The brawl over the fate of certain clean energy tax credits is set to escalate as congressional Republicans draw new lines in the sand and the White House steps up its pressure on GOP leaders to gut the credits for savings.
House and Senate Republicans will spend the next several weeks hashing out the details of their reconciliation bill after the House adopted a compromise budget blueprint Thursday. Yet as the hunt for funding cuts intensifies, 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.”
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.
In interviews, Senate Republicans — like their House counterparts — stressed their recent letter was not meant to represent a red line against the proposed repeals, but rather a plea to congressional leaders to be “thoughtful” when undoing Democratic victories from the Biden era.
“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.
House Majority Leader Steve Scalise (R-La.) said in a brief interview that Republicans will now begin committee-level discussions on specific policies to include in reconciliation, with the goal of getting the bill to Trump’s desk by the end of May.
Asked about the disagreements over the IRA, Scalise said, “There’s still a lot of big fights ahead, and each one of them is important to have.”
“Now is not the time to put red lines,” he said. “Now is the time for everybody to go to work in committees.”
Republicans haven’t identified specific IRA programs they want to protect but have mentioned “transferability,” which allows a project sponsor to sell tax credits to a third party, which stands to considerably impact how the industry’s financed.
‘Principled compromises’
As in the House, senators say several more Republicans support protecting the IRA but are staying quiet for now.
Indeed, Sen. Todd Young (R-Ind.), who didn’t sign the letter, said he’s looking at the investments in his state.
“I think a balance will probably be struck between elimination on one hand and full preservation on the other,” he said. “It’ll be something in between. But I’ve offered no promises to anyone on this because it’s going to require some principled compromises.”
He expected more detailed discussion of IRA credits to pick up soon. “It’ll be a distinct topic of conversation,” he said.
Young also commended Senate Finance Chair Mike Crapo (R-Idaho) for carefully hearing out all 53 Senate Republicans on a broad range of tax items.
“This has not been an effort — and I don’t anticipate that changing — to jam us,” Young said. “And it’s also not been hiding the ball. … It’s been very consultative.”
For his part, Crapo declined to offer any clues about those consultations. “I’m not discussing the status of our negotiations or any other tax policy,” he said. “I’m talking to all my colleagues on all the issues.” He said he hadn’t seen the new letter.
Energy and Natural Resources Chair Mike Lee (R-Utah) said he still prefers a full rollback but acknowledged that might not be possible. He noted the threat the four letter signers could theoretically pose to the reconciliation push given that there are 53 Republicans in the Senate.
“I support repealing,” he said. “I think it should be possible, but I can’t speak to it. I should probably read the letter and figure out how dug in those four are. Anytime we lose four, obviously that’s a thing.”
Trump has repeatedly attacked the IRA but exactly where the White House stands on the fine print remains a question. The White House did not respond to a request for comment.
Farm state lawmakers revolt
Bacon, who represents a Nebraska district that relies on wind power for 40 percent of its energy, said in an interview Thursday that he raised his concerns about repealing clean energy tax credits to Trump on two recent occasions — once in the Oval Office and again while sitting in on a Cabinet meeting about a month ago.
“They were talking about pulling the whole IRA, and I said, ‘It don’t work,’” Bacon said.
He 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.
Business concerns
A number of businesses with a stake in the preservation of the IRA’s energy and manufacturing subsidies returned to Capitol Hill for their latest round of lobbying this week. They met with House and Senate Republicans and urged them to fight for the incentives.
In an interview Thursday, Tillis, who has been known to occasionally buck his party, urged leaders to be careful with their knives.
“With all the other uncertainty out there, we don’t want to send a shock to businesses that invested in this space,” he said. “It is part of a transition that we’ve got to support.”
Rep. Mike Levin (D-Calif.), a co-chair of the House Sustainable Energy and Environment Coalition, said that if Republican leaders follow through on their stated plans to gut the climate law, it will be “a disaster” for clean energy projects.
“We have to provide predictability and stability for project developers, and they’re basing their assumptions on the availability of tax policy that will be advantageous to build projects,” he said. Eliminating that certainty, Levin said, “will be really bad.”
Bacon added, “You can’t pull the rug out from underneath these guys.”
