As President-elect Donald Trump’s second term approaches following his decisive victory in the 2024 presidential election, the future of the Inflation Reduction Act (IRA) remains uncertain.
Signed into law by President Joe Biden in 2022, the IRA represented one of Congress’s largest investments in the American economy, energy security, and climate change. However, with Trump’s campaign promises to scale back or eliminate key provisions of the legislation, stakeholders across industries are bracing for potential changes.
The IRA is a comprehensive piece of legislation focusing on climate change, healthcare, and taxation and spans across multiple government departments and agencies. It was created as a government effort “to lower consumer costs and drive the global clean energy economy forward.”
The climate sector, a key focus of the Biden administration, has been among the biggest beneficiaries of the legislation. According to the U.S. Department of Treasury, the IRA enhanced or created more than 20 tax incentives for clean energy and manufacturing.
With Trump set to return to the White House in five weeks, there is widespread fear among industry stakeholders that he might scale back some of the tax credits, a cornerstone of the IRA.
During his campaign in September, Trump vowed to pull back any “unspent” dollars under the IRA should he be elected in November, calling the law “the Green New Scam.”
Trump also claimed in his first term that America has “the cleanest air…[and]…the cleanest water,” and that the effects of climate change in America are exaggerated and “not our problem.” The solution to rising energy costs is restoring the predominance of oil and burning fossil fuels, he also said.
Despite Trump’s pledges to roll back the law, there are structural and political factors that might preserve key elements of the IRA.
A powerful factor that could potentially save all or parts of the IRA, according to many industry insiders interviewed by The American Bazaar for this story, is the fact that much of the top funding allocated in the IRA went to so-called red states and key swing states that are crucial in deciding the presidential election.
Ron Kosmahl, a long-term travel industry executive and a consultant at Norkas LLC, struck a cautiously optimistic tone. “I am hopeful that [the IRA] won’t be completely scaled down because a lot of the money is already allocated and went to red states,” he said.
According to Mother Jones, nearly half the money announced under the legislation for manufacturing electric cars, batteries, and various renewable energy products will go to the seven states that played a key role in electing Trump this year: Arizona, Georgia, North Carolina, Nevada, Wisconsin, Michigan, and Pennsylvania.
Kosmahl emphasized the bipartisan appeal of many projects supported by the IRA, including energy conversion initiatives and manufacturing under the CHIPS Act (Creating Helpful Incentives to Produce Semiconductors).
Himanshu Shah, Chairman of Emeren, a multinational company that specializes in solar project development, construction management, and project financing in Europe, North America, and Asia, echoed the sentiment.
“A full repeal of the IRA is unlikely with [the] majority of renewable projects in red states,” he said. “Demand will still be influenced by IRA policy change decisions on manufacturing credits, ITC/PTC [Investment Tax Credit/Production Tax Credit].”
He pointed out that the “incoming Congress appears to be planning a multistage reconciliation process that could address key IRA provisions.”
According to Shah, “Industry challenges of higher interest rates, project delays due to tariff changes, and grid bottlenecks from 2024 still persist, but the backdrop for increasing electricity demand is healthy [and favorable] due mainly to AI data centers.”
However, some experts fear that the new administration might still undermine parts of the legislation.
Alan Miller, a partner at the climate finance organization Cool Pact Capital, believes the IRA could still face some scaling down, especially with some tax credits potentially on the chopping block.
“The tax incentives will be more of a target than the expenditure items because of the politics of money flowing to red states to complete projects and create jobs,” he told The American Bazaar.
Miller foresees a trade-off where some tax credits for renewables might be sacrificed to extend expiring credits from Trump’s previous administration.
“This will hurt solar companies but allow specific projects, like battery storage, already underway in red states, to proceed,” he added.
Kosmahl also noted that in the “worst-case scenario,” some of the projects might be stopped. “But I feel that certain officials in both parties will want those projects to continue because they bring jobs and economic benefits,” he said.
The IRA stands as one of the most significant pieces of legislation signed by Biden — an achievement often described in near-messianic terms by him and his administration.
Speaking at the White House in August 2023, on the first anniversary of the IRA — which passed with Vice President Kamala Harris casting the tie-breaking vote — Biden framed the legislation as a fulfilled promise: “Delivering on promises that have long been made to the American people: to lower costs for families, especially healthcare costs; increase America’s energy security; restore fairness to the tax code; create good-paying jobs here in America; and address the existential threat of the climate crisis.”
Beyond its impact on energy and climate sectors, the IRA has also brought significant changes other areas of the U.S. economy.
For instance, the IRA also impact the U.S. Department of Health and Human Services (HHS), allowing Medicare to negotiate directly with drug companies to lower the prices of prescription drugs.
The HHS claims that nearly 1.5 million people saved almost $1 billion on prescription drug costs in the first half of 2024 with the help of the IRA’s new out-of-pocket cap. In 2025, the cap is set to lower to $2000 for Medicare Part D holders.
The Department of Energy (DoE), Environmental Protection Agency (EPA), Department of Treasury, HHS, Department of Agriculture (USDA), Department of Transportation (DOT), Department of Commerce, General Services Administration (GSA) are some key agencies encompassed by the IRA.
Miller and others interviewed highlighted the urgency among federal agencies to allocate funds with a Republican trifecta—the administration, the House of Representatives, and the Senate—set to take control of Washington.
“My colleagues in the Department of Energy are attempting to push money out the door as quickly as they can,” Miller said.
“A lot of IRA funding that’s being deployed right now because there are deadlines for when that money needs to be distributed by,” said Anjali Mahadevia, a climate tech entrepreneur and co-chair of the upcoming DC Climate Week. “I think what has already been committed will continue or will stand and suffice. But as far as new developments and new initiatives, I’m not too bullish on what that looks like from a climate perspective.”
Now despite stakeholders’ hopes, what happens if the IRA is scaled down, or repealed, in the worst case?
According to a report by the digital tax credit marketplace Crux, an “unlikely” full repeal of the IRA would generate about $600 billion in reduced federal spending through 2033. This prediction comes among the various promised initiatives for federal budget cuts by Trump’s administration.
Experts also warn that scaling back the IRA could have far-reaching economic consequences on the global stage.
“If the United States closes the loop, the Europeans, Chinese, and other Asian countries will step in and benefit economically, leaving the U.S. behind,” Kosmahl said. “It makes very little economic sense to not be on the football field competing for things that are good for everybody.”