White House confidence grows in climate law

US president Joe Biden's administration is feeling increasingly assured that climate-related tax credits in the Inflation Reduction Act (IRA) will be safe from repeal, as hundreds of projects funded through the law take root in areas represented by Republican officials.

The law — two years old last week — created an estimated $663bn of tax credits through to 2033 that are available for wind and solar projects, biofuel producers, electric vehicle (EV) manufacturers, clean hydrogen production and other energy projects. White House officials say tax credits created by the law are giving companies the certainty to invest in clean energy and zero-emission vehicle projects, prompting an estimated $282bn in investment that is creating jobs in Republican-led districts. "No Republicans voted for the IRA, but they know their constituents are receiving the benefits," Biden's climate adviser, John Podesta, says.

The majority-Republican US House of Representatives last year voted 217-215 to pass a bill that would repeal nearly all the law's clean energy tax credits. But 18 House Republicans said last week that they now believe a full repeal would be a "worst-case scenario" that would waste billions of dollars and undercut projects in their districts. Non-profit organisation Climate Power estimates that nearly 60pc of the energy jobs created since the law passed are in Republican-led districts, which tend to be in rural areas that are well suited to manufacturing or utility-scale energy projects.

Republican presidential nominee Donald Trump — now losing ground in polls to the Democratic nominee, vice-president Kamala Harris — says he aims to claw back any unspent funds for climate spending. If Trump wins, repealing the IRA's tax credits could help offset the costs of extending $4 trillion in tax cuts set to expire in 2025. But while Trump regularly attacks federal support for EVs, he has moderated his criticism after picking up an endorsement from leading EV manufacturer Tesla's chief executive, Elon Musk. "I'm for electric cars, I have to be, because Elon endorsed me very strongly," Trump says, although he adds that EVs should only have a "small slice" of the market.

There is a growing understanding that scrapping the IRA is "just bad politics", Podesta says. The White House expects repealing the law will become more difficult with time, as more businesses and consumers benefit from the tax credits. Last year, 3.4mn households received $8.4bn in energy tax credits created by the law, and the administration expects that number to grow. The White House is now pressing industry officials to speak up about the benefits of the law, which replaced short-term tax credits with incentives that will last 10 years or longer. "They need to shout that from the rooftops a little bit," Podesta says.

Work remains

The Biden administration still needs to implement key parts of the IRA, such as issuing final guidance for the ‘45V' clean hydrogen tax credit, finalising a programme to collect fees from oil and gas companies for methane emissions, and developing regulations that will govern the new ‘45Z' tax credits for clean fuels.

Federal permitting remains a major obstacle to the expansion of clean energy projects, particularly power lines that can take a decade or more to approve. The US Senate last week voted a bipartisan permitting bill out of committee that would fast-track approval of electric transmission projects, and in exchange expand federal oil and gas leasing and end the effective ‘pause' on new US LNG export licensing. Congressional negotiators expect progress on the bill during the ‘lame duck' session of Congress after the 5 November elections.

By Chris Knight