Congress Could Unravel Biden’s Climate Law. Here’s What to Watch

The Republican-led House of Representatives has narrowly passed a giant tax and spending bill that would end Inflation Reduction Act subsidies for clean power years early.

The proposed changes threaten to unravel a variety of incentives that would result in higher prices for everything from electricity to solar panels.

The bill now goes to the Senate, where it will most likely undergo changes. Here’s what to know about what’s in the passed version of the House bill and how it might change in the Senate.

What are potential economic consequences?

A full repeal of the Inflation Reduction Act would cut GDP $1.1 trillion, cost hundreds of thousands of jobs and spike consumer energy bills, according to think tank Energy Innovation Policy & Technology.

While a number of clean energy projects would get canceled if the House bill passes in its current form in the Senate, others would re-negotiate contracts with utilities or corporate offtakers, according to BloombergNEF’s Americas Head Ethan Zindler. “The result would inevitably be higher priced power in substantial parts of the US,” he said.

How does the House bill affect clean energy incentives?

Solar

The cost of installing solar panels on your home would soar under the House bill as it eliminates a 30% federal tax credit for residential solar systems at the end of the year. The legislation also rescinds a 30% tax credit for home battery storage systems. Even if you rent your solar array, the cost is likely to spike as the bill immediately scraps a tax credit for companies like Sunrun that lease systems to homeowners.

“If I could see a knockout punch for solar, it would be if all of a sudden systems got 30% more expensive and payback times got 30% longer,” said Reuben Ly, sales manager for A1 Sun, a family-owned solar installer in Berkeley, California.

Some Republicans in the Senate have objected to the wholesale gutting of the Inflation Reduction Act’s clean energy incentives. But if the date of the 17-year-old residential solar tax credit’s demise is uncertain, it seems apparent that its days are numbered, given Republicans’ vow to scuttle the incentive.

So if you’re thinking about going solar, now’s the time to find out if it’s possible to have panels installed by year end.

Heat pumps

If your fossil fuel furnace or water heater is on its last legs, it would be prudent to replace it now with a high-efficiency electric heat pump as the House bill revokes a $2,000 federal tax credit for the devices at the end of the 2025.

Electric vehicles

The $7,500 federal tax rebate for most electric vehicle purchases would end this year instead of 2032. Yet EVs may well maintain much of their momentum. Axing the federal tax credits would cut the EV share of new car sales in 2030 from around 48% to 42%, according to new research from Elaine Buckberg, a former General Motors economist now at Harvard University’s Salata Institute for Climate and Sustainability.

A large swath of EV buyers don’t qualify for federal rebates anyway, either because they make too much money or buy cars that are priced above payout thresholds. And three out of four buyers who received federal EV rebates would have bought an electric car anyway, according to a recent study by the National Bureau of Economic Research.

Still, there could be nasty little surprises in the near future. The House bill adds a $250 charge to registration fees for electric vehicles and a similar $100 charge to registration of hybrid vehicles, both designed to make up for lost gasoline tax revenue for non-fossil-fuel vehicles.

Which industries will be most affected if the House bill becomes law?

Solar already is suffering. Shares of Sunrun Inc., America’s biggest rooftop-solar company, fell as much as 42% on May 22 — the most ever in intraday trading. Equipment provider SolarEdge Technologies Inc. slid as much as 27%. NextEra Energy Inc., the biggest US developer of wind and solar projects, slid as much as 10.7%, the most since October 2023.

The House bill represents a “nightmare scenario for US clean energy advocates and defenders of the Biden-era IRA,” BloombergNEF analysts Ethan Zindler and Derrick Flakoll wrote in a May 22 note. The provisions that bar US projects from using components, subcomponents or even materials from China would make it nearly impossible for US solar and battery manufacturers to qualify for the tax incentives, they wrote.

How will investors react?

If passed by the Senate, the repeal of IRA credits would inject “significant regulatory and political risk” and undermine the US’s position as “the world’s leading destination for clean tech capital post-IRA,” said Alex Bibani, a senior portfolio manager at Allianz Global Investors in London.

“For investors, the message is clear: The US may no longer offer the reliable investment runway it did just months ago,” he said. “Project economics, supply chain commitments and capital flows may now pivot toward more stable jurisdictions like Canada or the EU unless clarity is quickly restored.”

How likely is the Senate to amend the cuts to clean energy incentives?

The Senate is expected to tweak the House’s move to gut the Inflation Reduction Act’s clean energy incentives, but how much remains an open question.

Senate Majority Leader John Thune told reporters that the Senate plans to write its own version of the bill and several GOP senators said they thought the phase-out of incentives, including for clean electricity and nuclear power, was too aggressive.

But given the House’s slim margin — Speaker Mike Johnson can only afford to lose a handful of votes to pass the legislation — major changes in the Senate may not fly.

“The Senate will have a mind of its own,” Senator John Curtis, a Utah Republican who chaired the Conservative Climate Caucus when he served in the House of Representatives, said in an interview. But he added: “We’re also very well aware that it’s a tenuous situation in the House and that will be respected.”

What effect have the clean energy credits had?

Inflation Reduction Act credits have helped drive hundreds of billions of dollars in new investment into manufacturing and wide-spread deployment of solar panels, electric vehicles and other emission reduction technology since the law’s passage in August 2022. Much of that has gone to Republican-leaning areas where labor and land costs tend to be cheaper.

Tax credits from the climate law have led to $321 billion in new private investment across 2,369 domestic clean-energy facilities, representing 4.7% of all US private investment in the first quarter of 2025, according to an analysis by Energy Innovation. An additional $522 billion of outstanding investment has been announced across 2,217 facilities, which is expected to create more than 680,000 operational and construction jobs, the research firm said in an analysis.

“Many of these announced investments are at risk of being cancelled if the Reconciliation text is passed as drafted,” the firm said.

What impact could this have on US emissions?

US greenhouse gas emissions peaked in the mid-2000s and have been more or less declining since then — though not nearly as fast as scientists worldwide say is needed to prevent catastrophic levels of global warming. US emissions stayed relatively flat in 2024. One big reason why President Joe Biden and Congress passed the IRA was to help drive down the nation’s emissions more quickly in the next decade.

That progress could be lost by unraveling those polices, leading to more climate pollution. Repealing the energy tax credits, for example, could increase emissions anywhere between at least 500 million metric tons to more than a gigaton in 2035, according to one estimate by the research firm Rhodium Group.

Photo: Contractors install solar panels on the roof of a home in San Jose, California. Photographer: David Paul Morris/Bloomberg