House Passes Bill Threatening Clean Energy Sector's Future

The U.S. House of Representatives recently passed the "One Big Beautiful Bill Act" (OBBBA), a comprehensive tax and spending bill that proposes significant changes to clean energy tax credits established under the 2022 Inflation Reduction Act (IRA). This legislation has introduced considerable uncertainty within the U.S. clean energy sector, leading to project cancellations, job losses, and potential shifts in the nation's energy landscape.

The OBBBA aims to expedite the expiration of clean energy tax credits that have been pivotal in driving over $321 billion in investments and creating thousands of jobs across various states. Additionally, the bill seeks to block the 45X manufacturing tax credits for "foreign entities of concern," particularly targeting Chinese-owned companies or those affiliated with them. Furthermore, the legislation includes provisions to terminate the 45V tax credit, which offers $3 per kilogram for green hydrogen production. Industry analysts warn that this could jeopardize approximately 95% of proposed green hydrogen projects, as these initiatives heavily depend on subsidies due to high production costs and market uncertainties.

The proposed legislative changes have already led to significant disruptions. In early 2025, over $14 billion in U.S. clean energy investments have been canceled or delayed. Notable affected projects include Kore Power's battery factory in Arizona, Bosch’s hydrogen fuel cell investment in South Carolina, and BorgWarner's electric vehicle (EV) factory closures in Michigan. Approximately 10,000 clean energy jobs have been lost due to the uncertainty surrounding the bill. These job losses are particularly impactful in Republican-led areas, with states like Georgia and Tennessee facing significant risks due to their substantial EV investments.

The bill's potential to raise import tariffs and increase manufacturing costs could exacerbate existing supply chain challenges. The U.S. offshore wind industry, for instance, faces turmoil, though a recent federal reversal saved Equinor’s $5 billion Empire Wind project, sustaining hopes for related manufacturing developments. Additionally, the OBBBA includes a provision that critics argue undermines the authority of federal courts. This clause prohibits U.S. courts from enforcing contempt citations against the government unless plaintiffs have posted a monetary bond, potentially limiting the judiciary's power to enforce compliance with injunctions or restraining orders. The bill also contains Section 899, empowering the President to impose retaliatory taxes on foreign nations that levy digital service taxes on major U.S. tech firms. This provision targets countries like Germany, which is proposing a 10% tax on platforms such as Google, and could generate $116 billion over a decade. However, experts warn it might deter foreign investment.

Major developers like Air Products and Fortescue are reassessing or canceling green hydrogen projects due to the proposed termination of the 45V tax credit. Plug Power has significantly reduced output, and industry leaders argue that removing these credits undermines investments and U.S. competitiveness in clean energy. The bill passed the House with a narrow 215–214–1 vote, largely along party lines. Democratic lawmakers have criticized the measure, arguing it effectively neutralizes court rulings and enables executive overreach. Some Republican senators plan to seek modifications, indicating potential challenges in the Senate.

The OBBBA's approach to clean energy tax credits marks a significant shift from previous bipartisan support for renewable energy incentives. The 2022 IRA had established robust tax credits to promote clean energy investments, leading to substantial economic growth and job creation in the sector. The current legislative move to curtail these incentives represents a departure from prior commitments to fostering renewable energy development.

The proposed changes may be driven by several factors. The bill aims to extend tax cuts from the 2017 Tax Cuts and Jobs Act, which are set to expire at the end of 2025. To offset the projected addition of several trillion dollars to the national debt, reductions in clean energy tax incentives are being considered. By restricting tax credits for foreign entities, particularly those affiliated with China, the administration seeks to reduce reliance on Chinese-controlled supply chains and address national security concerns.

The "One Big Beautiful Bill Act" introduces significant changes to the U.S. tax and energy policy landscape, with profound implications for the clean energy sector. The acceleration of tax credit expirations and restrictions on foreign entities have already led to substantial project cancellations and job losses. As the Senate reviews the legislation, the future of U.S. clean energy investments remains uncertain, with potential long-term impacts on the nation's economic growth, energy independence, and environmental commitments.