A ‘Profound Mistake’: Senate Republican Rollback of IRA Clean Energy Tax Credits Would Cost Jobs, Raise Energy Prices and Bring More Climate Extremes

The United States Senate Committee on Finance has released draft legislation that would quickly end or scale back most major tax credits for clean energy, solar panels, electric vehicles (EVs) and other benefits provided by the 2022 Inflation Reduction Act (IRA).

The plan would get rid of a $7,500 EV tax credit for consumers within 180 days, along with home energy rebates for heat pumps and other products. A tax credit for rooftop solar panels would also expire six months after the legislation passed.

Chief Executive of America’s Clean Power Jason Grumet said the Senate bill “would increase household electricity bills and threaten hundreds of thousands of jobs across the country,” reported The New York Times.

Grumet predicted that “good paying jobs, technology innovation, and AI data centers will be driven overseas.”

Federal tax credits for solar and wind power would be quickly phased out, and companies would only qualify for the biggest tax credits if they start construction within the next six months. If they began construction next year, they would receive 60 percent, with the credits falling to 20 percent the following year. Projects built beyond 2027 would not get any tax benefits.

The Republican controlled Senate has released their Finance committee text. On energy policy, it improves slightly over the House bill — but it will still gut clean energy projects, killing jobs largely in Republican districts. This is a garbage bill. THREAD. 🧵 www.finance.senate.gov/tax-reform-2…

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— Leah Stokes (@leahstokes.bsky.social) June 16, 2025 at 5:46 PM

Tax breaks for power sources like nuclear, geothermal and hydropower would be phased out in 2036, a summary of the bill said.

“It appears Senate Finance has taken this bill from a flat D to a solid D+ for the clean energy industry,” said Ethan Zindler, a BloombergNEF analyst and U.S. Treasury Department official during the Biden administration, as Bloomberg reported. “And that may be with a bit of grade inflation factored in.”

The Senate draft preserves renewable energy tax credits slightly longer than the House version, which would have done away with them almost immediately, reported The New York Times.

Under the IRA, 10 percent of refining or recycling costs for critical minerals were covered by a permanent tax credit, Heatmap reported.

However, the Senate changes start phasing out the critical minerals tax credit beginning in 2031, with 75 percent able to be claimed that year, half in 2032 and a complete end to the credit in 2034.

“In practice, this means that the Senate GOP text would end the IRA’s permanent tax credit for producing many critical minerals, which would damage the financial projects of many mineral processing and refining projects,” Heatmap said.

The new Senate version of the legislation expands slightly the type of qualifying battery components.

Overall, the Senate phaseout of clean energy tax credits is faster than many supporters of the technologies had hoped, with some analysts warning that electricity prices could increase due to the changes, reported The New York Times.

The new draft would make companies that lease solar energy ineligible for federal tax credits. Analysts say this change could lead to a sharp decline in the rooftop solar market.

“This is worse than I thought it would be,” said Sam Ricketts, co-founder of clean energy consulting group S2 Strategies, as The New York Times reported. “I was expecting senators who had purportedly supported the clean energy industry to step forward and make a mark here and improve the bill in a material sense. They have not done that.”

FACT SHEET: The “Baseload Fallacy”: Undercutting Wind, Solar, and Batteries While Supporting Nuclear and Geothermal Won’t Protect the Grid—Or Families’ Energy Bills, from @ClimatePower climatepower.us/news/fact-sh…

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— Sam Ricketts (@samtricketts.bsky.social) June 17, 2025 at 10:14 AM

While no Republicans voted for the IRA in 2022, almost 80 percent of the $841 billion-plus clean energy investments that have been announced since have gone to Republican districts in states like Georgia and Wyoming.

Clean energy groups and Democrats called the new Senate draft a disaster, saying the plan would destroy manufacturing and jobs all over the country while driving up the cost of energy.

The changes to the IRA would also make meeting the country’s goal of cutting emissions by at least half below 2005 levels by the end of the decade virtually impossible.

“This bill would endanger hundreds of thousands of clean energy jobs and take food out of the mouths of millions of children,” said Oregon Senator Ron Wyden, the leading Democrat on the Senate Finance Committee, as reported by The New York Times.

Ari Matusiak, chief executive of nonprofit Rewiring America, called the Senate package a “profound mistake.” Matusiak pointed out that in 2023 more than 3.4 million U.S. homes used the residential clean energy and energy efficiency home improvement credits to make upgrades.

Jackie Wong, the Natural Resources Defense Council’s senior vice president for climate and energy, referred to the revised package as “a 20-pound sledgehammer swung at clean energy,” adding that it “would mean higher energy prices, lost manufacturing jobs, shuttered factories, and a worsening climate crisis.”