WASHINGTON, Sept 18 (Askume Breakingviews) – Politicians rarely turn down an invitation to a ribbon-cutting ceremony, especially if it promises hundreds of thousands of manufacturing jobs. No Republican member of Congress voted for the climate investment bill that U.S. President Joe Biden will sign into law in 2022, but its most attractive provisions are likely to remain in place even after Donald Trump returns to the White House. An influx of private investment and the strategic placement of projects in Republican-leaning areas made the Inflation Reduction Act too valuable to repeal.
Trump is not a climate policy advocate. The former president opposed tax credits for electric vehicles, embraced conspiracy theories about offshore wind farms and preferred opening federal lands to oil wells rather than solar farms. If he is elected, with Republicans in control of Congress, he could appoint climate skeptics to key government positions and roll back environmental regulations. But the nominee has publicly expressed support for expanding nuclear power and has toned down his opposition to battery-powered cars, perhaps because of his affection for Tesla CEO Elon Musk. That gives members of his party an opportunity to support some green initiatives.
Importantly, there has been no significant increase in opposition to the IRA, unlike the organized 2010 movement against President Barack Obama’s health care law, which gave Republicans control of Congress and state houses across the country. By comparison, Republican complaints about climate policy have focused on narrow issues such as car emissions standards or conflicts over red meat consumption and gas stove cooking. The largest body of climate legislation in American history remains largely untouched.
There is a solid financial basis behind this calm response. According to consulting firm Rhodium Group, in the two years after the bill passed, American businesses and consumers invested a total of $493 billion in clean technology and infrastructure , up 71% from the previous two years.
Utility-scale solar panels, batteries and electric vehicle supply chains are the biggest winners. But emerging technologies such as carbon capture and storage and small nuclear reactors have also attracted money from Bank of America (BAC.N) and oil majors such as Chevron (CVX.N) and Exxon Mobil (XOM.N) . Demand for the legislation for the production and investment tax credits was so great that initial cost estimates suffered surprise revisions. The government’s Congressional Budget Office initially calculated the 10-year cost of the credits, most of which was unfunded, at just under $400 billion. Goldman Sachs (GS.N) and other forecasters estimate the final bill will be at least three times that amount.
Republicans, who were initially silent, have taken notice. In August, eighteen members of Congress wrote a letter to Republican House Speaker Mike Johnson calling for the Investment and Production Tax Credit to be enacted into law, arguing that the IRA boosted jobs and economic activity in their districts. Given that the party currently has a tenuous hold on the House and that the Democratic caucus continues to strongly support the IRA, these members could collectively make repealing the law impossible.
The phenomenon of two parties jointly legislating is not accidental. Companies are deliberately targeting investments in Republican states and regions to neutralize the politics of climate investment and take advantage of a more business-friendly tax system. For example, Georgia has successfully attracted battery and solar manufacturers under Republican Governor Brian Kemp. Korea Hanwha Qcellsannounced plans to supply solar panels to Microsoft (MSFT.O) through a $2.5 billion factory in the state , while Hyundai Motor(005380.KS) and LG (003550.KS) teamed up to build a $4.3 billion battery factory. A senior executive at solar power producer VSK Energy told the Financial Times last month that the company is considering building PV production facilities in Republican states for strategic reasons.
Different states have different stakes in different parts of the law. While Midwestern states can rely on electric vehicle production and consumer credit, Nevada benefits more from incentives to encourage the mining and processing of minerals such as lithium in the United States rather than relying on imports from China.
Officials in the Biden administration and Vice President Kamala Harris’ campaign have been eager to highlight where climate investments should go. In the battleground state of North Carolina this month, Treasury Secretary Janet Yellen cited data showing that households in the state had claimed hundreds of millions of dollars in tax credits from IRAs and called on Republicans to repeal them because they pose a “challenge.”
Still, while the IRA’s production and investment credits are likely to survive even after a full Republican takeover in November’s election, other parts of the law are likely to be more fragile. For example, Republicans could eliminate grants that encourage homeowners and landlords to install energy-efficient heating and appliances and redirect the funds to other priorities. The party’s representatives could also change the eligibility requirements for clean hydrogen and carbon capture tax credits , making it easier for the fossil fuel industry to access these credits. Wind energy projects that have come under particular scrutiny from Trump could have a harder time getting federal permits, while new oil wells and liquefied natural gas plants could move forward faster.
If Trump is elected, he could use his executive authority to grant new leases on federal lands or change eligibility criteria for special programs, since those decisions would not require congressional approval.
But the core of the IRA will remain unchanged. Corporate investment is at the heart of the law’s design: Its tax credits are intended to be generous enough to spur a virtuous cycle of investment in green technologies that lowers prices and creates new supply chains and jobs in the United States. Foes may also be satisfied. It’s hard to repeal a law with a shovel in your hand.
Follow @Rubinations on X
