The House Ways and Means Committee recently unveiled its contribution to budget reconciliation negotiations, placing popular clean energy tax credits and green initiatives on the chopping block.
What's happening?
On May 12, the House Ways and Means Committee put forward a 389-page document outlining proposed budget cuts amid ongoing negotiations.
Policy analysis firm the Rhodium Group's initial review of the proposal revealed deep cuts to a broad swath of energy-related appropriations. The proposal largely targeted clean energy provisions introduced in or strengthened by the Inflation Reduction Act of 2022.
House Speaker Mike Johnson acknowledged the possibility of clean energy spending cuts back in September. At the time, Johnson suggested using "a scalpel and not a sledgehammer" — but Johnson subsequently revised his position to "somewhere between a scalpel and a sledgehammer."
The Rhodium Group has yet to fully analyze the Committee's proposed cuts. However, the organization likened its impact to that "of a full repeal of the energy tax credits initially extended and expanded in 2022," potentially raising energy costs by 7% for the average American household in 2035.
The Committee proposed abruptly and comprehensively ending most "clean vehicle" tax credits by the end of 2025. According to Utility Dive, the package also targets "the investment and production tax credits for nuclear power, wind, solar, batteries, geothermal and other clean energy technologies after 2028," before axing them "completely after 2031."
Ultimately, myriad IRA provisions are in jeopardy. The Rhodium Group cited "extremely complicated and unprecedented implementation rules," which would further disrupt investment and development due to fiscal uncertainty engendered by the proposal. The measures would still have to be voted on in the House and then proceed to the Senate before reaching the President, with the Senate the most likely place for many clean energy provisions to be saved, but nothing is certain until the votes are cast.
Why is this proposal so concerning?
The Inflation Reduction Act provided comprehensive fiscal support for a cleaner future, incentivizing individuals and businesses alike to transition to renewable energy.
The Economic Policy Institute lauded the IRA's impact in August 2023, observing that the "fiscal support it provides for [clean energy] investments admirably matches the scale of the decarbonization challenge in front of us." Its subsidies benefited American "businesses, households, and even sub-national governments," saving households money and incentivizing greener commerce.
The proposal's "sledgehammer" approach will not only stifle commerce but threaten to stall the adoption of electric vehicles and other subsidized green tech.
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Absolutely 💯 What's being done about the proposed cuts?
Per a May 13 Politico report, some lawmakers were openly skeptical of the proposed cuts.
The timeline was "too short for truly new technologies," Sen. Kevin Cramer said. "I don't think it's fair to treat an emerging technology the same as a 30-year-old technology."
Sen. Shelley Moore Capito likened the proposal to a "blanket" repeal of the IRA's investments. "There has been job creation around these tax credits," Capito noted.
On May 13, the League of Conservation Voters issued an open letter urging lawmakers to reject the bill. Describing it as a "retroactive tax increase," the group warned it would result in "skyrocketing electricity costs, job losses, the shuttering of manufacturing plants, and undermine our global competitiveness."
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