Policy and Subsidy: From the IRA to Its Rollback

On 16 August 2022 President Biden signed the Inflation Reduction Act. Most of its energy provisions were tax credits, and most of the credits were open-ended: any qualifying project or factory could claim them, without a budget cap, for about a decade. Clean electricity, whatever the technology, would earn a production credit (45Y) or an investment credit of 30% of capital cost (48E), with bonuses for domestic content and for sites in "energy communities". Factories would earn a credit per unit made in the United States (45X): 7 cents per watt for a solar module, $35 per kilowatt-hour for a battery cell. Existing reactors would earn up to $15/MWh when prices were low (45U); clean hydrogen up to $3 per kilogram (45V); carbon captured and stored $85 a tonne (45Q); a new electric car up to $7,500 for its buyer (30D). Crucially, most of the credits could be sold for cash to any taxpayer under a new transferability rule, so a developer no longer needed a bank with a large tax bill to use them.

Capital followed. Announced US investment in clean-technology manufacturing surged, much of it in Republican-held districts (Clean Investment Monitor and others, reported). Utility-scale solar and storage additions set records in 2023–25 (EIA). A market for transferred credits grew to about $42 billion in 2025 (Chapter 14), and First Solar, the largest US solar manufacturer, turned its 45X manufacturing credits into cash every year. Constellation and Vistra, whose nuclear fleets now had a floor price under 45U, were re-rated from declining merchant generators into growth stocks (Chapter 11).

Three years later, on 4 July 2025, President Trump signed the budget law known as the "One Big Beautiful Bill Act", Public Law 119-21. It kept most of the IRA's structure and cut its reach. Wind and solar projects would earn 45Y or 48E only if construction began by 4 July 2026 or the project was placed in service by 31 December 2027. Consumer credits for electric vehicles ended for vehicles acquired after 30 September 2025, and the 25D credit for homeowners' rooftop solar and batteries for spending after 31 December 2025. Hydrogen projects would have to begin construction before 1 January 2028. Three days after signing, an executive order told the Treasury to tighten the rules on when construction "begins"; Notice 2025-42, in August, removed the long-used safe harbour under which a developer could start construction by spending 5% of a project's cost, leaving only a test of physical work for wind and solar starting on or after 2 September 2025 (with an exception for solar of 1.5 MW or less). On 6 June 2026 a federal court in Washington vacated the notice (Oregon Environmental Council v. IRS), which restored the 5% safe harbour for now; whether the government will appeal or reissue the rule was unconfirmed at the time of writing. The statutory dates, 4 July 2026 to begin construction and 31 December 2027 to be placed in service, were unaffected. The US share of new-car sales tha