TL/DR –
The Inflation Reduction Act (IRA), which provided $370 billion in tax credits for renewable energy projects, is facing repeal, putting many renewable projects at risk. The bill’s new rules mean clean energy projects must be in service by 2027 or begin construction within 12 months of the bill’s enactment to qualify for remaining credits. Tax credits for energy-efficient upgrades face a shorter validity, expiring on June 30, 2026, and those for electric vehicle purchases are set to end this year while fossil fuel companies continue to enjoy subsidies and drilling leases.
Explore how the new law will transform US climate and energy policy. Discover the impacts of slashed clean energy tax incentives and changes in electric vehicles and fuel economy.
Clean Energy Tax Incentives Reduced
In 2022, Biden signed the Inflation Reduction Act (IRA), the largest climate investment in US history, allocating nearly $370 billion in tax incentives for renewable energy projects and efficient appliances. However, much of this now faces repeal. The removal of these incentives threatens renewable energy projects across the country, according to Jean Su from the Center for Biological Diversity. Su warns the cuts could cause a surge in greenhouse emissions and air pollution due to increased electricity demand from AI data centers and continued reliance on fossil fuels.
Critics suggest this continued reliance on fossil fuels could lead to market volatility. Utilities may be encouraged to construct more expensive fossil fuel plants, subsequently raising electricity rates. With clean energy projects needing to begin construction within 12 months of the bill’s enactment or be in service by 2027 to qualify for remaining credits, many projects face an uncertain future. Tax credits for energy-efficient home and commercial upgrades also expire soon, although credits for nuclear, geothermal power, hydrogen, and carbon capture technologies are preserved.
Electric Vehicles and Fuel Economy Changes
Electric vehicles (EVs) face harsh treatment under the new law. Tax credits for new and used EV purchases are due to disappear this year, and charging station installation credits expire in June 2026. Critics argue this move abandons the goal of making the US globally competitive in future markets such as mineral, battery, and vehicle production, potentially ceding dominance to China. The law also includes a provision reducing fines for ignoring fuel economy rules to zero.
Impact on the Market
Provisions of the IRA benefiting fossil fuel companies remain, including billions in subsidies and drilling leases in the Gulf of Mexico. The law also introduces a new tax credit for coal used in steel making and authorizes drilling, mining, and logging on extensive public lands, including the sensitive Arctic National Wildlife Refuge. Despite this, renewable advocates did secure a small victory through the withdrawal of a devastating new tax on wind and solar.
—
Read More US Economic News