The Inflation Reduction Act of 2022 included provisions intended to advance clean energy initiatives across the United States and offered tax incentives to drive investment in renewable energy technologies, such as solar, wind and battery storage.
Specifically, the Inflation Reduction Act included $370 billion in investments designed to incentivize private investment in clean energy, job creation, and supply chains and reduce energy costs. The legislation was intended to support the Biden Administration’s goal of achieving 100% carbon pollution-free electricity by 2035, as well as a 50% to 52% reduction in greenhouse gas pollution and net-zero emissions by 2050.1
However, some critics of the legislation argue its energy subsidies could have a much higher budgetary impact than originally reported. The Cato Institute estimates the bill’s energy subsidies may cost American taxpayers between $936 billion and $1.97 trillion over the next 10 years and between $2.04 trillion and $4.67 trillion by 2050.2 These estimates are based on data that indicates the Inflation Reduction Act ’s energy subsidies are multiple times larger than initial estimates and potentially expose Americans to unlimited liability.
In his first day in office, President Trump signed an executive order called Unleashing American Energy, which froze the distribution of Inflation Reduction Act funds for clean energy. The Trump Administration is expected to take additional action to cut certain provisions of the Inflation Reduction Act to help pay for a renewal of the Tax Cuts and Jobs Act of 2017.
Will the Inflation Reduction Act Be Repealed?
It’s probably unlikely that the Inflation Reduction Act will be repealed in its entirety, as many of its provisions have bipartisan support, including its clean energy tax credits. In fact, in August 2024, a group of 18 House Republicans sent a letter to Speaker Mike Johnson in support of preserving the Inflation Reduction Act ’s clean energy tax credits. These lawmakers acknowledged that, “The partisan process of passing the Inflation Reduction Act created a deeply flawed bill that will prevent the development of lifesaving cures, empower the IRS to harass small businesses, and distort energy markets.” Nevertheless, they argued that, “Energy tax credits have spurred innovation, incentivized investment, and created good jobs in many parts of the country.”3
Instead of a full repeal, the Republican-led government may decide to focus on reducing the scope of the tax credits to more closely align with the administration’s fiscal goals. For example, potential modifications may include targeted cuts to federal funding for renewable energy initiatives focused on agencies such as the Department of Energy and the Environmental Protection Agency.
Another possibility is that the administration may seek to implement additional restrictions on certain aspects of the Inflation Reduction Act. For example, the administration may seek to reduce regulatory emissions standards for traditional power plants, require stricter eligibility standards for renewable energy projects and create additional requirements for labor associated with energy incentives.
In Summary
Each new administration seeks to make its mark on policy, and the Trump Administration has expressed interest in rolling back or adding stricter requirements surrounding some of the provisions of the Inflation Reduction Act. While President Trump may have an impact on these provisions, it’s unlikely he’ll be able to repeal the act completely due to bipartisan support of some portions of the legislation.
