WASHINGTON — Over the last two years, a surge in clean energy manufacturing has helped push U.S. factory construction to the highest level in half a century. Solar power installations and electric car sales are breaking records. Even Republican-led states like Montana and Utah are writing climate plans to secure federal cash.
Yet the law driving this dizzying transformation of America’s energy landscape, the 2022 Inflation Reduction Act, is facing a highly uncertain future as next week’s election looms.
If he returns to the White House, former President Donald Trump has suggested he would gut the law, which is expected to pour as much as $1.2 trillion over the next decade into technologies to fight climate change such as wind turbines, solar panels, nuclear reactors, carbon capture and electric vehicles, as well as the factories to supply them.
“My plan will terminate the Green New Deal, which I call the Green New Scam,” Trump said in September, using his catchall phrase for climate policies. “We will rescind all unspent funds under the misnamed Inflation Reduction Act.”
By contrast, Vice President Kamala Harris, who cast the law’s tiebreaking vote in the Senate, hopes to accelerate the growth of clean energy to slash greenhouse gas emissions, though that would require speeding up federal permits while overcoming local opposition and electric grid constraints.
While the Inflation Reduction Act is billed as the biggest climate law in U.S. history, analysts say it is too early to judge its impact.
“The law has a 10-year window and we’re only two years in,” said Andrew Reagan, executive director of Clean Energy for America, an advocacy group. “A big question for this election is whether we’ll continue to see a rapid acceleration of clean energy that helps us meet our climate targets and catch up with adversaries like China.”
Since the law passed, companies have announced $154 billion in investments for U.S. factories to make clean energy technologies, spurred on by tax credits. But only about half of that, $86.7 billion, represents factories that are currently operating or under construction, according to data from Atlas Public Policy, a research firm.
Some companies may be waiting to see how the election shakes out. “There is uncertainty,” Reagan said. “People are holding onto projects.”
One recent survey of 900 companies in the clean energy industry found that 53% said they would lose business if the Inflation Reduction Act were repealed, and 21% said they would have to shed workers.
It could prove difficult for Trump to dismantle the law entirely. Roughly 80% of new manufacturing investments has so far flowed to Republican congressional districts, including electric-vehicle plants in Georgia and battery factories in South Carolina, according to Atlas Public Policy. In August, 18 House Republicans wrote a letter to Speaker Mike Johnson asking him to retain key clean-energy tax credits.
But Trump could push Congressional Republicans to repeal portions, such as tax breaks for electric vehicles and charging stations, or make certain credits hard to get. Some conservative groups have recommended that Trump freeze activity at the Energy Department’s Loan Programs Office. As of September, that office had roughly $210 billion in loan authority to help promote novel technologies.
The Trump campaign did not respond to a request for comment.
‘It’s going to take a little more time’
Perhaps the most visible impact of the Inflation Reduction Act has been a surge of domestic manufacturing. Four years ago, the United States had hardly any capacity to build solar panels, wind turbines or lithium ion batteries. Most of that happened in China and elsewhere.
That’s quickly changing.
The law gave hefty tax breaks to wind and solar developers if they used components made in the United States. It also doled out additional tax credits for domestic clean-energy factories. In addition, billions of dollars in funding from the 2021 bipartisan infrastructure law have allowed the Biden administration to nurture domestic supply chains.
Those tax credits have been so popular that the law is now expected to cost more than originally estimated, maybe as much as $1.2 trillion over 10 years. Critics point out that the law might no longer cut the deficit, as Democrats initially promised.
A race to get money out
Most of the money in the Inflation Reduction Act flows through tax credits that are effectively uncapped for 10 years. But both the law and the 2021 bipartisan infrastructure bill also authorized roughly $182 billion in grants and spending for energy and climate programs over several years.
As the election approaches, the Biden administration has been trying to get as much of that money out the door as possible, making it harder for a future Trump administration to claw back spending.
In August, the Environmental Protection Agency announced $4.3 billion in awards to states and local governments that had competed to devise ideas for reducing emissions. Utah won $75 million for a plan to deploy electric vehicles in low-income areas and reduce leaks of methane, a potent greenhouse gas, from oil and gas operations. Pennsylvania won $396 million to cut pollution from steel mills and other industrial facilities.
The EPA is now racing to finalize those awards by year’s end, so that the funding is fully obligated and can’t easily be rescinded.
If elected, Trump, who has railed against subsidies for electric cars, could try to scrap the law’s $7,500 tax credit for consumers to purchase EVs built in the United States. He could try to repeal a provision that charges oil and gas companies up to $1,500 for every ton of methane that leaks from their systems. Or he could revise guidelines around certain energy tax credits, making them harder to obtain.
“They might not be able to kill the entire thing, but there’s a lot that could be changed,” said Kevin Book, managing director of ClearView Energy Partners, a Washington-based research firm. “And it doesn’t take a lot of uncertainty to quash investment.”
Climate goals in question
Analysts generally expect that America’s planet-warming emissions would be higher under Trump, who has also promised to increase oil and gas drilling, than under Harris. But figuring out the exact impact is difficult.
One recent analysis by BloombergNEF estimated that America’s wind, solar and battery capacity could triple over the next decade if the Inflation Reduction Act stayed in place and interest rates kept declining. But repealing the law could jeopardize about 17% of those expected projects, particularly wind power. Higher inflation or new trade disputes with other countries could further roil the industry.
Solar power and batteries have become cheap enough that installations would quite likely keep growing no matter what, although maybe at a slower pace, said Gregg Felton, CEO of Altus, the largest owner of commercial-scale solar projects in the United States. “We have a business that is going to grow regardless,” he said. “The question is, how fast?”
The pace matters when it comes to climate change. The Biden administration has pledged to cut U.S. emissions 50% below 2005 levels by 2030 to help limit global warming to tolerable levels. Early analyses suggested that the Inflation Reduction Act could help achieve a 40% cut.
But the law could struggle to achieve its full potential, even in a Harris administration, without major reforms to reduce the yearslong waits that energy projects and transmission lines face in obtaining government permits.
“About half the emissions reductions in the bill depend on us being able to build solar, wind and transmission much faster than we’re doing today,” said Ryan Jones, a co-founder of Evolved Energy Research, an energy modeling firm. “A lot of things have to go right for that to happen.”
This article originally appeared in The New York Times.
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