Illustration: Natalie Peeples/Axios
Republicans are starting to plot out a reconciliation bill that could peel back parts of the IRA.
Why it matters: Every one of the IRA's climate spending and incentive provisions is on the table right now in a 2025 package to overhaul the tax code and extend the original Trump tax cuts, according to advocates, Hill aides and lawmakers we spoke with.
- But moderates in both the House and Senate still resist repealing business-friendly incentives already in the tax code.
Zoom in: Republicans told us the top repeal targets include the EV tax credit, the methane fee and whatever is left of the $41 billion tranche of cash that EPA got from the climate law.
- "We're looking at the IRA money as part of that, and anything else that obviously has some kind of financial generation aspect to it," incoming Senate Environment and Public Works Chair Shelley Moore Capito told Nick.
- The 45Q carbon capture credit and incentives for advanced manufacturing and hydrogen are likely to stick around.
- "There are some provisions of the IRA that we're seeing in place and implement it that people seem to be liking," Sen. Lisa Murkowski told reporters.
Yes, but: Even a wholesale repeal of the EV credit — which has spawned industry commitments to build factories, battery plants and mineral facilities in GOP districts — could be precarious.
- Rep. Buddy Carter, a Georgia Republican with a Hyundai EV plant in his district, acknowledged the automaker probably wants the credit to remain.
- "That's why I think we should be very selective and very careful in the way that we approach it," Carter told reporters. "Let's see what's working."
- Carter was one of 18 House Republicans (most of whom will serve next year) who signed a letter to leadership arguing to keep the IRA's energy incentives.
What we're watching: The fate of the IRA's marquee climate provision — tech-neutral production and investment credits for low-carbon power — is up in the air.
- Currently, those incentives are uncapped and set to phase out only when energy sector emissions drop 75% (or in 2032 if the emissions goal is hit before then).
- One possibility is that Republicans cap the spending — projected to vastly exceed initial estimates — or give an earlier sunset date.
Multiple GOP senators said the IRA didn't come up as they debated leadership yesterday, and newly minted Leader John Thune hasn't said much public about the specifics.
- The lobbying push to keep various IRA programs in place has already begun.
- "We want to make sure that energy interests are kept in mind throughout that process," Mike Sommers, API's president, told reporters this week.
Between the lines: Much depends on how Republicans view the budgetary impacts of extending 2017 tax cut law provisions.
- IRA repeal appeals to Republicans in part because it could help pay for extensions of individual income tax cuts.
- But recall that Republicans argued that the cuts would pay for themselves via economic growth and boosted investment.
- "You got a lot of dynamic feedback from tax cuts, deregulation and other pro-growth policies that I feel like in the past we've never gotten full credit for," House Budget Chair Jodey Arrington told Nick when he asked about using IRA provisions to pay for tax cuts.
- "We don't just assume that it's a direct cost for every provision."
