Fresh off the heels of the Democratic National Convention, following last month's Republican National Convention, all eyes are on the 2024 US national elections. Prediction markets teeter 50/50, and national polling is within a razor’s margin. And business — particularly long term-oriented companies and investors — are allergic to uncertainty.
Without a doubt, this election is about so much more than business and climate. But to the degree that it’s still possible to separate politics from policy, the election is a rare binary moment of divergent futures for US climate policy, and in particular, the crowning jewel of US climate policy: the IRA.
Amid all the shake-ups in American politics, it can be hard to tell where the real priorities for either party lie — or what is politically and legally feasible. With President Biden stepping down, an administrative shift is guaranteed. GOP presidential nominee Donald Trump and the right-wing agenda of Project 2025 have threatened to “gut” the IRA. In contrast, the Democratic candidate, current VP Kamala Harris, brings strong climate credentials but vague plans.
We’ll walk you through the different scenarios — from a fully Republican-controlled government to a Democratic sweep to everything in between — and explain how each could impact the key elements of the IRA. Our goal is not to predict the future (that’s your job!), but to provide a clear, accessible resource that helps you understand the stakes and potential shifts, so you can better prepare for whatever comes next in the evolving political landscape.
This is part one in CTVC's two-part series on what's in the IRA and how the 2024 US election could affect it. In this edition, we're exploring tax credits. Part two will dive into climate-related funding mechanisms and regulations
Reality of repeal
There are countless moving pieces and forces at play in determining the future of the IRA. Not to get all Schoolhouse Rock, but different outcomes across the presidency and branches of Congress, with varying margins, would dictate the government’s actions regarding the IRA.
Possible election outcomes
Scenario 1: A unified Republican government
Implications: Trump has stated that repealing the IRA is a priority, and many current Republican members of Congress agree, in part due to its content and in part due to the way it was passed (via the budget reconciliation process, to bypass the Senate filibuster). With control of both chambers of Congress and the presidency, Republicans could pursue a full repeal or significant rollback of the IRA via executive actions or budget reconciliation — possibly eliminating or reducing tax credits.
Caveats: Although Trump and Project 2025 have stated that repealing the IRA is a priority, given the bipartisan popularity of some provisions, like nuclear and grid investments, wholesale repeal may be challenging. As of August, several House Republicans have publicly called on Republican House Speaker Mike Johnson to not remove “energy sector tax credits.” Plus, with only a narrow majority in the Senate and/or House, budget reconciliation would involve fighting for votes from Republicans, and could lead to more piecemeal repeals of specific targets.
Scenario 2: A Republican-controlled Congress with a Democratic president
Implications: While a Republican majority in Congress might attempt to roll back IRA provisions, a Democratic president could veto such attempts. This scenario could result in a legislative stalemate, with limited changes to the existing law. Still, budgetary pressures might still lead to some cuts or changes; Republicans may also focus on targeted modifications, such as reducing specific tax credits or limiting funding, which could be negotiated during the budget process.
Caveats: Overturning a veto requiring a two-thirds majority in both chambers, making Congressional margins crucial.
Scenario 3-4: A split Congress with a Republican president
Implications: With the Senate under Democratic control, it would be challenging for the Republican House and president to pass any legislation that fully repeals or significantly alters the IRA; a similar situation would occur with the House. Any legislative changes would likely require compromise, focusing on areas where bipartisan agreement could be reached, such as modifying less popular provisions or adjusting funding allocations. However, a Republican president could still issue executive orders or directives to federal agencies to modify the implementation of the IRA.
Scenario 5-6: A split Congress with a Democratic president
Implications: In a split control scenario with a Democratic Senate and presidency, significant changes to the IRA would be difficult to achieve. The Democratic leadership would work to preserve the IRA, blocking major repeal efforts — and likely being able to keep implementation from federal agencies in place. However, the Republican-controlled House might push for budgetary constraints or minor modifications, potentially affecting funding allocations and implementation timelines through negotiations.
Scenario 7: A Republican president with a Democratic-controlled Congress
Implications: In this scenario, a Republican president could issue executive orders to alter the implementation of the IRA, but significant legislative changes would be blocked by the Democratic Congress. The Democratic-controlled Congress would likely prevent any new legislation aimed at repealing or substantially modifying the IRA, leading to a potential gridlock. Still, similar to scenarios 3 and 4, a Republican president could use executive actions to seek to delay or refocus implementation of IRA provisions.
Scenario 8: A unified Democratic government
Implications: Under a fully Democratic government, the IRA would likely be fully preserved and potentially expanded. Democrats could introduce new legislation to strengthen the IRA, extending tax credits, increasing funding, and launching additional climate-related programs. They could still face potential judicial challenges, however.
Tax credit breakdown
Beyond high-level scenario planning about the potential risks to the IRA, the shape of the IRA (and its climate impact) is buried in the details. Remember, the IRA is a $370bn mixed goodie bag of climate tech provisions across a mix of direct investment, tax credits, and funding.
As Alfred Johnson, CEO of Crux, told us, "The IRA dramatically increases the use of tax credits in a very favorable way for energy finance. It provides them for many more different kinds of technologies than received them before, things like bioenergy, nuclear, and advanced manufacturing tax credits, which have really broad based historical support on both sides of the aisle. The other thing that the law did was extended them, so put them in place for at least 10 years."
Tax credit where it's due
Tax credit
Description
Repeal risk
Renewable Energy Production Tax Credit (PTC)
Extension and modification of the Production Tax Credit for electricity from solar, wind, and geothermal.
Base credit of 0.3 cents/ kWh; 1.5 cents/ kWh if Wage and Apprentice Requirements are met.
Requires new legislation to repeal or reduce the credit. Implementation rules could be adjusted to limit eligibility or reduce the credit value. However, PTC was passed in 2005 and have been re-approved by both parties in the past.
Energy Investment Tax Credit (ITC)
Extension and modification of the Investment Tax Credit to expand clean energy manufacturing for electric vehicles, wind turbines, and solar panels. Also applies to energy storage technology, qualified biogas properties, and microgrid controllers.
30% ITC; 10% bonus if domestic manufacturing requirements are met (steel, iron, etc).
Could be repealed or reduced through new legislation. The scope could also be limited through changes in eligibility criteria.
But similar to PTC credits, have garnered bipartisan support in the past.
Nuclear Production Tax Credit (45U)
Tax credit for zero-emission nuclear power production, including TVA reactors which would qualify for direct payments as non-tax entities.
Base credit of 0.3 cents/ kWh; 1.5 cents/ kWh if Wage and Apprentice Requirements are met.
Legislative action required to repeal or modify. Criteria for eligibility could be narrowed. However, nuclear energy largely has bipartisan support.
Hydrogen Production Tax Credit (45V)
Offers a tax credit for the production of clean hydrogen, encouraging investment in hydrogen as a clean energy carrier — both ITC and PTC are available.
Base credit of $0.6/ kg; Up to $3/ kg for hydrogen produced between 0-0.45 kg of CO2 per kg.
Legislative action required to repeal. Regulatory changes could redefine what qualifies as "clean" hydrogen, potentially altering eligibility. Currently, the Treasury has laid out three pillars that define the criteria for hydrogen producers to access tax credits; those definitions could be reissued at the direction of the executive branch and/or head of Treasury.
Clean Manufacturing Investment Tax Credit (45X)
Extension of the advanced energy project credit for investment in advanced manufacturing facilities for clean energy technologies, such as solar panels and batteries.
Base rate of 6%; 30% tax credit if Wage and Apprentice Requirements are satisfied.
Requires new legislation to repeal. Could be reduced in scope or value through changes in eligibility or credit calculations. Currently the majority of these tax credits overall are leveraged in rural or majority Republican states — but some in the mining industry would want to expand these credits to include raw mineral extraction, including for lithium.
Carbon Capture Tax Credit (45Q)
Extension and increase of tax credits for CO2 use and storage — received per ton of carbon oxide capture and sequestered or transformed.
Base rate of 6%; 30% tax credit if Wage and Apprentice Requirements are satisfied.
45Q was designed to support the transition of states like West Virginia from coal to cleaner energy. They also grandfather in those who have already invested based on the existing incentives. Could be repealed or reduced through new legislation, possibly during budget negotiations.
Clean Fuel Production Tax Credit (45Z)
Offers tax credits for the tech-neutral production of clean fuels, including biodiesel, renewable diesel, and sustainable aviation fuel.
Offers up to $1/ gallon for non- aviation fuel and up to $1.75 for sustainable aviation fuel
Guidance that includes incentives for sustainable aviation fuel from corn ethanol and soybeans, in a boost for Midwestern agricultural producers, goes into effect in 2025; would require new legislation for repeal. Definitions of eligible clean fuels could be adjusted to narrow the scope.
New and used EV tax credits
Tax credits for consumers buying qualified clean vehicles.
Offers $7,500/ new vehicle; $4,000/ used vehicle.
Could be repealed during the budget-making process, or targeted via executive authority over the Treasury. Already a target for Republicans and the Trump campaign.
Provides tax credits for homeowners who make energy-efficient improvements, such as installing insulation, windows, and HVAC systems; also for homeowners who install clean electricity systems, such as solar panels, on their properties.
Legislative repeal required — possible during budget reconciliation. The range of eligible improvements could be limited, or the credit value could be reduced. Already, these credits proved more popular than expected, and US consumers claimed $8.4bn in these tax breaks in 2023, according to recent IRS data.
The 2017 Tax Cuts and Jobs Act, passed by then-president Trump, was the largest tax code overhaul in three decades, and is set to expire in 2025. Both sides of the aisle are gearing up for a fight over which parts of it to extend, and how to compromise in other budget negotiations.
Some are already talking points from Republicans, like EV tax credits, as mentioned above, so they could be on the chopping block. Others, like ITC and PTC, are largely safe: as Neil Chatterjee, former head of the Federal Energy Regulatory Commission and current advisor to Palmetto, told us, "The solar ITC in particular long predates the IRA. It was actually first created in the Energy Policy Act of 2005 under President Bush. It's been revised and extended several times since with bipartisan support."
And few other key IRA expansions don't seem to be under the microscope. Some of the biggest changes that the bill brought to tax credits were the expansion of transferability and the two-tier tax credit structure (base and bonus rates). When we spoke with experts, they did not seem worried about the reversal of transferability, but pointed out that the bonus rate could change if a Republican-led administration pushes to simplify the tax code via legislation or executive authority.
Additionally, some of the tax guidance related to the IRA's provisions has not yet been finalized, which could leave room for a new administration to influence or delay the finalization of these rules.
Another possible change in these tax credits would involve placing more restrictions on the recipients of these tax credits. Laws prevent many of these credits from going to "foreign entities of concern (FEOC)," aka companies from nations that are considered adversaries of the US, like China, and guidance on what constitutes this entity was issued in the spring. A Republican administration might seek to either broaden these restrictions, in line with a tougher stance on China and other foreign competitors.
Keep an eye out next Friday for a piece on what's at stake in terms of the funding that the IRA offers up to climate tech!
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