Republicans in the U.S. House of Representatives unveiled a sweeping tax reform proposal that would eliminate several climate-related incentives introduced under the Biden administration.
Chief among the proposed cuts is the repeal of the electric vehicle (EV) tax credits—$7,500 for new EVs and $4,000 for used models—effective from Dec. 31. Automakers that have not yet reached 200,000 EV sales would be allowed to retain the new-vehicle credit for one additional year.
A related provision, set to take effect in 2027, could bar tax credits for vehicles that use battery technology licensed from Chinese companies—even if deployed by American firms like Ford or Tesla, CNBC reported.
In addition to EV tax incentives, the bill proposes to repeal corporate average fuel economy (CAFE) standards and greenhouse gas emissions rules beginning in 2027. The proposal also seeks to terminate a federal loan program supporting the manufacture of advanced technology vehicles and rescind any unused funding from it.
The portion related to fuel economy and emissions standards will be heard by the House Energy and Commerce Committee on Tuesday.
Clean Energy Credits Face Major Cuts
The House tax panel's proposal includes a phase-out of "technology-neutral" 45Y tax credits for renewable energy projects such as wind, solar, nuclear, and geothermal. These credits, previously without expiration, would begin tapering in 2029—reducing to 80% that year, 60% in 2030, 40% in 2031, and eliminated entirely thereafter, reported Reuters.
A key provision of the 2022 Inflation Reduction Act (IRA)—transferability of tax credits—would also be eliminated under the new plan. This measure had allowed developers to sell their credits to finance construction of clean energy projects.
Oil And Gas-Favored Credits Preserved
Despite the broad cuts, the proposal largely preserves tax credits for carbon capture and sequestration (45Q) and direct air capture, both of which are favored by the oil and gas industry.
Some limitations on foreign ownership of projects were included. A tax credit for sustainable aviation fuel is also extended, signaling support for biofuel producers aiming to expand their market share.
Industry Backlash And Republican Dissent
Industry groups, particularly from the solar and wind sectors, criticized the proposal, warning it could cost American jobs and undermine efforts to expand domestic energy production—and conflict with President Trump's stated energy goals.
Abigail Ross Hopper, president of the Solar Energy Industries Association, noted that the sector has invested billions in states that voted for Trump.
Genevieve Cullen, president of the Electric Drive Transportation Association, described the proposal as "catastrophically short-sighted," warning that cutting federal investment in electrification would undermine U.S. leadership in energy innovation. She added that the plan would give "an enormous market advantage" to competitors like China and put American manufacturing and jobs at risk.
In 2024, the U.S. Treasury awarded over $2 billion in point-of-sale rebates for electric vehicles.
Meanwhile, more than two dozen House Republicans and four GOP senators from states benefiting from IRA-driven investments urged the committee to retain several of the clean energy tax credits.
