President Donald Trump signed the One Big Beautiful Bill Act (OBBBA) into law on July 4, radically reforming the American energy and industrial policies shaped by his predecessor’s 2022 Inflation Reduction Act (IRA).
While the new bill delivers targeted wins for clean energy technologies like geothermal and nuclear—largely by not rolling back IRA provisions—it slashes key IRA tax incentives for solar and wind generation, green hydrogen production, electric vehicles (EVs), and home electrification. It also tightens restrictions around foreign investment and procurement, which threatens domestic clean tech manufacturing and disrupts already strained supply chains.
The one energy sector the OBBBA unequivocally supports? Fossil fuels, with expanded access to public lands, tax breaks, credits, and regulatory rollbacks—not to mention a handicap on their biggest competitors, solar, wind, and electric vehicles.
The Legacy and Lost Potential of the IRA: Clean Energy Deployment, Electrified Homes, Job Creation, and On-Shored Supply Chains
To fully grasp the significance of the IRA (and by extension, the impact of the OBBBA) we need to revisit the scale of the repealed legislation. Innocuously titled “Inflation Reduction Act,” and passed through the fast-tracked legislative process of budget reconciliation, the bill delivered the single largest federal push for decarbonization in US history.
It offered broad production and investment tax credits for clean energy, plus targeted support for green hydrogen, carbon capture, nuclear, and consumer incentives for EVs and residential solar.
Learn more about Columbia Business School’s Climate Knowledge Initiative
The IRA spurred capital investment and generation buildout in the already-thriving solar and wind industries. And for less mature technologies like green hydrogen, carbon capture, and next generation nuclear, the IRA meant an opportunity to achieve cost-competitiveness.
Increased renewable energy generation means less climate change-inducing greenhouse gas emissions, but the impact of the bill went beyond climate. It helped re-shore manufacturing, created jobs—especially in Republican-led states—and laid the groundwork for secure, domestic supply chains across energy sectors.
At the time, Goldman Sachs Research estimated demand for federal tax credits to the tune of $1.2 trillion spurring $2.9 trillion in total spending over the first decade and over $10 trillion by 2050. Those investments, in turn, represent a win-win-win for the climate, the US economy, and the world.
What Comes Next for the Clean Energy Transition?
Even without federal support, solar and wind are economically unstoppable. Pre-IRA, these technologies were already cost-competitive with fossil fuels and being deployed at scale, fast.
Learn more about Columbia Business School’s Climate Knowledge Initiative
Batteries, too, are quickly becoming cost competitive, in part climbing the learning curve faster than even solar power of late. Even—or especially—a look at Texas’s rapidly transforming power mix confirms this picture.
With the Investment and Production Tax Credits (ITC and PTC) for solar and wind being phased out by 2026, we will likely see a brief spike in projects for the next 18 months as they race to be placed while still eligible, then a deceleration.
The silver lining on the clean-energy front: Both nuclear and geothermal, long trailing behind solar and wind, get a lifeline under the OBBBA. Unlike for other renewables, ITC and PTC incentives are fully preserved for new nuclear and geothermal, as well as the nuclear production credit for existing nuclear plants.
Battery storage also retains its ITC incentives under the OBBBA, marking a partial reprieve for solar and wind technologies. But all three will face new barriers from the “foreign entity of concern” (FEOCs) limitations, which restrict access to critical materials—key inputs in battery production and other renewables.
The 45Q tax credit for carbon sequestration is also preserved under the OBBBA, with increased support for enhanced oil recovery (EOR). While technically a form of carbon storage, EOR keeps fossil infrastructure alive longer and can crowd out support for carbon capture deployment for hard-to-abate sectors like cement, steel, and chemicals, where it could be truly transformational.
The Big Loser: Manufacturing and, by Proxy, American Competitiveness
The OBBBA deals its biggest blow to US manufacturing. The IRA’s Advanced Manufacturing and Advanced Energy Project Credits jumpstarted domestic battery, solar panel, and wind turbine production, creating jobs, protecting supply chains, and decreasing reliance on Chinese imports.
By sidelining clean tech in favor of fossil fuel interests, American competitiveness and energy security is another casualty of the current administration’s energy policy. While the OBBBA supports deployment of nuclear, geothermal, and carbon capture, it lacks direct funding for research and development of next-generation technologies, a gap formerly filled by Department of Energy (DOE) grants for First-of-a-Kind (FOAK) projects. With cuts to funding for these initiatives, the United States will only fall further behind in the global clean energy race.
The Big Winner: China
In 2024, China invested $818 billion of the $2.1 trillion that went into the energy transition. That represents 40% of the total, and more than the US, EU, and UK combined. It got a head start in the development and deployment of technologies, and remains the uncontested leader. The IRA gave the United States a much-needed boost. But without it, the country will likely fall further behind.
This policy seesaw alone will cause further harm to the US investment climate. Companies will be hesitant to invest given shaky policy grounds. Global investors will look to Europe, where the Green Deal remains largely intact, or to China, where subsidies are consistent and massive.
Raw economics favor clean energy, decisively. The Trump Administration putting its thumb on the scale of fossil fuels will mean short-term profits for polluting industries, but it also means long-term harm to the US economy. The global clean-energy transition will continue, leaving the United States further behind.
We thank Mariana Castaño, Nicolas Herrera Isaza, and Ariela Farchi Behar for research and analysis supporting this article.
