President-elect Donald Trump’s pick to head the Treasury Department puts the fate of Biden-era clean energy tax credits up in the air.
Hedge fund manager Scott Bessent — whom Trump tapped for the position Friday — has called the Inflation Reduction Act a “doomsday machine for the budget.” That aligns him with Trump, who has pledged to rescind unspent money from a law he calls the “greatest scam in history.”
As Treasury secretary, Bessent would be able to rewrite or reverse some of the law’s valuable tax provisions, which were designed to boost renewable energy and other emerging technologies like hydrogen, carbon capture and electric vehicles.
Cutting those tax credits could offer a political win to conservatives who say the Biden administration is skewing prices in the energy market. It could also offset some of the cost of extending the multitrillion-dollar tax cuts Trump implemented in 2017 — and which are set to expire next year.
The question, however, is how much capital the Treasury Department wants to spend on the IRA’s credits, which have bipartisan support.
“I expect that they’re going to be pretty hostile, but I don’t expect that the IRA is going to be repealed,” said David Victor, a professor of innovation and public policy at the University of California, San Diego. “There are a lot of tweaks to be done at the margin, but doing a wholesale repeal of a lot of the tax credits could be difficult.”
If confirmed, Bessent could influence how the government steers money to industries like “clean” hydrogen, which is awaiting final guidance on how companies can apply for lucrative IRA tax credits. That guidance could determine whether the nascent industry spikes emissions or supports fossil fuels. Bessent could also play a major role in executing Trump’s plans to raise tariffs, which could have major effects on industries ranging from solar to steel.
Bessent, who would be the first openly gay Treasury secretary, is the founder of the Key Square Group hedge fund and previously worked for Soros Fund Management, the hedge fund run by liberal donor George Soros. Bessent is also a Trump donor who served as an economic adviser during the presidential campaign, acting as public spokesperson for Trump’s economic plans.
In an interview with CNBC the day after the election, Bessent said the administration would juice the economy through “deregulation, energy dominance and reprivatizing the economy.” He has previously called for more robust oil drilling as an economic stimulus.
In a statement Friday, Trump said Bessent would “work to create an Economy that places Growth at the forefront, especially through our coming World Energy Dominance.”
What’s next for the IRA?
While the Trump administration will be unable to claw back already-spent IRA funds — such as those awarded through grants and loans — it could undo some of the law’s tax provisions.
Through the IRA, the Biden administration sought to use the tax code to help remake the energy and industrial sector. The roughly $527 billion in tax incentives for low-carbon energy were designed to help large-scale wind and solar projects get built and to boost emerging sectors like hydrogen fuel and sustainable aviation fuel. Other language in the law boosts tax credits for projects that use union labor or rely on domestically-produced iron and steel.
“I don’t think you can understate how important the IRA has been for the energy industry,” said Lauren Collins, a partner at Vinson and Elkins who works with renewable energy developers. “I don’t know how much of that you’ll be able to stop. But has there been a chilling effect over the past few weeks? For sure.”
The long list of tax credits and policy goals embedded in the IRA left much of the implementation work up to the Treasury Department, which has been steadily rolling out guidance and rules.
Aviva Aron-Dine, the acting assistant secretary for tax policy, told reporters on Oct. 1 that the department had issued 75 pieces of IRA-related guidance. Others have come out since then, including a high-profile tax credit for clean energy manufacturing.
At the time, Aron-Dine said the Biden administration planned to finalize regulations for “a number of key provisions that are especially central to the IRA’s climate and economic goals,” including technology-neutral clean energy tax credits for zero-emissions technology and the investment tax credit for clean energy projects that begin construction before the end of this year.
Any rules that have not been finalized by Jan. 20 will be left to the incoming Trump administration to either rewrite or undo entirely.
Even those that are finalized, however, could be reopened by the Trump administration to put them more in line with its agenda. The hydrogen production tax credit, for instance, could be rewritten to reward projects that use fossil fuels, rather than renewable energy production.
Finalized rules would require a new rulemaking process to unwind. That can be a lengthy process — and one that could throw the energy industry into even more turmoil as companies try to meet skyrocketing demand as well as government and corporate commitments to cut planet-warming emissions.
“Investors want certainty, they want to know whether their projects will qualify for tax breaks or not,” said Aaron Bergman, a fellow at Resources for the Future and a former Department of Energy official. “Rewriting the tax guidance could create a lot of uncertainty for what is a significant revenue stream.”
Collins, the Vinson and Elkins lawyer, said that developers have been especially interested in getting their projects financed or beginning construction soon, to make sure they don’t lose their potential tax benefits.
Executives from across the energy industry have cautioned that the tax credits are also helping jump-start costly projects — and that reversing policy could risk upsetting the market.
In an interview with POLITICO, Exxon CEO Darren Woods said the incoming Trump administration should strive to offer the industry “certainty.”
A group of 18 Republican House members urged Speaker Mike Johnson (R-La.) this summer to maintain the IRA tax credits to ensure “business and market certainty.”
“Prematurely repealing energy tax credits, particularly those which were used to justify investments that already broke ground, would undermine private investments and stop development that is already ongoing,” they wrote in an August letter. “A full repeal would create a worst-case scenario where we would have spent billions of taxpayer dollars and received next to nothing in return.”
