With victories in the Iowa and Nevada caucuses and New Hampshire primary under his belt, it is becoming clear that Donald Trump will likely become the next Republican candidate for the 2024 US election. With his potential return to office now almost within reach, there are increasing concerns surrounding the future of the Inflation Reduction Act (IRA) and how a Trump presidency would shape environmental policy in the US.
The Inflation Reduction Act is the largest environmentally focused investment policy in US history. The bill’s scope includes spending on clean electricity, individual clean energy incentives, EVs and sustainable fuels, conservation, building efficiency, and electrification, among other areas. The act also strengthened Investment Tax Credits (ITC) and Production Tax Credits (PTC), which apply to projects in various environmental and climate-focused areas, including solar and wind technologies, and geothermal and tidal energy. It is estimated that spending on projects under the IRA will be roughly $380 billion, however, as the bill is uncapped it has the potential to generate even higher levels of energy and climate spending if the demand exists.
The impact of a Trump presidency on IRA will be dependent upon whether the Republican party can not only win the presidency but also gain control of the Senate and maintain a majority in the House of Representatives – all three of which are required for major change.
In the event the GOP does gain control of both the White House and Congress, we believe that the consumer elements of the IRA, such as incentives for the purchase of EVs and home heating, are the most at risk. Conversely, the least at-risk elements are likely to be tax credits to build nuclear, hydrogen, and carbon capture. It is possible that renewables tax credits (e.g., wind and solar) could be modified. Republicans are likely to want to implement a variety of tax cuts should they come into office, and modifying the IRA is a relatively straightforward way to source those cuts, but we believe it is unlikely that the current policies in place will be materially scrapped.
In addition to the IRA, we expect a Trump presidency to affect environmental policy more generally via government appointments. The introduction of more conservative officials at the Environmental Protection Agency, Department of the Interior, Department of the Treasury, and Department of Energy, among other federal departments and agencies, is likely to influence environmental policy and regulation during Trump’s time in office.
However, a Trump presidency is not the only possible outcome of the upcoming election. The IRA is a landmark bill for Biden’s administration and remains at the center of incumbent President Biden’s campaign. If elected for a second term, he intends to continue building upon the 142 projects that have been announced since the bill was signed into law, leading to the creation of over 80,000 jobs and $98 billion dollars invested as of December 20231. This is a small percentage of the overall bill and we would expect acceleration of these numbers in the second term of a Biden presidency.
______________
