How the Republican Megabill Cripples the Domestic Clean Energy Economy — Just as It’s Getting off the Ground

Congress is busy trying to get Trump’s “big, beautiful” budget reconciliation bill across the finish line. In addition to selling out our public lands and attempting to limit review of polluting projects by the courts, the bill would hobble our fast-growing clean energy economy — a critical piece in fighting climate change. All of this to pay for tax cuts that will overwhelmingly benefit the wealthiest Americans and still raise the deficit by nearly $4 trillion dollars.

There are real obstacles to deploying clean energy technologies at scale. They include the upfront cost, particularly in the case of electric vehicles (EVs) or energy efficiency upgrades; the need for supporting infrastructure, such as EV charging stations or interregional transmission; and the lack of domestic supply chains and manufacturing capacity to build key components. The Inflation Reduction Act (IRA) contained specific provisions to address these obstacles through a combination of tax credits, materials sourcing requirements, and federal grants and loans. Now, this bill takes a sledgehammer to all of it. Here’s how.

Battery Manufacturing

Key goals of the IRA include deploying more low-carbon technology, making clean energy supply chains more resilient, and incentivizing more domestic manufacturing. The tax credits are a key policy tool to achieving these goals. To be eligible for a clean vehicle tax credit (30D), companies have to meet sourcing requirements, meaning that a specific amount of battery components and minerals need to be sourced domestically (including recycling) or from an allied country. The IRA also created an advanced manufacturing tax credit (45X) for facilities producing clean energy technologies domestically, with a bonus credit for companies that meet higher labor standards.

In reality, certain supply chain gaps are harder to fill, even with tax breaks. In the case of batteries, we have a gap in midstream capacity — refining minerals such as nickel, cobalt, or lithium, using them to synthesize “active materials,” and using that to produce battery cathodes, anodes, and ultimately, cells. Currently, those processes primarily take place in Asia, and companies import the finished components to assemble them into cells in U.S. gigafactories. Onshoring these production steps is complex. Beyond upfront investment, it requires a skilled workforce with specialized knowledge — not only to produce the battery components, but to produce and maintain the machinery required to build them. Even in the most favorable policy environment, it would take years.

Under the Biden administration, the Department of Energy (DOE) addressed these problems through grants and loans to help companies innovate and scale key technologies. In a perfect world, here’s how it would play out: The Loan Programs Office finances key facilities that fill known supply gaps (like this one and this one); those facilities sell to domestic battery factories, which get an advanced manufacturing tax credit (45X) that help defray high upfront capital costs; and finally, an EV company uses the batteries produced in that factory so they will be eligible for the clean vehicles tax credit (30D).

The current reconciliation package entirely undermines that strategy.

In its current form, the bill eliminates the clean vehicles tax credit (30D) and phases out the Advanced Manufacturing Tax Credit (45X), while introducing new requirements that would make it effectively impossible for any company to be eligible or demonstrate compliance. Meanwhile, the Energy and Commerce bill rescinds unobligated IRA funding from the Loan Programs Office, along with several other IRA programs.

The combination jeopardizes $81 billion and nearly 60,000 jobs from battery facilities that have been announced since the IRA was passed. With these credits and loan programs intertwined, an effective repeal of the tax credits causes further harm — and it’s not just those factories that benefited from loan funding. Numerous factories did not receive any public IRA funding, but companies made investment decisions with the expectation of stable tax credits that are now at risk. Further, these companies may have been counting on sourcing components from a domestic supplier who used a grant or loan to bring their technology to commercial scale. Likewise, the facilities that were directly supported by IRA funding would have planned to sell their products into the domestic market, which, again, was based on an expectation of stable consumer and producer tax credits. The current bill puts all this investment at risk.

The irony is that as this bill makes its way through the legislative process, the same committees are holding hearings on strengthening America’s supply chains and maintaining global competitiveness. They propose to achieve this by gutting environmental protections and pushing rushed mining projects while sabotaging the value-added industries that would have used those minerals to create skilled jobs across the country.

Wind and Solar

The current bill contains a similar path for wind and solar: a so-called “phase out” of vital tax credits and repeal of IRA-funded programs addressing key bottlenecks.

Let’s start with tax credits: In theory, the bill accelerates the phase out of Clean Energy Production and Investment Tax Credits (45Y and 48E, respectively), which were also tiered to incentivize the development of facilities that meet strong labor standards, use domestic materials, and are located in energy communities. Manufacturing facilities that produce solar and wind components are also eligible for the 45X tax credits. Under the IRA, these tax credits would have started phasing out after 2032, or when U.S. greenhouse gas emissions dropped to 25% of 2022 levels.

In reality, the reconciliation bill effectively terminates these tax credits. It introduces infeasible requirements related to sourcing and investment from foreign entities that many industry voices say are unworkable. It also changes eligibility from facilities that began construction before 2032 to “placed in service before 2028,” rendering facilities with longer lead-times for construction ineligible.

Transmission Capacity

Finally, none of these efforts will make a dent in helping us reach our emissions reductions goals if we do not increase transmission capacity in the United States. Transmission capacity would need to at least double by 2030 to realize the emissions reductions made possible by the IRA’s clean energy investments, according to modeling from Princeton’s Net-Zero America report. Increasing transmission capacity also improves grid resilience and lowers consumer energy costs.

This bill undermines that goal by repealing all unobligated funds from IRA transmission funding programs, including Interregional and Offshore Wind Electricity Planning, Modeling, and Analysis funding, Grants to Facilitate the Siting of Interstate Electricity Transmission Lines, and the Transmission Facility Financing Program. In this moment, where new load growth, destabilized grids, and rising electricity prices are evident at every corner — we cannot afford to go backwards. Building out transmission is a complex challenge that, like onshoring high-tech supply chains, can’t be fixed with money alone, but these programs were an important step to move development forward. Earthjustice has long recognized the urgent need for just, equitable, and sustainable transmission development, and worked across the environmental movement to articulate what’s needed to achieve that goal.

Climate change continues to be one of our most pressing threats that touches almost every aspect of our daily lives. The IRA recognized its gravity and the need to harness American ingenuity and the power of the American workforce to fight it, not to mention catch up with other countries that are moving aggressively towards decarbonization and capturing the supply chains of the present and future. The result is hundreds of thousands of new jobs and hundreds of billions in investment to communities across the country. This reconciliation bill threatens this progress and sacrifices our clean energy future, green jobs, and historic investments, all so the richest people in this country can hoard even more wealth. We can’t let that happen.