What’s to become of the Inflation Reduction Act? This singular piece of legislation, easily one of the most consequential in the last century in terms of federal investments in the private sector, will be in jeopardy when Donald Trump assumes the presidency in 2025. To what extent is of course a matter of debate and conjecture.

Since the election, many authorities on the IRA have expressed one of two things: sheer dread at the prospect of the incoming administration rolling back some of the law’s more popular programs, like tax credits for EVs and consumer rebates for heat pumps; or that such attempts will prove to be such a political and legislative nightmare that Trump will leave well enough alone.

The likelihood of either scenario playing out as such (or some variation/combination of the two) will depend on several factors, but none more so than how popular the IRA’s clean energy investments prove to be with businesses, manufacturers, and legislators in red states. But before we dive into what the law has accomplished for the home and clean energy sectors to date and speculate on which provisions will have a target on them, it’s worth making this proclamation for posterity: the IRA will not be repealed.

“We write to urge you to prioritize business and market certainty as you consider efforts that repeal or reform the Inflation Reduction Act,” reads an August 2024 letter sent to Speaker Mike Johnson and signed by 18 Republican members of Congress. “Energy tax credits have spurred innovation, incentivized investment, and created good jobs in many parts of the country,” it continues.

There is nothing in the letter to suggest its authors offer a sweeping endorsement of the IRA, top to bottom. But judging from the sentiment and their numbers, and by the fact that they’re speaking on behalf of their districts, it’s clear that reversing the law would be borderline impossible.

What has the IRA accomplished?

In a word, much. When accounting for everything since the law passed in August 2022, the IRA has injected more than $160 billion into investments in clean energy production and industrial decarbonization. This extends to utility-scale solar, wind energy, distributed renewable generation, scalable energy storage systems, emerging climate technologies, and zero emission vehicles, among other examples.

And of course, on the home front, there is the matter of residential efficiency tax credits (aka the 25C credit), tax credits for zero energy ready homes (aka 45L credit), the Department of Energy’s in-progress Home Energy Rebate program, various state and utility rebates for home energy efficiency upgrades, and grants and related initiatives under the Environmental Protection Agency’s $27 billion Greenhouse Gas Reduction Fund.

The dividends from all the above are manifold. Recent figures provided by Clean Investment Monitor revealed that American businesses and households invested more than $242 billion in clean energy and efficiency upgrades since the law’s passage, representing a 58% increase from the previous two-year period (2020-2022). Using those same time frames, the purchase and installation of residential and commercial rooftop solar and battery storage saw a 40% increase. Findings also reveal an estimated $78 billion in federal investments for tax credits, grants, and loan guarantees between 2022-2024, while “private spending in those technologies over the same time period was 5-6 times larger than public investment.”

In other words, this unprecedented federal spending into clean energy and all that entails has indeed spurred enormous investment on the part of the private sector, businesses and private citizens alike. Add to which, according to a recent report from E2, a non-partisan group of business leaders, “nearly 60% of the announced projects [through two years of the IRA] – representing 85% of the investments and 68% of the jobs – are in Republican congressional districts. This despite the fact that no Republican voted for the legislation.” (When combined with other signature legislation from 2022, including the CHIPS Act and Bipartisan Infrastructure Law, investments from the private sector have reached $1 trillion.)

“People would feel hard pressed to turn that away,” says José Reyna, executive director of GreenHome Institute. “From that perspective, the business case for maintaining provisions for home energy tax credits and other things could be made, besides the environmental case.”

What if consumer incentives go away?

Here is where we enter the realm of the possible, even likely. While certain members of Congress who are mindful of their tax base, Republican or otherwise, would likely thwart any attempt to kill a law that has created jobs and bolstered infrastructure investments, there is no guarantee they would protect provisions that amount to federal subsidies for residential heat pumps and solar panels.

“The incoming administration has made no secret that they’re going to be rolling back certain protections,” Reyna says. The potential gutting of the EPA under Lee Zeldin, Trump’s current pick to lead the agency, has pretty much everyone in the clean energy industry worried as well.

If certain incentives in the form of consumer rebates and tax credits do get the axe, Reyna believes our best recourse is “the prescriptive approach.” “People will have to do the right thing,” he says, and that includes contractors advising their clients (i.e., homeowners) on the energy and cost savings they will see – the former sooner than the latter – upon initiating critical upgrades to their homes. And if that technique doesn’t work, he says that push back may be necessary. “Contact your legislators and tell them, this will hurt our bottom line!”

“The reality is, we are just barely out of the gate with the IRA, and rescinding these programs and tax credits would be taking away the opportunity of our most vulnerable to benefit financially from more efficient homes,” says Christopher Kessler, a Maine State Representative (District 121) and energy advisor for Evergreen Home Performance. Somewhat optimistically, Kessler takes solace in the fact that his state is “in a decent position” to provide such incentives since various funding sources operate independent of the federal government.

For things like the DOE’s Home Energy Rebates program, which to date only ten states (Maine included) and the District of Columbia have funds available, there is now a sense of urgency. Kessler says, “I am told federal employees are working overtime to get through these final approvals and transfer funds before the new administration begins.”

Kessler’s perspective reveals one possible outcome within the next administration. “Let the states decide,” Trump has said. (He was talking about a different issue.) As uncertain the road ahead is for the IRA, to say nothing of how Investment Tax Credits and Production Tax Credits as defined by the law will be impacted once the next Congress amends the federal tax code, it is likely that home efficiency tax credits and rebates, as well as other broad decarbonization initiatives, will left to the states.

Tangential issues

Along with the IRA, CHIPS Act, and Infrastructure Law, one key measure enacted by the Biden administration was the invoking of the Defense Production Act, a law that grants the president powers to “ensure the nation’s defense by expanding and expediting the supply of materials and services from the domestic industrial base.”

In 2020, Trump used the law to spur production of personal protective equipment; in 2021, Biden used it to speed up production of Covid vaccines; and in 2023, Biden used it again to “turbocharge U.S. manufacturing of heat pumps,” according to Ali Zaidi, Biden’s national climate advisor.

The ‘Made in America’ label has become an important tool within the IRA, and rightfully so. It is a climate policy grounded in principles of economic nationalism. As more production facilities come online, whether for air-source heat pumps, geothermal equipment, EVs, or something else, they will require more workers to manufacture these products, transport them, install them, and maintain them. This outlook also speaks to the Biden administration’s motivations for launching the American Climate Corps, impressing upon the Federal Energy Regulatory Committee (FERC) to issue a new transmission and cost allocation rule, and much more.

But not every heat pump (or solar cell or turbine or piece of HVAC equipment) will be 100% local. U.S. imports of refrigerator freezer and heat pump parts hit an all-time high in October 2022, with a value of over $133 million, according to U.S. Census Bureau data. Imports peaked again in October 2023 and January 2024, at $112 million and $115 million, respectively.

Globally, the top three exporters of heat pumps are China, South Korea, and Mexico, who respectively represent the U.S.’s third, sixth, and second biggest trade partners. And if the incoming administration follows through on its promise to raise tariffs on imports from some of our biggest trade partners, it could place significant financial strain on clean energy businesses, contractors, builders, and consumers.

According to Reyna, whose professional background is in public finance, “the U.S. has been very intentional in its trade relations, whether it’s with the Pacific Rim, the EU, or within our own continent. I think imposing any new tariffs, any sort of isolationist [trade policy] would be damaging, not just to the environment, but for the economy in general.”

He mentions countries like South Korea, India, and Germany, among others, as important centers of technological innovation. To effectively cut ourselves off from these pipelines would be counterintuitive, he says. “We can’t exist in a bubble. In a global economy, you will not succeed.”

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