How a Republican president could hobble the climate law

President Joe Biden’s signature climate law will soon face a new threat: the 2024 presidential election.

The Inflation Reduction Act has so far survived Republican-led attempts on Capitol Hill to repeal major parts of its $369 billion in clean energy and climate spending.

But a Republican president like Donald Trump or Ron DeSantis would have multiple avenues for hindering the law through executive action — including by tightening limits on its tax credits, holding back some of its loans and grants, or revising Treasury Department rules that haven't yet reached the finish line when Biden leaves office. That would likely hurt U.S. efforts to be a world leader on climate change and meet the international commitments that the Obama and Biden administrations have made, and undercut Democrats' top achievement of recent years.

The fight could mirror the years of GOP attacks that Obamacare faced after Congress enacted it in 2010, including multiple repeal attempts and Trump's use of executive actions to undercut it.

Some Republican presidential candidates, including Trump, are already targeting the IRA's grant and loan spending, which provide a major piece of the federal government's support for shift to clean energy.

"They're just pouring money out," Trump told supporters during a rally in New Hampshire this month. “All these crazy deals, this Inflation Reduction Act … it increases inflation."

Nikki Haley slammed the law Wednesday and said she'd repeal it.

"The IRA is a communist manifesto filled with tax hikes and green subsidies that benefit China and make America more dependent on Beijing,” she said in a statement. "As president, I will repeal Biden’s green energy handouts and make sure Americans are not dependent on China for vital goods."

Among other options, a GOP president could have the Treasury Department rework the guidance it has issued on the climate law's tax credits, including contentious mineral sourcing requirements for electric vehicles and their components.

The White House's interpretation of the law has already run afoul of Senate Energy and Natural Resources Chair Joe Manchin's vision. The West Virginia Democrat, who played a key part in writing the law, agrees with Republicans in saying Biden is doing too much to increase EV sales.

“I think any Republican president would roll back or put a stop to the Inflation Reduction Act or significantly stifle it,” said Simon Moores, CEO of Benchmark Mineral Intelligence. Even so, he said, "That wouldn’t stop the money that’s been deployed to date, including over $130 billion for battery capacity already."

Colin Hayes, a former staff director for Republicans on the Senate Energy and Natural Resources Committee under Sen. Lisa Murkowski of Alaska, said a Republican president could complicate investments in sectors like EVs and offshore wind.

That may be especially true for provisions championed by Democrats that conservatives may consider wasteful or too progressive, such as efforts to use the law to redress social, economic or racial injustices.

"The worst-case scenario is that people using Inflation Reduction Act tax credits will only able to use the base credits, and that the energy community adders, the domestic content adders, the low-income community adders — all things putting major horsepower behind clean energy deployment — could effectively go away once guidance and rules are rewritten,” said Hayes, a founding partner at lobbying firm Lot Sixteen.

Kevin Book, managing director of ClearView Energy Partners LLC, a research firm, said, “I think there's a very good chance that some of the provisions could be revisited, reinterpreted by the IRS and Treasury in a differently minded administration."

Book and Hayes still think the climate law will survive. Not only are Democrats mostly unified in defending it, but the IRA is benefiting majority-Republican districts around the country.

Since the law was enacted, companies have announced more than $270 billion in capital investments on projects and manufacturing tied to renewable energy and electrification, according to the American Clean Power Association.

Still, DeSantis, the Florida governor, earlier this year blocked funding tied to the law in his state, while former New Jersey Gov. Chris Christie — now running for the GOP presidential nomination — called the law a “mistake” in a Bloomberg TV interview.

“They can slow things down, they can tighten criteria,” Jeff Navin, a partner at Boundary Stone Partners and former chief of staff at the Department of Energy, said about a potential Republican president. “There are a few discretionary programs they can refuse to exercise, like the increased authority for loan programs.”

Mandy Gunasekara, EPA’s chief of staff under Trump and a conservative energy policy advocate, said a GOP president would ask Congress for changes. But without strong Republican majorities, he or she would have to improvise.

The IRA created a $27 billion Greenhouse Gas Reduction Fund. The law also set up a $3 billion environmental and climate justice program. EPA is in the process of doling out the money.

“Any area where the government’s wastefully spending taxpayer money, that’s somewhere a Republican will want to scrutinize and, to the extent possible, cut back," said Gunasekara.

Race to the finish line

The Treasury Department is still racing to finish guidance for some of the law's tax incentives, and everything may not be done by Inauguration Day. Any pending work would be ripe for Republican intervention.

Some guidance documents may not be completed because of their complexity or because programs aren't yet scheduled to take effect, such as a credit for technology-neutral net-zero power sources, which will replace the existing wind energy production tax credit and solar energy investment tax credit.

“I’d imagine if there is a change in administration, there’d be a freeze on new guidance until the new team came in place, and they could slow-walk that guidance and put in more restrictive or limited guidance,” Navin said. “I’d imagine the Biden team knows there’s this possibility. That’s why they’re prioritizing certain pieces of guidance over others.”

Hayes says a main concern is that Republican leaders may simply want to redirect spending away from the IRA to other priorities, rather than undermine it for ideological reasons.

“The best thing [the Biden team] can do is to get the implementing rules and guidance finalized in a legally defensible way so companies can march ahead with investments in projects and hiring people to build them,” he said.

Obamacare parallels

Republican attempts against the IRA echo how Trump and the GOP tried to both repeal and sabotage the Affordable Care Act, President Barack Obama and the Democrats' signature health care law.

Trump and Republicans tried in 2017 to repeal most of the law, also known as Obamacare, but failed when then-Sen. John McCain (R-Ariz.) voted against the effort.

“[Trump] was however able to change some of the rules and considerably weaken the law,” said Michael Doonan, a policy professor at Brandeis University.

Those actions included cutting funds for outreach to potential enrollees, slashing subsidies to insurers and reducing restrictions on insurance plans.

"If there is discretion in some of the funding for environmental projects, the administration could steer these towards projects to more supportive states, to allies in business or to minimize any adverse effect on the fossil fuel industry," Doonan said of the climate law.

Republican lawmakers have so far been unable to repeal the IRA’s clean energy tax provisions, despite trying a handful of times since they took the House majority in January.

The first was H.R. 1, the House GOP’s broad energy policy package, also known as the “Lower Energy Costs Act.” It passed the House in March, but Senate Majority Leader Chuck Schumer (D-N.Y.) declared it “dead on arrival” in the Senate, and Biden pledged to veto it.

The GOP tried again with its bill to raise the debt ceiling, the “Limit, Save, Grow Act,” the next month. That legislation incorporated H.R. 1 but went even further in targeting the energy incentives in the IRA. Those rollbacks didn’t survive debt ceiling negotiations with the Senate and Biden.

Most recently, the House Ways and Means Committee passed the “Build It in America Act,” another attempt to repeal some of the IRA’s energy tax breaks.

‘Law of the land’

For now, Navin said, the IRA is the “law of the land” regardless of who wins the White House, and the administration's ability to shift priorities is limited.

“The executive branch doesn’t have the ability to just refuse to spend money for purposes that Congress dictates,” he added. “That’s long-standing, settled law.”

Even though Treasury has been working on guidance for tax credits, those incentive structures are written into the law, giving a future administration little wiggle room.

“They could restrict the scope, they could structure it in ways that make those tax credits less applicable or less broadly available,” said Navin. “But the tax credits would still exist under law, and taxpayers could still claim them.”

DOE’s loan programs, which got an $11.7 billion boost in the IRA, would be a prime target of a Republican administration. Those programs did not make any new loans or loan guarantees during Trump’s time in office. It would be legal for him to do the same in a second administration.

However, DOE got in trouble in 2017 when the Government Accountability Office said the department violated a law against “impoundment” of funds when it tried not to release money under the Advanced Research Projects Agency-Energy. Trump wanted to scrap ARPA-E but Congress refused, and the administration was forced to change course.

‘It will be difficult’

Congressional Democrats are banking on the IRA’s broad popularity among Republicans as a safeguard against both a future president and lawmakers.

“I think so much of it will be embedded by then, it will be difficult” to roll back, said Massachusetts Rep. Richard Neal, the top Democrat on the House Ways and Means Committee, which oversees tax issues.

“This will be wildly popular when people see what these tax credits are like. Who’s using them right now? Republicans. Red states," he said.

Illinois Rep. Sean Casten, one of the top Democratic voices on energy and climate, said: “You’ve got a bunch of businesses that are making investments that are predicated on a tax credit that was passed by Congress. You’re going to have a huge fight about that.”

House Republicans’ previous repeal attempts show that they might keep trying to undo the IRA.

“I just want an all-of-the-above energy approach,” Rep. Blake Moore (R-Utah) said when asked what he wants a GOP president to do about the IRA. “And so we have to invest in traditional energy and we have to invest in alternative and renewable energy as well.”

Ways and Means Chair Jason Smith (R-Mo.) said, “Let’s get a Republican president first.”