Republicans Mull ‘Thoughtful’ Phaseout of Green Credits

March 26, 2025

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by Andres Picon, Kelsey Brugger, Nico Portuondo (E&E News) The House Budget chair says his party may consider altering, rather than repealing, tax credits. Republicans are also not finding as much climate money to cut as they once expected.

Two weeks after a group of House Republicans called for the preservation of clean energy tax credits in the party’s forthcoming reconciliation bill, House Budget Chair Jodey Arrington appears to be softening — even if ever so slightly — his push to ax those credits completely.

The Texas Republican suggested Tuesday that rather than eliminate them, as he and other conservatives have advocated for in recent weeks, the GOP may simply look to phase out the Inflation Reduction Act incentives more quickly to mitigate more severe economic consequences.

“I’d like to repeal every jot and tittle of the IRA tax credit expansion, but I think there’s a thoughtful way to transition from those,” Arrington told POLITICO’s E&E News, referring to the credits in Democrats’ 2022 climate law as well as others that are “probably wasteful and distortionary.”

The effort would be focused on “transitioning out of them in a way that is least disruptive to the market,” he added.

Arrington’s latest thinking on the IRA incentives come as House and Senate leaders are under increasing pressure to quickly unite around a compromise budget resolution for their reconciliation bill but seem nowhere close to resolving their differences.

Nearly two dozen Republicans have indicated publicly that they do not want to see the bill target the tax credits, which have helped create new projects and jobs in their districts.

But Republicans and their staff are still in the process of deciding which energy and climate programs they will change or repeal to offset the cost of their other priorities, namely extending the 2017 tax cuts.

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It’s not clear, though, that modifying or shortening the applicability of the tax credits, tightening eligibility requirements or making other changes would satisfy the growing number of Republicans who support maintaining the tax credits.

They have not said they would oppose the reconciliation bill if it touches the credits, but they made it clear in their March 9 letter that they are concerned that companies’ planning and project commitments “would be jeopardized by premature credit phase outs or additional restrictive mechanisms such as limiting transferability.”

Under current Treasury Department guidance, the popular 45X credit, which supports manufacturing of clean energy technologies, begins to phase out in 2030 and ends completely in 2032, with an exception for critical minerals projects. The 45Q credit for carbon capture and sequestration, which also has bipartisan support, has a 2033 deadline for construction.

“A lot of these questions are not necessarily going to be binary, meaning it’s not like, ‘Do we keep it as is, or get rid of it?’ said Jeff Navin, a co-founder and partner at the advocacy firm Boundary Stone Partners. “A lot of things are going to be changed.” READ MORE

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Excerpt from RFD-TV: While President Trump pulled the plug on the prior Administration’s EV mandate, tax credits for electric vehicles are still in play.

The ethanol industry says that will allow for more competition, but could also open the door for more hybrid technology.

“The tax credit being eliminated would have an impact on hybrid technology. But I think at the end of the day, I think, eventually, consumers and the manufacturers hopefully get to the point where hybrid technology is the winner,” said Renewable Fuels Association’s Troy Bredenkamp.

Bredenkamp says more hybrids could equal more ethanol sales, giving consumers the best of both worlds. READ MORE

Excerpt from Los Angeles Times: But perhaps no sector of the economy will be more affected by tariffs than the automotive industry, which depends on global supply chains for raw materials, parts and vehicle assembly.

“The supply chain for vehicle manufacturing is pretty tightly integrated across several countries — especially Canada, U.S. and Mexico,” said Danny Cullenward, senior fellow with the Kleinman Center for Energy Policy at the University of Pennsylvania. “If a tariff applies every single time there’s a border crossing, that’s going to have massive impacts on vehicle manufacturing.”

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Trump last month imposed 25% tariffs on all imported vehicles and certain automobile parts. If the tariffs remain in place, experts expect all vehicles sold in the U.S. — gas-powered or electric — to become more expensive, perhaps motivating drivers to hold onto their older cars.

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Electric vehicles could be especially susceptible to price increases. Lithium-ion batteries in EVs have traditionally been made with rare-earth metals, such as cobalt and nickel, that are largely found overseas. Although some American automakers are transitioning to new batteries that don’t depend on those scarce minerals, many of the largest EV battery producers are in China, South Korea and Japan.

Trump announced Wednesday on TruthSocial that he will place a 125% tariff on all Chinese goods.

“A lot of the [EV] batteries are still coming from China,” Tal said. “Some car companies will be more impacted by that than others.”

To combat air pollution and stem the proliferation of greenhouse gases, the California Air Resources Board adopted a rule in 2022 to require an increasing percentage of new car sales to be zero-emission vehicles over the next decade. The Advanced Clean Cars II regulation culminates in a statewide ban on the sale of new gas-only cars in 2035. READ MORE

Excerpt from E&E Daily: Republican leaders are facing calls to protect clean energy subsidies just as they plan to begin writing their reconciliation bill.

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Republicans leaders are losing support for axing some of their biggest energy-related targets.

On Wednesday, four Senate Republicans sent a letter to Senate Majority Leader John Thune urging him to be judicious when weighing which Inflation Reduction Act tax credits to cut. They cautioned that climate law tax breaks have spurred new investments, reduced utility bills for Americans and ensured certainty for businesses that already have “meaningful U.S. investments.”

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That same day, the White House assured a group of conservative holdouts eager to see steeper cuts in reconciliation with a new commitment to work with Congress to pursue “historic spending reductions” — in part by “targeting the ‘Green New Scam’ IRA tax credits,” according to a statement from the House Freedom Caucus.

The dueling visions for the future of those energy subsidies — namely those supporting advanced manufacturing, carbon capture and biofuels — stand to complicate Republicans’ reconciliation plans and could ultimately spare certain incentives that are spurring clean energy projects and emissions reductions.

At least one congressional Republican has already gone directly to President Donald Trump to warn him that a wholesale repeal of the IRA will not fly.

“You can go in with a scalpel, but you’re not gonna get [all] Republican vote[s] if you’re gonna pull the whole thing,” said Rep. Don Bacon (R-Neb.), one of more than 20 Republicans calling for the preservation of some of the energy incentives.

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“You’ll notice in the letter, there are no demands — there’s no mandates,” said Sen. John Curtis (R-Utah), who led the letter. “It’s just a call to be thoughtful, to be careful.”

He thought some of the calls for repeal were merely partisan strife. “What we’re saying is, ‘Don’t just put a partisan hat on,’” he said. “Let’s put a ‘what-is-best-for-the-country’ hat on.’”

Sens. Lisa Murkowski (R-Alaska), Thom Tillis (R-N.C.) and Jerry Moran (R-Kan.) also signed this week’s letter. They joined the 21 House Republicans who penned their own letter last month calling for a “targeted” approach to the tax credit repeal.

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He (Bacon) noted that farmers across a number of Midwest and Plains states “all depend on biofuels.” In fact, he said the tax subsidies for renewable fuel production were so important to farmers that Republican leaders would not be able to garner enough support to repeal them.

“You’re not gonna get us to vote to take that away. That’s what’s saving us right now,” Bacon said. “They’re not gonna do it because it is a red line. Most of it’s gonna be preserved.”

It wouldn’t be the first time conservatives have capitulated to certain groups over federal subsidies. In 2023, the Iowa delegation successfully pressured then-Speaker Kevin McCarthy to carve out certain biofuel tax credits in the House GOP debt ceiling legislation, which sought to rescind much of the IRA.

Even though the matter was just for show — the bill had no chance of passing the Democratically controlled Senate — the showdown illustrated the power of the Midwestern contingent.

On Thursday, House and Senate lawmakers on both sides of the aisle reintroduced the “Farmer Fuel First Incentive Act” to extend the clean fuel production tax credit, also known as 45Z, while restricting its availability to renewable fuels made only from U.S.-sourced feedstocks.

The bill is sponsored by Reps. Marcy Kaptur (D-Ohio) and Tracey Mann (R-Kan.) in the House, and Sens. Amy Klobuchar (D-Minn.) and Roger Marshall (R-Kan.) in the Senate. READ MORE

Except from Politico Pro Greenwire: The conservative think tank founded by Agriculture Secretary Brooke Rollins is stepping up its farm policy work, including resisting environmental policies on climate change as well as advocating for U.S. exports and smaller government.

The America First Policy Institute announced Wednesday its plans to take on a more serious role in agriculture, with the goal of filling what the group considers a void in right-leaning think tanks in the nation’s capital.

“We believe farm country is in a dire state,” said Tate Bennett, AFPI’s director of rural policy, citing fallen commodity prices and higher farm operation costs, among other challenges.

Bennett and other AFPI leaders announced the agenda on a conference call with reporters. Leaders in the effort — called the Farmers First Agenda — include AFPI Chair for Rural Policy Christie Mullin, the wife of Sen. Markwayne Mullin (R-Okla.).

Rollins helped found the AFPI after leaving the first Trump administration, where she was a top policy adviser. The group hasn’t had a big agricultural agenda, aside from promoting fair trade. READ MORE