The IRA’s New Conventional Wisdom
When the Inflation Reduction Act was first up for consideration in 2022, it received scant support from corporate America, including the oil-and-gas sector. So it may come as a surprise that it was almost an applause line when John Podesta, the senior Biden administration official charged with implementing the law, told a gathering of energy executives in Houston last week that the law is here to stay. “If you’re a politician who wants to turn your back on your community,” Podesta told the crowd. “I think you’d be very foolish.”
[time-brightcove not-tgx=”true”]Over the course of the last two years, the promise of money flowing from the law has excited companies and communities alike. In the energy industry, oil and gas firms are eager to take advantage of incentives for capturing carbon dioxide and producing hydrogen fuel. Local communities, especially in red states, have come to appreciate new clean technology jobs. In turn, a conventional wisdom has emerged: even though the law passed Congress with no Republican votes, it would likely survive future GOP control of Washington.
You don’t have to rely on Podesta to see the forces moving in that direction.
For one, corporate lobbies are gearing up to fight changes that remove incentives for their industries. At the CERAWeek by S&P Global conference in Houston, Dustin Meyer, the head of policy, economics and regulatory affairs at the American Petroleum Institute, told me that the lobbying group would “absolutely” lobby to keep IRA incentives for hydrogen and carbon capture. Dan Brouillette, Donald Trump’s second energy secretary and the head of utility lobbying group Edison Electric Institute, told me that his group would fight for the pieces of the law it likes. “It’s not going to be a full scale repeal on day one,” he told me.
Even some elected Republicans are singing a somewhat similar tune. In Houston, I asked Alaska Senator Dan Sullivan whether he would support the energy provisions in the IRA if the GOP were to win the White House in November. Sullivan criticized the Biden Administration’s implementation of the law, but told me that it would be hard to undo. Ultimately, he said, he would want to “take a hard look” at the law to decide what provisions he might support.
But Sullivan offered perhaps a more interesting tidbit: a future GOP government would likely be less concerned with rolling back the IRA and more concerned with targeting the federal agencies in charge of implementing the law and creating regulations under other existing laws. “That’s where the action is going to be,” he said.
Indeed, a future Treasury Secretary could change the way tax credits are calculated—potentially offering a more lax interpretation of the law for provisions popular with favored industries and more stringent interpretation for the ones the administration doesn’t like. And, just as importantly, the flurry of regulations that the Biden administration has implemented around the law could be rolled back. Many of these regulations were designed to work in tandem with the IRA, and the clean energy picture shifts if either goes away. And then there’s the possibility that Congress makes smaller changes to the law—say capping a tax credit as part of a budget negotiation. “I think some implementation of the IRA may change,” said Brouillette. “But the statute itself doesn’t get repealed on day one.”
How all of this shakes out matters a great deal. Most obviously, the durability of the law will in large part shape the future trajectory of U.S. emissions. But the uncertainty also has implications for businesses and consumers. Some counted on these tax incentives for investments they’ve already made. Others are holding back—not necessarily to see if the law survives, but how it does.