As Republicans aim to negotiate a broad budget agreement, House GOP leaders have presented a series of cuts this week to the Inflation Reduction Act’s (IRA) climate change provisions. These proposals include reducing tax credits for clean electricity production and domestic clean technology manufacturing. Implementing these changes would significantly hinder U.S. efforts to lower emissions and transition to cleaner energy, while also impacting the rise in manufacturing investment seen across the nation.
According to George Strobel, co-CEO of Monarch Private Capital, which funds solar projects, these credits are essential. “It will come to a screeching halt without the credits,” he stated.
Since the announcement on May 12, several Senate Republicans have expressed reservations about the House proposal. They worry that these cuts could eliminate jobs in their states and negatively affect American businesses. As a result, they view the House language as a starting point that will likely undergo revisions during negotiations. Senator Lisa Murkowski of Alaska stated, “Anything that comes over from the House, almost by law, we’ve got to redo.”
The debate over the clean technology tax incentives is expected to concentrate on immediate concerns, such as the impact on jobs and American businesses versus the need to fund other priorities, including extending corporate tax cuts. However, the potential consequences of a U.S. retreat from clean technology extend far beyond jobs and carbon emissions.
The U.S. is already lagging in the development of an economy based on established technologies like wind, solar, and electric vehicles. Eliminating IRA incentives without a suitable replacement would essentially concede that the U.S. cannot catch up. More importantly, abandoning these incentives would make it even harder for the U.S. to compete in the market for emerging technologies like geothermal, advanced nuclear energy, and hydrogen.
These issues have significant implications for the global economy. China already leads in manufacturing technologies like electric vehicles, and without U.S. competition, it could dominate future technologies as well. These negotiations are crucial for the years to come. Greg Bertelsen, CEO of the Climate Leadership Council, emphasized the importance of this period, stating, “To some extent, I think it’s hanging in the balance. This is a critical period of time.”
To fully grasp the impact of the proposed tax incentive changes, consider some key data. A Rhodium Group published on Tuesday indicated that the cuts could jeopardize “a meaningful amount” of the $522 billion in clean technology manufacturing investment planned for the U.S. This could lead to a decline of over 70% in domestic clean energy deployment through 2035, resulting in higher electricity costs for both consumers and industry.
The clean technologies under discussion are part of a global market projected to exceed $100 trillion by 2050, according to a 2022 by the Boston Consulting Group. The effects extend beyond clean tech, as higher energy prices would make the U.S. less attractive for and manufacturing investments.
In the past, a U.S. withdrawal might have been enough to halt global clean tech progress, given the U.S.’s status as the world’s largest economy. However, in 2025, the rest of the world is less likely to change course based on the actions of one administration.
China’s role is a major factor. The country has become a manufacturing center for various clean technologies, facilitating their global export. In many instances, these Chinese-made clean technologies have surpassed traditional alternatives. For example, Chinese electric vehicles are widely regarded as offering a better experience at a lower cost compared to those from the U.S. or Europe and are rapidly expanding globally. Furthermore, in many developing countries, solar power has become the quickest and cheapest way to achieve rapid electrification.
Since President Trump’s inauguration, I’ve spent a considerable amount of time outside Washington, engaging with policymakers and business leaders worldwide. While many were taken aback by the Trump Administration’s climate policy attacks, few have shown interest in replicating those actions, instead continuing to see opportunities in green investments.
The central question for members of Congress is how much of that $100 trillion market they aim to capture. The proposal put forth by House GOP leadership is merely the beginning of the discussion and is unlikely to pass into law as it currently stands. However, for those hoping to secure a share in the future of energy technologies, it is not an encouraging start.
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