‘one big beautiful’ budget reconciliation bill with a 215–214 partisan vote. There were some last-minute changes and a lot of stuff in there, so I thought it would be worth summarizing all of the climate-relevant provisions.
Bear in mind this is just what the House passed, and a number of Senators have said that they plan to make changes to moderate the bill. A final bill would need a majority of votes in both the House and Senate – a tall order given the 1-vote margin in the House and the fact that many Senators have said they want to see significant changes.
Inflation Reduction Act
The bill would gut most of the IRA's tax credits and other investments. The clean electricity tax credits would effectively be immediately terminated, except for nuclear power, which got some last-minute carve-outs.
New nuclear power plants could qualify for tax credits if they begin construction by 2028, and tax credits for existing nuclear power production would survive until 2032. Transferability of tax credits (which makes them easier and more efficient to use) would also be retained only for nuclear power.
The EV tax credits (for new, used, and commercial vehicles) and for residential EV chargers would also be terminated by the end of this year, except for companies that have sold fewer than 200,000 EVs (like Rivian), for whom the tax credit for new EVs would expire at the end of 2026.
The home electrification, efficiency, rooftop solar, and battery storage tax credits would expire at the end of this year. That includes tax credits for existing homes and also to build new energy efficient homes.
Same for the clean hydrogen tax credit.
The advanced manufacturing tax credit for domestic manufacturing of clean technologies would be phased out between 2029 and 2032, except for wind manufacturing, which loses its tax credits after 2027.
The tax credit for biofuels would actually be extended, through 2031.
The tax credit for carbon capture and storage largely remained the same, other than some foreign entity and transferability restrictions, although Heatmap reports that transferability is really important to this industry.
A lot of loan and grant funding that hasn't yet been contractually obligated would also be rescinded. Some examples include the Department of Energy's Loan Programs Office and the EPA's Greenhouse Gas Reduction Fund, a.k.a. Green Banks that our Electrification Action Team has been doing a lot of great educational webinars about.
A new EV and hybrid fee
In addition to ending the tax credit for EVs, the bill would introduce a new $250 annual fee on EVs and $100 on hybrid vehicles. This is in lieu of raising the gas tax, to pay for road and bridge maintenance, and puts that financial burden disproportionately on clean vehicle owners (while still not raising enough revenue for the maintenance fund). I wrote about this over on the Nerd Corner.
No more methane fee
The bill actually retains the fee on methane pollution passed in the IRA, but the language is altered so that the fee isn't collected until ten years from now, so it's rendered toothless.
Permitting reform
The bill includes a new option for project developers to pay a fee to get an expedited NEPA review that won't be subject to lawsuits. We don't support this kind of ‘pay to play’ approach and we instead support comprehensive bipartisan permitting reform negotiations.
No public lands sell-off
There was initially a provision to sell of ~450,000 acres of public lands in Utah and Nevada, but that was withdrawn in the final bill. But it still requires lease sales in the Arctic National Wildlife Refuge, western Gulf of Mexico, and Alaska’s Cook Inlet for fossil fuel and mineral exploration/extraction.
California vehicle emissions waiver separately revoked
In a separate event but close to the same time, the Senate voted to revoke California's Clean Air Act waiver that allows the state to set its own vehicle pollution regulations that are stricter than EPA's. California used that waiver to set its mandate that all new in-state passenger vehicle sales be zero-emissions by 2035, for example. This vote bypassed determinations by the Senate Parliamentarian and Government Accountability office that the Senate couldn't use the Congressional Review Act (and thus bypass the 60-vote filibuster) to do this. But a recent Harvard study found that the IRA EV tax credits and charging infrastructure are much more important for EV adoption than California's waiver.
The Senate also voted to roll back other air pollution regulations, which is less relevant to the climate but bad for the environment and public health.
The ball is in the Senate's court
While the House budget resolution bill is awful for the climate, we'll be lobbying our Senators to draft a more measured version that preserves more of the IRA tax credits.
Jesse Jenkins' Princeton REPEAT team also has a new analysis out of the combined effects of the Trump administration's climate regulatory repeal and a potential gutting of the IRA. Summary:
Full repeal of current federal energy and climate policies would:
- Increase U.S. greenhouse gas emissions by roughly 0.5 billion metric tons per year in 2030 and more than 1 billion metric tons per year in 2035.
- Raise U.S. household and business energy expenditures by $25 billion annually in 2030 and over $50 billion in 2035.
- Increase average U.S. household energy costs by roughly $100 to $160 per household per year in 2030 and roughly $270 to $415 per household per year in 2035.
- Reduce cumulative capital investment in U.S. electricity and clean fuels production by $1 trillion from 2025-2035.
- Imperil a total of $522 billion in announced but pending investments in U.S. clean energy supply and manufacturing.
- Reduce annual sales of electric vehicles by roughly 40% in 2030 and end America’s battery manufacturing boom.
- Substantially slow electricity capacity additions, raising national average retail electricity rates and monthly household electricity bills by about 9% in 2030 — and as much as 17% in some states (including TX, OK and PA).
- Kill off the nascent clean hydrogen, CO2 management, and nuclear power sectors.
- Increases in fuel consumption would increase retail gasoline prices 3–15 cents/gallon and natural gas prices would increase 2–7% in 2035.
@Dana Nuccitelli thank you for your rapid and cogent summary of the impacts (as usual!).
For Jesse Jenkins' first point, “Increase U.S. greenhouse gas emissions by roughly 0.5 billion metric tons per year in 2030 and more than 1 billion metric tons per year in 2035,” could you explain whether that increase is in reference to current emissions, or to 2005, or to the projected emissions if the IRA were to stay in place?
Also, apparently a clause in the House Reconciliation bill is particularly harmful to the rooftop solar PV industry. When time permits, would you be able to explain that?
Hi @Joanne Leovy. Jesse's numbers there refer to the difference between the current policies scenario (with IRA plus EPA regulations) and the full repeal scenario (no IRA or EPA regs). Repealing the IRA and EPA regulations increases 2030 emissions by 500 MT and 2035 emissions by 1 GT (and each of the two measures is responsible for about half of those increased emissions). It's the difference between the green and red lines here:
The bill text is really bad for rooftop solar because those systems are expensive, and so leasing and power purchase agreements have become popular ways to make rooftop solar systems affordable for a lot more homeowners. Anecdotally, I leased my first rooftop solar system (and then bought it out when the lease was over), and later installed a second rooftop solar system that's a power purchase agreement. I couldn't have afforded either system otherwise.
Companies leasing rooftop solar systems or offering power purchase agreements could still qualify for investment tax credits under the initial bill text. But then they changed it. Heatmap has a good story about it:
While the earlier language from the Ways and Means committee eliminated the 25D tax credit for those who purchased home solar systems after the end of this year (it was originally supposed to run through 2034), the new language says that no credit “shall be allowed under this section for any investment during the taxable year” (emphasis mine) if the entity claiming the tax credit “rents or leases such property to a third party during such taxable year” and “the lessee would qualify for a credit under section 25D with respect to such property if the lessee owned such property."
@Dana Nuccitelli
At the end of the summary you mention that CCL will lobby Senators to change parts of the bill. CCL must acknowledge that its lobbying tactics in the House was a failure. All House mmebers who wrote to Speaker Johnson to preserve most of the IRA voted for reconcilliaton package.(except one who was asleep at the time of the vote!) The bloc of climate deniers the House stood firm and got their wishes in the final bill. It is clear that our"friends" among the GOP don't consider climate as an imporant issue. I doubt that it will be different in the Senate.
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