U.S. Energy Policy Update
President Trump signs H.R.1 One Big Beautiful Bill Act becomes Law
Three years after the Inflation Reduction Act (IRA) was passed, the U.S. House of Representatives passed sweeping legislation that threatens to undo much of its clean energy agenda. The bill, known as the “One Big Beautiful Bill Act,” aims to dismantle many of the tax incentives that have supported the rapid growth of solar, wind, and battery storage projects in the United States since 2022.
On Tuesday, July 1st, after an extended voting session, the Senate passed its amended version of the bill by a 51–50 vote, with Vice President JD Vance casting the tie-breaking vote. The Senate version included several new provisions, many of which were even more aggressive than the original House bill, including expanded incentives for fossil fuels and deeper cuts to clean energy programs.
On Thursday, July 3rd, the House voted again to pass the Senate version, and on Friday, July 4th, US Independence Day, President Trump signed the bill into law.
The Road to Repeal - IRA Rollback Timeline (May–July 2025)
- Late May
The United States House of Representatives passes H.R.1 (“One Big Beautiful Bill”) - July 1
The United States Senate passes an amended version of the bill (51–50, tie broken by Vice President Vance) - July 3
The House of Representatives (despite the concerns of deficit hawks) approves the Senate version (218–214) - July 5
President Trump signs the bill into law
Key Rollbacks
Department of Energy (DOE) Loan Programs
The final OBBA made deep, targeted cuts to several major clean energy loan programs, well beyond the original reductions contained in the House version of the bill.
The cuts included:
- $3.6B from the Title 17 Loan Guarantee Program, which funds innovative clean energy technology projects.
- $3B from the Advanced Technology Vehicles Manufacturing (ATVM) Program, which supports American EV and component manufacturing, such as EV batteries.
- $5B from the Energy Infrastructure Reinvestment (EIR) Program, which helps repurpose fossil infrastructure (e.g., turning a coal plant into a battery storage site).
- Full elimination of the Tribal Energy Loan Guarantee Program, which helps fund Native American–led clean energy projects.
With billions slashed from DOE loan programs, the final bill is likely to stall new projects in battery tech, EVs, and tribal clean energy.
Elimination of IRA Clean Energy Grant Programs
In addition to loan program reductions, the final bill aggressively targets IRA grant programs, stripping billions in funding for large-scale deployment and community-based initiatives:
- The Greenhouse Gas Reduction Fund (GGRF) - A $27B EPA program designed to finance clean energy and emissions reduction projects, especially in low-income communities.
- Multiple DOE clean energy and transmission deployment grants, these programs focus on large-scale clean energy infrastructure and grid modernization efforts.
Methane Fee Delayed Indefinitely
While the House preserved a delayed start to the IRA’s $900/ton methane emissions fee, the Senate bill removes it entirely, which creates regulatory uncertainty and a setback for emissions reduction efforts.
Notably, this fee was the first federal charge on greenhouse gas emissions in U.S. history. Eliminating it removes a key financial penalty for methane emissions, which are more than 80 times more potent than carbon dioxide (CO₂) over a 20-year period, making methane a major short-term climate exacerbator.
Biofuels Tax Credit Extension Scaled Back
The House version extended the Section45Z biofuels production credit through 2031 (a 4-year extension), while the Senate reduced that to 2029, offering just a 2-year extension beyond the IRA’s original 2027 expiration.
EV Tax Credit Repealed After September 2025
The Senate version fully repeals the $7,500 EV tax credit for purchases after September 30, 2025, eliminating a central IRA incentive and potentially weakening EV adoption in the United States.
Corporate Average Fuel Economy (CAFE) Credit Elimination
The final bill eliminates civil penalties for automakers failing to meet fuel economy standards, ending enforcement for future model years. This removes a major compliance incentive, allowing inefficient vehicles to re-enter the market without consequence. As a result, the CAFE credit market is effectively dismantled, cutting off a key revenue stream for EV leaders like Tesla, who previously sold credits to high-emitting manufacturers such as GM, Ford, and Stellantis.
The final bill scales back key clean energy support from biofuels to EVs, signaling a shift in federal climate priorities.
New Fossil Fuel Measures
While key clean energy measures were rolled back, the final bill also includes several new Senate-driven provisions that expand fossil fuel development and shift investment policies:
Expansion of Oil & Gas Leasing Mandates
The OBBBA requires 30 offshore lease sales in the Gulf of Mexico (two per year over the course of 15 years), six lease sales in Alaska’s Cook Inlet, and quarterly onshore lease sales in key Western states. The purpose behind this is to offer more land and water for oil and gas drilling, thereby guaranteeing more development in the future.
New Fees on Wind & Solar Projects on Federal Lands
The Senate added acreage-based rents and capacity fees for renewables on federal lands, creating a new cost burden for developers.
Creation of DOE’s “Energy Dominance” Financing Authority
Replaces Section 1706 with a $1B loan program focused on fossil, nuclear, and critical minerals. This new program excludes projects that already receive other forms of federal support and reflects a shift away from a focus on clean energy. This represents a significant shift from clean energy investment to traditional energy sources.
Expanded Royalty Cuts and Fossil Fuel Deductions
The Senate repeals the IRA’s methane royalties, meaning oil and gas companies no longer have to pay extra for leaking methane.
Additionally, the coal royalty rate is cut to 7%, allowing companies to pay the government less for mining coal on public lands.
Lastly, the Intangible Drilling Cost (IDC) deduction will be restored, letting fossil fuel companies claim major tax write-offs for expenses such as labor and supplies used in drilling.
Strategic Petroleum Reserve (SPR) Refill Funding Sharply Reduced
SPR refill funding will be reduced from $1.3 billion in the House version to just $171 million in the final bill, weakening support for energy security goals.
The final bill strengthens fossil fuel economics, cutting costs while weakening funding for emergency reserves.
Clean Energy Provisions Preserved or Softened
While many clean energy provisions were rolled back or eliminated, few key measures were preserved or slightly softened in the final bill:
Excise Tax on Renewables Removed
The House version introduced a new excise tax on wind and solar projects, which would have imposed significant additional costs on developers. The final law eliminated this provision entirely, removing a major financial burden from renewable energy developers.
Wind & Solar Tax Credit Phaseout Slightly Softened
While both the House and Senate versions accelerate the rollback of tax credits compared to the original IRA timeline (which extended through 2032), the Senate offers slightly more flexibility: projects qualify if they either begin construction before June 30, 2026, or are operational by December 31, 2027, offering two paths instead of the single hard cutoff set by the House at December 31, 2028.
Hydrogen (45V) Tax Credit Deadline Extended
The House proposed ending eligibility for the $3 per kg clean hydrogen credit (Section 45V) after 2025. The Senate extended the construction-start deadline to January 1, 2028, giving hydrogen developers more time and flexibility to secure the credit.
Analysis and Comments
The OBBA, signed by President Trump, represents a significant shift in U.S. energy policy. Former President Biden’s IRA made renewable energy a priority and incentivised corporations to make long-term investments in renewable technology and generation. The volte-face by the current administration will have the opposite effect.
While some provisions of the IRA did survive the OBBA, most were watered down or rolled back. Moreover, the Trump administration sent the market a clear signal that it prefers traditional fossil fuel industries (oil, natural gas, and coal) over renewable ones.
One of the main issues that the US may confront as a result of the OBBA’s slashing of renewable energy benefits is that the country will most likely experience a reduction in utility-scale wind and solar projects and resulting electricity generation at the very time the country needs more to feed energy-intensive industries like manufacturing and technology (AI). Over the past 10 years (2004 - 2024), solar electricity generation has increased tenfold to 218 million MWh.
It is unlikely that the US will build and place in service any new (not existing restarts) nuclear power generation in the next 10 years due to the timing of permits and construction. In July 2023, the US commissioned its first new nuclear power plant (in Georgia) in past thirty years. This plant was originally approved in 2009 and was scheduled for completion in 2016. Clearly, this is not an encouraging example.
From an electricity generation standpoint, the most likely outcome is that the US will see an even greater reliance on natural gas-fired generation. Today, over 40% of the country’s electricity is generated using natural gas (up from 30% ten years ago). Assuming turbines can be sourced on a timely basis (there have been news reports that wait times for new turbines is more than 5 years), we believe this figure is set to increase, which, along with expanding LNG exports, will result in a progressive increase in the domestic price of natural gas (and electricity) in the coming years.
Key Takeaways
The OBBA will be a positive for the domestic oil and gas industry and is clearly intended to maximise production. However, it is important to note that investment in these industries will continue to be heavily influenced by international crude and LNG prices.
The elimination of EV tax credits and civil penalties under CAFE standards removes key incentives for fuel efficiency. This dismantles the CAFE credit market and weakens electrification efforts, allowing legacy automakers to delay progress without consequence.
The OBBA offers no new support for grid modernisation or clean energy deployment. It introduces long-term regulatory uncertainty across the electricity sector, slowing decarbonization efforts and creating hesitation for utility investment.
The law will most likely reduce the rate of growth in renewable generation and increase the country’s reliance on natural gas (and possibly a modest resurgence in coal). The consequence will be increasing electricity and natural gas prices as manufacturing and technology (including AI) demand continue to expand.