The Inflation Reduction Act (IRA) is Joe Biden's signature climate law. It incentivised clean-energy investment through uncapped tax credits, including a "transferability" provision that allowed companies with a wide range of tax liabilities to invest in clean energy. The original law's subsidies were designed to phase out between 2029 and 2032.
Under the IRA, America was on track to slash its greenhouse-gas emissions by 40% from their 2005 level by 2035, according to the Rhodium Group, a research firm. The Cato Institute, a libertarian think-tank, warned that the IRA's uncapped provisions could cost $4.7trn by 2050.
In 2025 House Republicans passed a draft budget bill that would trim roughly 60% of the IRA's tax credits, saving an estimated $515bn by 2034, according to the American Action Forum, a conservative think-tank. Donald Trump pressured wavering Republicans, threatening dissenters with primary challenges.
Three provisions stand out. First, the bill kills transferability, even for technologies generally favoured by Republicans such as nuclear power and carbon capture. Second, provisions regarding "foreign entities of concern"—meaning China—are written with calculated vagueness: credits appear denied if "any component, subcomponent, or applicable critical mineral" has forbidden foreign connections, guaranteeing years of regulatory confusion. Third, the bill changes the timing of payments so that projects earn credits only after operations begin rather than when construction starts, adding years of delay given the vagaries of permit-granting.
The One Big Beautiful Bill Act, signed in July 2025, largely rescinded the IRA. Tax credits for wind and solar energy will soon stop. Subsidies for electric vehicles, heat pumps and other energy-efficient building expenses will also be cut off. The Senate made the withdrawal of the credits marginally less abrupt than the House version, but clean-energy projects must still begin construction within a year to receive tax credits. Zero Lab, a research group at Princeton University, estimated the legislation will increase America's carbon-dioxide emissions by 500m tonnes in 2030, roughly 10% more than would have been emitted in the bill's absence.
Without the IRA, America may still manage a greenhouse-gas reduction of nearly 30% below its 2005 level by 2035. State-level regulations such as renewable portfolio standards will continue to drive clean-energy deployment, and unsubsidised renewables already compete with or beat new fossil-fuel plants in many parts of America. The Rhodium Group projects 342GW of renewable capacity will still be added by 2035—producing as much electricity, after accounting for intermittency, as roughly 100 nuclear plants.
In 2024, 90% of new power capacity in America came from carbon-free sources, with solar panels alone accounting for over three-fifths of new installations. In March 2025 over half of all American electricity came from non-fossil sources for the first month on record. (20250524, 20250802)
The One Big Beautiful Bill phases out IRA tax credits for solar, wind and green hydrogen by 2027-28 but maintains credits for batteries, nuclear and geothermal. Because developers who start projects before July 2026 and complete them rapidly still earn credits, BloombergNEF (BNEF) expects more than 50GW of solar installation in both 2026 and 2027. After that, additions fall sharply. The Rhodium Group expects clean-energy generation additions between 2025 and 2035 to be 57-62% of what would have occurred under IRA policies. An estimated $500bn in planned renewables investment will be redirected elsewhere.
BNEF projects that after the post-OBBB crash, annual renewable additions will start climbing again, with 94GW of additional renewable generation and storage added in 2035—more than any year to date—supported purely by cost advantages rather than subsidies.
The most costly of all follies is to believe passionately in the palpably not true. It is the chief occupation of mankind.