The “One Big Beautiful Bill Act” (OBBBA) makes sweeping changes to the current domestic energy policy landscape, reflecting the focus on clean energy tax credits which were one of the central policy debates in the negotiations from the onset.
Since the bill’s passage there have been a flurry of headlines pointing out the climate impacts of this legislation, notably that it is projected to increase U.S. greenhouse gas emissions by 470 million tons by 2035; equal to 7 percent economy-wide emissions increase above the original credits in place. Additionally, over the next decade this bill is expected to cost households and businesses more than $50 billion, while undermining half a trillion dollars in sorely needed investment for electricity and clean fuels production across the country.
And yet, there are two truths for clean energy evident here. While it is true that damages to the climate, economy and clean energy deployment are clear and incontrovertible, it is also true that a group of clean energy incentives were preserved through this partisan legislative process which solely relied on congressional Republicans advocating for them.
A Sledgehammer to Many Clean Energy Incentives
Electric Vehicles
The electric vehicle industry in the United States took a major blow as the 45W Commercial Clean Vehicle Credit, 30D New Clean Vehicle Credit, and 25E Used Clean Vehicle Credit were all terminated effective September 30, 2025. The 30C Alternative Fuel Vehicle Refueling Property Tax Credit closely follows with a June 30, 2026 termination date. The suite of electric vehicle incentives alone was projected to create more than 220,000 job-years, while saving U.S. drivers $12 billion in fuel costs over the next decade; all while strengthening the incentives for companies to invest in U.S. manufacturing.
Over the last 15 years China has driven two thirds of global growth in EV sales and manufacturing capacity as well as 80% of the growth in battery manufacturing capacity. The termination of these credits will only further cede global leadership in the sector to China.
Residential Energy Savings
Tax credits for residential improvements and upgrades including the 25D Residential Clean Energy Credit and 25C Energy Efficient Home Improvement Credit now end by December 31, 2025. The 45L New Energy Efficient Home Credit and 179D Energy Efficient Commercial Buildings Tax Deduction were also repealed effective June 30, 2026.
These incentives enabled taxpayers to save more than $990 per year on their utility bills with the 25C credit, and supported more than 240,000 domestic jobs. Dominick Zito, the co-owner of Florida Solar Design Group emphasized the localized impacts of these credit repeals: “It’s a dramatic effect, a huge detrimental effect on communities…If peoples’ solar businesses are down 30%, 40%, 60% (and) there’s no work, there is that much less work for employees.”
Manufacturing
The 45X Advanced Manufacturing Production Credit, an incentive for producing clean energy components like batteries, solar panels and even critical minerals, is now under strict Foreign Entity of Concern (FEOC) provisions with an earlier phaseout for wind components, which lose eligibility at the end of 2027. The 45X credit has already spurred $186 billion of private investment, creating more than 165,000 new jobs – largely in the EV battery and manufacturing sector – which are now at risk due to these and other changes to the tax code in the OBBBA.
Clean Electricity
The 45Y and 48E Clean Electricity Production and Investment Tax Credits were enacted to provide technology neutral incentives for the deployment of zero-carbon electricity sources, until the latter of 2032 or when the U.S. power sector reached a 75 percent emissions reduction from 2022 levels. The addition of strict Foreign Entity of Concern (FEOC) provisions and an aggressive, early phase-out schedule for wind and solar eligibility for these credits in the OBBBA will cost more than 1.6 million jobs, $197 billion in wages for U.S. workers, and $290 billion in lost GDP. A July 7 Executive Order, calling for revised guidance on these credits to be published within 45 days, creates additional uncertainty for companies already scrambling to capitalize on the bill’s new, 12-month window to initiate projects.
A Shift to the Scalpel Approach for Certain Sources
Importantly, aside from renewable projects, Republicans opted for the infamous “scalpel” approach, salvaging much of the existing incentives for several clean energy technologies. This outcome was far from certain. The original House-passed bill essentially repealed the 45Y and 48E clean electricity tax credits; one version of the Senate bill included an excise-tax on wind and solar production and an unworkable placed-in-service requirement that would have decimated the fastest growing source of electricity in the United States, crucial to meeting rapid growth in electricity demand. At the 11th hour, several key congressional Republicans negotiated to allow projects which commence construction within a year of enactment to qualify for the credit, effectively saving numerous projects that have already begun making significant investments in pre-construction planning. Despite very real concerns about its challenges, the final bill also included FEOC restrictions that will be feasible to meet for at least some companies.
These changes mattered. Compared to an earlier Senate draft, the final bill preserved 661,430 jobs, $80 billion in wages, and $129 billion in GDP according to estimates of an analysis from Greenline Insights, in partnership with C2ES. That’s due largely to credits for grid-firming technologies including nuclear, geothermal, and energy storage not beginning to phase out until 2032. What’s more, upgrades to the existing U.S. nuclear fleet, enabled by the technology-neutral tax credits, could generate an estimated $38 billion in capital investments, create 390,000 jobs, provide $31 billion in labor income, and increase U.S. GDP by $49 billion.
This embrace of clean energy technology extended to the 45U Zero-Emission Nuclear Power Production Credit. The continued operation of existing nuclear plants is good news for the nuclear energy industry which provides high-wage jobs to more than 70,000 workers. Similarly, the 45Q Tax Credit for Carbon Sequestration, while subject to a new FEOC restriction, actually increased the credit value for projects which utilize the captured carbon. While the 45Z Clean Fuel Production Credit was extended for two years, through 2029, it did regrettably undercut the emission-reducing benefits of the credit. Even the 45V Clean Hydrogen Production Tax Credit, which was fully repealed in multiple iterations, was preserved until the beginning of 2028. This is thanks in no small part to a robust advocacy effort, powered by Senators representing key investments and private sector partners, aimed at protecting this incentive for an industry projected to create 100,000 net new jobs by 2030.
So, What’s Next?
What lessons for clean energy should we take away from the twists and turns of the last several months? Careful consideration reveals three key points:
- First, hard fought progress toward emission reductions has been undeniably, and significantly set back;
- Second, ideological disdain for certain technologies proved a hurdle too high to overcome. However, key Republicans were willing to go to bat for certain clean energy incentives that will still enable billions of dollars in new, low-carbon investments over the next several years, and;
- Third, those investments and the jobs they’ve already begun to create (many in the states and districts of Republicans who stuck their neck out for these incentives) offer clean energy advocates a path forward in this space to garner widespread bipartisan support, if they’re willing to take it.
As C2ES President Nat Keohane said in a recent Washington Post op-ed: it’s the clean economy, stupid.