Repealing the Inflation Reduction Act would drive the economy into a ditch

On Tuesday, Indiana’s Republican Gov. Eric Holcomb announced that GM and Samsung will build a $3 billion electric vehicle battery cell plant employing 1,700 people in St. Joseph’s County. On the same day, 600 miles away in Washington, House Republicans were voting — again — to repeal clean energy tax incentives from last year’s Inflation Reduction Act (IRA) that are driving the Indiana announcement and scores of others nationwide.

While the latest Republican effort to roll back the popular IRA incentives is likely to fail just as an earlier attempt in the debt ceiling negotiations did, the juxtaposition of the politics in Congress against the kitchen-table economic impact in rural Indiana was jarring. The GM-Samsung plant is the latest in a growing wave of historic clean energy investments that are poised to transform communities around the country, from a new battery plant in West Virginia to a solar factory in Oklahoma.

And it raises a huge question: What would happen if Republican efforts to repeal the IRA were successful, either in this Congress or the next when the GOP could control the White House and both chambers of Congress?

The easy answer is it would flatten a clean energy industry that is one of the fastest-growing sectors in the U.S. economy, betraying companies that have chosen to invest and leading to economic chaos and layoffs in a number of industries including construction, steel and energy. Recently announced manufacturing plans would likely be scaled back or scrapped altogether.

The longer-term fallout could be even more damaging. The abrupt policy reversal would create huge levels of doubt and uncertainty around U.S. economic policy, sending a chilling message that the private sector can’t count on federal laws to make informed economic decisions.

“Good tax policy requires certainty that can only come from long-term predictable tax laws,” Sen. Chuck Grassley of Iowa, a godfather of modern Republican tax policy and former chairman of the Senate Finance Committee, once said. “Businesses need certainty in the tax code so they can plan and invest accordingly.”

That has essentially been the orthodoxy of the Republican party for decades — that investment and economic growth require certainty and predictability. It’s difficult to reconcile that position with what is happening now.

The Inflation Reduction Act, which President Biden signed into law nearly a year ago, is a package of carrots, not sticks, with a core suite of tax incentives aimed at accelerating clean energy technologies that are urgently needed to mitigate climate change. To be clear, this is a massive economic opportunity, with trillion-dollar global markets at stake as the world shifts away from fossil fuels.

For the building sector, the law includes incentives for energy efficiency and clean energy improvements to homes and buildings, which we expect to drive massive new economic activity and job creation in building trades such as heating and cooling, electrical, insulation, and plumbing. Beyond buildings, there are incentives covering a wide swath of the economy, including new and used electric vehicles and charging equipment; advanced biofuels; and utility-scale electricity generation from clean sources such as nuclear, wind and solar.

All of it is geared toward doing the work in America. There are requirements or bonus incentives throughout the law for projects to use American-made materials and for investments to be made in economically distressed areas, including former coal-mining communities. There are wage and apprenticeship provisions aimed at building a well-trained and well-paid blue-collar workforce in the U.S.

The law is clearly working. Along with the steady stream of build-it-in-America announcements, product manufacturers are seizing on the economic opportunity by adjusting their products to be cleaner and thus qualify for incentives.

One example is Clayton, a manufactured housing builder that announced recently that all of its new homes will meet the Department of Energy’s highly efficient Zero Energy Ready Homes standard starting in 2024, aligning with the Inflation Reduction Act’s $5,000 tax incentive for homes meeting that standard. Clayton noted that the new homes will be equipped with increased insulation, Rheem heat pump water heaters, low-E windows, high-efficiency Carrier heating and cooling equipment and ecobee smart thermostats.

Think about all of the supply orders, hiring and contracts stemming just from that one decision. Given what we hear from the market, we believe there are hundreds if not thousands of similar decisions being considered as we speak.

Now is not the time to look back. Whether we like it or not, the IRA horse has left the barn and is galloping into the pasture.

Ben Evans is the federal legislative director of the U.S. Green Building Council.