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The IRA's uncertain future

Illustration of a gloved hand holding a scalpel over a hundred dollar bill

Illustration: Natalie Peeples/Axios

Folks gaming out the Inflation Reduction Act's future think much of it would survive Republican election wins.

Why it matters: The climate law's tax credits are popular in the business community … but not among the GOP rank and file.

  • Even so, sources on and off the Hill think its programs stand a chance of being preserved.

Driving the news: A full IRA repeal "realistically isn't happening," Rep. Garret Graves told Axios last week.

  • What we could see instead, he said, is a lot of pressure to alter "some of the excessive subsidies" with a "scalpel."
  • Graves expects the GOP to rein in IRA spending — with caps on spending or timelines — to be in line with initial CBO projections.

If any GOP member has a reason to weigh in on the IRA's future, it's new House E&C environment subcommittee Chair Buddy Carter. He prefers Graves' "scalpel" approach.

  • Carter's district is home to a $7.6 billion Hyundai-LG plant that'll benefit from the IRA's credits on advanced manufacturing and consumer-level EVs.

There's a "good chance" Republicans will "make some significant changes" if the GOP scores an election trifecta, Carter told Axios, noting his own concerns around "picking winners and losers."

  • But although he doesn't think the "government should dictate" a market for EVs, he acknowledged "some good things that, had they been put there on their own, we would've supported."
  • He added, "Obviously I want Hyundai to be successful with this plant, but I still can't compromise on my feelings that it has to be market-driven."

The big picture: Republicans haven't coalesced around a repeal strategy, though many do sound like Donald Trump on EVs. Trump's blasted its EV tax credits, saying they enable "rich people" to buy "luxury electric cars."

  • The signature GOP energy bill, H.R. 1, would pare back some programs like the EV credits and methane fee, and lawmakers have tried to rescind IRA money through appropriations.
  • But the GOP supports the missions of some credits, like the hydrogen program, carbon capture incentives and "sustainable" aviation fuel credit.

Between the lines: Many in business and government affairs circles say the jobs these credits bring to red districts will make it hard to totally unwind the law.

  • "Any program that is driving job growth in the United States is going to be durable," noted Al Gore III of ZETA, an EV supply chain trade group, especially "in places that have traditionally been hubs of manufacturing — the Southeast and Midwest, to name a few."

What we're watching: 2025 is going to be a huge year for tax policy because the Trump tax cuts will be up for renewal.

  • If Republicans take back the White House, that would create fertile ground for altering or repealing IRA programs to help pay for business and individual tax cuts.
  • If President Biden stays on, lobbyists see opportunities to make fixes to the law in a bipartisan package, or even create a new incentive for transmission development.
  • "The key thing to remember is that it's going to be less of a fight about [IRA repeal] specifically and more about what a big-picture tax bill in 2025 looks like," said Xan Fishman, director of energy policy and carbon management at the Bipartisan Policy Center.
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