Now that the dust has settled with the Republicans controlling both Congress and the Presidency, the Clean Tech industry is anxiously awaiting the potential impact the new administration will have on its future. While it is not expected that all existing government initiatives, including the Inflation Reduction Act, will be revoked, the elimination of some clean energy initiatives have been targeted as a way to decrease the federal deficit.
President Trump is a well-known supporter of the fossil fuel industry, which, in his initial term, led to many regulatory rollbacks that supported its growth and competition. This is expected to play a large part, once again, in the energy-focused initiatives under his new term.
While the exact changes remain uncertain, examining President Trump’s previous term, recent executive orders and the House Budget Committee’s list of potential revenue raisers can provide insights into the new administration’s intent surrounding energy initiatives.
During his initial term, President Trump’s 2018 budget proposed an increase in federal revenue related to sales and divestment in certain energy initiatives of approximately $36 billion, including the following:
In addition, President Trump’s 2018 budget proposal cut the Department of Energy (“DOE”) funding by $3.1 billion, an 18% reduction in budget when compared to the 2017 budget. This included a 65% reduction, from $2 billion to $636 million, in funding to the DOE’s Office of Energy Efficiency and Renewable Energy (“EERE”), which develops and implements energy-efficient technologies and renewable energy sources to help the United States transition to a clean energy economy.
President Trump’s 2018 budget proposal did support an increase of the National Nuclear Security administration by 11.4%, from $12.5 billion to $13.9 billion, which would have increased funding for research on safer and more efficient nuclear technology. This represented one of only a handful of actions that would have moved forward clean energy initiatives.
While these items were included in President Trump’s 2018 budget proposal, the proposal was ultimately curtailed by the Republican controlled Congress. The 2018 budget that was passed by Congress still provided a reduction to the DOE’s budget, but not to the extent President Trump originally requested. With President Trump’s additional experience in the federal legislation processes, as well as his influence over more members of the Republican controlled Congress, the Clean Tech industry should be aware that the prior initiatives could be a reference point for the new administration.
Takeaway: The Trump budget proposal in 2018 would indicate that the new administration may continue their support for nuclear energy, however, the nuclear sector remains wary based on recent comments by President Trump. That said, the pressure to decrease the Federal deficit will likely require a reduction in the DOE’s EERE’s budget. Identifying what energy initiatives that will be targeted to decrease the federal deficit is the ultimate question, however we can look to recent executive orders to provide additional insight.
Executive Orders: Of the dozen executive orders signed by President Trump, one of the most impactful to the Clean Tech sector was signed on January 20, 2025, and entitled “Unleashing American Energy.” Section 7 of the executive order, labeled “Terminating the Green New Deal” paused the disbursement of funds appropriated through the Inflation Reduction Act (“IRA”) of 2022 or the Infrastructure Investment and Jobs Act (“IIJA”), including funds for electric vehicle charging stations made available through the National Electric Vehicle Infrastructure Formula Program and the Charging and Fueling Infrastructure Discretionary Grant Program.
However, the next day, the White House clarified in an issued memorandum that the Section 7 pause only applies to funds supporting programs, projects or activities that contradict the policy provided under the Order. Funding will not be terminated if it assists:
- [to] establish our position as the leading producer and processor of non-fuel minerals, including rare earth minerals, …
- to protect the United States’s economic and national security and military preparedness by ensuring that an abundant supply of reliable energy is readily accessible in every State and territory of the Nation
- to eliminate the “electric vehicle (EV) mandate” and promote true consumer choice, …; by terminating, where appropriate, state emissions waivers that function to limit sales of gasoline-powered automobiles; and by considering the elimination of unfair subsidies and other ill-conceived government-imposed market distortions that favor EVs over other technologies and effectively mandate their purchase by individuals, private businesses, and government entities alike by rendering other types of vehicles unaffordable
The executive order does not impact the Internal Revenue Code provisions providing clean energy federal income tax credits, which would have to be approved by Congress. However, the order could limit the viability of a project as grant programs, including IIJA and IRA grant funding, are halted.
In addition, the President signed the “Temporary Withdrawal of All Areas on the Outer Continental Shelf from Offshore Wind Leasing and Review of the Federal Government’s Leasing and Permitting Practices for Wind Projects” on January 20, 2025, which was not a surprise due to President Trump’s constant critiquing of wind power energy. The order temporarily halts all offshore wind energy leasing with the Offshore Continental Shelf. In addition, federal agencies were instructed to pause issuing new or renewed approvals, permit leases or loans for wind projects until the review of the environmental impact of such projects is completed.
Takeaway: While the executive orders cannot impact the current Internal Revenue Code provisions providing clean energy tax credits, they will affect new and existing projects that are potentially being considered in the wind, electric vehicle, and charging station space. Without the ability to receive government grants, the feasibility of these identified clean energy projects may be in question.
Federal Budget Committee
Federal tax reform is expected to occur in the 2025 taxable year, and while a complete dismantling of the IRA is not anticipated, the current clean energy provisions are expected to be modified. Congress intends to pass federal tax reform through a process called budget reconciliation. A budget reconciliation process is addressed in the Federal government’s annual budget resolution process. This process is desirable to the Republican-controlled Senate as it avoids the general 60-vote threshold necessary to adopt legislation. Under reconciliation, only a simple majority is needed. This would allow the Senate to enact tax legislation this year without the support of any Democrats or Independents. However, the limited Republican majority in the House continues to challenge whether House Republicans will be forced to work with Democrats. Read more here: Federal Tax Reform Timing Still Uncertain.
The Republicans will have two chances in the 2025 calendar year to pass a budget reconciliation process. The Senate has clearly shown its intention for the first reconciliation bill to focus on the border and the second to focus on federal tax reform, including extending the Tax Cuts and Jobs Act (“TCJA”). More recently, it appears that the Senate would prefer to address energy in the first bill, which will be the focus over the next four months. Whether the first budget reconciliation process will only focus on clean energy grant programs, or also IRA federal tax credit provisions for clean energy, remains unclear.
Under the budget reconciliation process, the Budget Committee provides a specific dollar amount for increases to the federal budget deficit over a 10-year budget window. For example, when passing the TCJA in 2017, the budget resolution allowed Republicans to increase the budget deficit by $1.5 trillion over 10 years. As the Congressional Budget Office currently estimates that the extension of the TCJA beyond 2025 would cost $4.6 trillion over 10 years, many anticipate that Congress will have to identify revenue raisers to decrease the impact on the federal budget deficit.
The House Budget Committee released a list of revenue proposals that details tax policy options for a reconciliation bill. The list includes the following energy proposals:
- Repealing IRC Section 45Q Carbon Sequestration, IRC Section 45U Nuclear Power, IRC Section 45Z Clean Fuels, and EV Tax Credit estimated to save $404.7 billion over the next ten years
- Close the EV credit leasing loophole, estimated to save $50 billion in the next ten years
- Repeal Green Energy Tax Credits, estimated to save $796 billion. However, the communication highlights that if political will, there are several smaller reform options available, starting as low as $3 billion, that would repeal a smaller portion of these credits.
It is not expected that the clean energy credits provided under the IRA will be repealed. Even though the IRA is generally identified as a Democratic bill, many Republican districts, particularly in the Midwest, are dominating in relation to US technology projects.
Takeaway:
The revenue raiser list provided by the House includes a very broad identification of energy incentives that may be limited. When talking to House Representatives, it was noticed that there are still a variety of members supporting clean fuel production, carbon sequestration, as well as methanol clean energy projects. However, there does seem to be a consistent theme through the recent communication that offshore wind technology, electric vehicles, and charging stations are potential areas for significant adjustments. Clean Tech companies should continue to monitor the timing of when changes to Clean Energy grant funding, as well as changes to the IRA will take place. The need to advocate for grant funding and IRA credits with House Representatives and Senators may be sooner than originally anticipated if energy is addressed in the first reconciliation bill.
While members of the Clean Tech community remain uncertain regarding future plans, the new administration seems to have provided some indications, through recent events, that a reduction of federal spending for offshore wind facilities, as well as electric vehicles and chargers may be first on the list. It will continue to be essential for the Clean Tech industry to stay informed regarding potential changes due to the new administration, and plan accordingly. However, it is much too soon to execute on any of those plans. The Congressional process surrounding Clean Energy will take time, with negotiations just beginning.
Thank you to Melissa Roth, Withum Clean Tech Leader and Matt Greco, Withum manager, who assisted in the content of this article.
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