Welcome to The Economic Dispatch - your fortnightly energy & society newsletter!
It has been a quiet couple of weeks since we last posted and almost nothing notable has happened. With the upcoming election looking as uncertain as ever, we thought it was time to examine what could happen to the Inflation Reduction Act (IRA) under a second Trump administration. The IRA has triggered a flood of new investment in American industry, particularly in ‘red’ states, but doing good things has never been reason enough for Republicans. Let’s dive in!
Earth’s Oceans, 2024-07-21
+250 Zettajoules since 1992 (that is a lot of energy)
This is equivalent to dropping 4 Hiroshima sized nuclear bombs into the ocean every second from 1992 to today
Why R's might keep the IRA intact
Queue the ABBA hit Money Money Money. Red states have been huge beneficiaries of new investment spurred by the IRA. These states have cheaper, non-union, labor forces and often times very ‘business friendly’ tax codes. Massive corporate welfare programs that make the Bible belt particularly attractive for an onshoring initiative like the IRA.
It is pretty clear that Republican representatives love the outcomes here, even if they didn’t vote for the bill that caused it. For all of my adult life, political discourse has been dominated by people in destroyed communities yearning for days gone by when America made things. In the good old days, you could earn a living working 9-5 in the local factory and say racial slurs at work! This is the fantasy that Joe the Plumber always talked about.
I think the ideal outcome for many Republican legislators, and Trump, would be that the IRA continues functioning as intended. They get to rail against it, vote against it, and then parade around all of the new investments like nothing happened.
Another reason to believe the IRA is safe is that it is really hard to pass bills in Congress. Probably don’t need to expand on this one too much. We have filibusters, parliamentarians, Marjorie Taylor Greens, and plenty of other weird things that keep Congress dysfunctional.
How a Trump admin can undermine the IRA
There are ways for a Trump admin to screw up the IRA in each branch of our government. So let’s go through them in Constitutional order as the Founders would have wanted.
Article I - The Congress
Congress brought the IRA into this world and it can take it out. Republicans have already expressed interest in cutting funding in the IRA that was allocated to the IRS. This would have a severe impact on many things, from auditing billionaires to administering the massive amounts of very complex tax credit transactions that are the heart and soul of the IRA. The IRA is a bill of carrots (tax credits), and it takes a lot of paperwork to grow them (execute tax equity partnerships).
Republicans are beholden to people who would like to cheat on their taxes. People like Elon Musk are donating $45 million per month to help elect Trump. This puts them in, at least what should be, a tough spot. The IRA needs to function for all of the investment to flow into their communities, but their biggest supporters (and themselves) need it to be understaffed so they can commit tax fraud. Frankly, I don’t think Trump and the Republicans in congress will see this as a difficult choice and will gladly reduce IRS audits, even if it means their constituents will continue to struggle to find good jobs.
Article II - The Executive
Probably the easiest way Trump can impact the IRA is through executive action and agency rule making. These actions only need Trump to sign off and a willing department to wreak havoc on America. He (Project 2025) has been clear that he wants to destroy some agencies and dismantle the federal bureaucracy. If he doesn’t actively use agencies rule making abilities to reduce the impacts of the IRA, he could gut staffing so much that the agencies can’t enforce provisions in the IRA.
One small, if you consider $1 billion small, example is the Environmental Protection Agency’s methane emissions program. The IRA authorized funding of ~$1b to address methane emissions for oil and gas production. This is the kind of thing Trump could disrupt without congress pulling the funding by ordering the EPA to stop looking for projects to fund. Changes in the judiciary have also jeopardized EPA’s ability to regulate carbon emissions under the Clean Air Act, which would have disastrous consequences for climate action. More on that later.
Article III - The Judiciary
Executive actions face litigation pretty consistently, and there is no reason to think that will stop. Any actions that Trump takes to undermine the IRA will get challenged by people trying to keep the US in the climate fight. However, they will lose all of those challenges. There are plenty of courts in the US, but the Supreme Court will be the final gate for any legal challenges, and Trump has a 6-3 ultra loyal majority that is very excited for a new era of fascism. The Supreme Court threatens to undermine the IRA with or without a 2nd Trump administration.
The erosion of the IRA has already begun with the decision to strike down the Chevron Doctrine, which had given federal agencies broad rule making authority since 1984. Now the courts will have final say on the technical details of regulation, because why would scientists have a say when lawyers are available. The purpose of this decision is to prevent the EPA from doing environmental regulation, the FDA from ensuring food and drugs are safe, and the DOE from teaching your children to read. You might think that contradicts my points from earlier about Trump being able to do rule making through agencies. You would be correct! Except that the 6 conservatives on the Supreme Court don’t care - they will protect the positions of power that they have. You can look forward to them writing the stupidest things you can imagine trying to explain how future cases are different and actually agencies can make rules if Trump is in charge.
Well, that was depressing
It sure was. We have seen lots of great reporting on Trump might mean for the climate, like the CarbonBrief and Rhodium Group’s analysis below.
4bn tonnes of emissions through 2030 are at stake in the 2024 election. Current trajectories still leave us behind our target. There is work to do! As much as this hurts me to say… getting out and voting in 2024 is actually going to be effective here. I can’t pretend I’ve just fallen out of a coconut tree - voting isn’t a magic bullet that will prevent every harm. But it can be effective at mitigating damage, and that matters. Every tonne of emissions reductions matters. It’s time to see what can be, unburdened by what has been.
Does Trump have carte blanche?
By now, we are all well aware that the “uncancellable” former President will say just about anything without reserve. He has also made it very clear that he will fight for his fellow red-blooded Americans by tearing down any impediments to freedom, capitalism, or [insert buzzword tangential to his agenda] on the path to making America great, yet again. We have examined a few of the most likely avenues the Don will exploit on his journey to getting his way, but let’s dive a little deeper into Chevron and the IRA.
Chevron
With respect to the overturning of the Chevron Doctrine, as previously noted in this post, that courts, rather than industry experts, will have the final say on how laws will be interpreted. Without the gray-area baked into laws that experts used to dictate the most effective implementation, we can expect laws to become much more defined. However, you can see the conundrum we are in, for it is impossible to anticipate every variable when making laws and stricter laws will be harder to pass in Congress. This creates a lovely positive feedback loop of inefficiencies.
In all reality, district courts are expected to become bogged down with a heightened number of timely, expensive litigations, as a result of the Corner Post doctrine also being overturned. This overruling grants litigants a 6-year statue of limitations from when the plaintiff suffers an injury. While the point is nuanced, it is important to note that the statute of limitations begins 6-years from when the plaintiff suffers an injury rather than when the regulation was passed; i.e. shell corporations can be created for the sole purpose of trying to overturn acts that have been historically significant in the fight against climate change that have been around for decades.
The long and short of the Chevron overturning is that the government has lost one of its largest tool in fighting climate change. Many of the laws used in the climate fight do not specifically address climate change but rather a completely unrelated topic such as clean air. In 2022, the IRA added seven new provisions to the Clean Air Act (CAA) including industrial policy which funds decarbonizing technologies aimed at reducing greenhouse gasses via tax credits. This was all possible because the industry experts at the EPA interpreted the CAA’s purview to limit GHG emissions. Now that subject matter experts no longer have final cut on the interpretation of laws, I wonder how the stacked supreme court will facilitate climate justice…..
IRA
Rest easy; the entire IRA cannot be repealed without a red sweep in Congress (well, kind of). Trump, despite what he wants you to believe, needs action from Congress to repeal the bill. Congress, in my humble opinion, will be focused on the 2017 Trump Tax cuts, which currently need $4.7T in funding. As a result of the insufficient funds, Congress will likely turn to cutting EV Tax Credits, DOE Loan Guarantee Funds, Renewable Energy Tax Credits, and IRS technology modernization for the influx of cash. While the EV Tax Credits are a highly politicized topic and the IRS is simply looking for $80B for new computers, the R’s are setting their sights on the Renewable Energy Tax Credits within the IRA.
To overturn the IRA, R’s will need 60 seats in the Senate, which seems highly unlikely according to most projections. However, the Budget Reconciliation process offers Trump an auxiliary path to oust the IRA. The Budget Reconciliation process is an expeditious way to pass a law and only requires a simple majority in both chambers of Congress (ironically, this is how the Dems was able to muscle through the IRA in the first place).
With all that being said, there is a single shred of light: the IRA tax laws will likely go unaffected if we have a split Congress. Vote for what you believe in, especially if its a blue senator, for a blue senate could be the only thing holding this world back from an irreversible climate catastrophe.