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.
Disappointing climate savings
The search for savings continued Tuesday. House Energy and Commerce Chair Brett Guthrie (R-Ky.) said that Republicans may need to lean more on climate-related revenue sources, such as rolling back emissions regulations, to minimize cuts to Medicaid.
Generating significant climate-related revenue from the IRA, however, may be more difficult than Energy and Commerce leaders originally envisioned.
On Tuesday, E&C Energy Subcommittee Chair Bob Latta (R-Ohio) said the committee had recently received a Congressional Budget Office report detailing the amount of climate funding available to be rescinded from the IRA. The results, Latta said, were disappointing.
“A lot of the dollars had already been pushed out by the Biden administration, so we had to wait for the CBO score to come back,” Latta said. “The number is not what we wished it would have been.”
Latta did not specify the exact amount of funding CBO came up with, and a spokesperson for E&C did not return a request for comment for more specific information
E&C leaders have said they could target the IRA’s Greenhouse Gas Reduction Fund for potential rescissions, as well as other clean energy grant programs that fall under the committee’s jurisdiction. EPA is working on clawing back grant money in what has become a legal battle with non-profit groups.
The committee is targeting $880 billion in total savings as part of their reconciliation effort. That could change in negotiations with the Senate over a compromise budget blueprint for the party-line bill.
Republicans are also looking for savings and revenues from pushing more drilling and mining, including in the Arctic National Wildlife Refuge.
Balancing cuts, savings
Arrington’s comments mark a subtle change for the lawmaker leading the House’s effort to pass a sweeping reconciliation bill with a razor-thin House majority. They suggest that Republicans may be willing to temper their attack on clean energy incentives in order to maximize support for the legislation.
Arrington had said in late February that in order to help meet savings targets, Republicans should “consider repealing every one of the policies in terms of the green energy subsidies that came out of the IRA.”
“It’s wasteful, it’s unnecessary, and in fact, it’s harmful,” he said at the time.
In a separate interview in early February, Arrington cautioned against congressional leaders carving out particular subsidies for certain industries, whether it be renewable fuel or the oil and gas lobby, out of fear protecting tax breaks for one industry would cause the floodgates to open.
“There are some members, because of the economic interest of their district, who would like to keep one piece or a couple of pieces,” Arrington said at the time. “I think once you start doing that — you can start doing that in health care, and it just all starts to break — it all starts to fall apart.”
Instead, he suggested across-the-board tax cuts: “Give them bonus depreciation. Let’s lower people’s taxes and stop with the special interest tax breaks.”
That sentiment was echoed Tuesday down Pennsylvania Avenue at the American Clean Power Association. Marty Durbin, head of the GOP-friendly Chamber of Commerce Global Energy Institute, stressed that making the 2017 tax cuts permanent was the group’s top priority.
After that, he said, “there’s a whole lot of different provisions that different parts of our membership care about, and we’re certainly weighing in on some of those.”
Durbin added that the Chamber joined with groups like the clean power lobby to tell lawmakers “the simple facts about how much investment was facilitated. Those provisions in states and districts all around the country. So we’re watching how that’s going to go.”
Frank Macchiarola, the chief advocacy officer at ACP, chimed in to stress most of the investments are in red states.
‘Things are going to be changed’
It’s been an argument energy lobbyists of all stripes have been pushing on Capitol Hill — and they’ve found a receptive audience.
Earlier this month, a group of 21 House Republicans sent a letter to House Ways and Means Chair Jason Smith (R-Mo.) in support of the “sector-wide” energy credits intended to support traditional and renewable energy projects alike.
A recent analysis from Clearview Energy Partners, a research group, found that half of the 21 GOP lawmakers backing the IRA won their 2024 election by fewer than 10 percentage points.
And two — Reps. Don Bacon (R-Neb.) and Mike Lawler (R-N.Y.) — are from districts that former Vice President Kamala Harris won in November. Clean energy lobbyists hope that vulnerability will work in their favor.
“The margins are so tight, particularly in the House,” said Heather Reams, president of the center-right group Citizens for Responsible Energy Solutions. “I find this very hard to believe that we’re not going to see a lot more of a measured approach.”
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.”
