Trump likely to roll back but not dismantle Biden's clean energy spending

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As a candidate, Donald Trump denounced clean energy spending tied to the Biden administration’s sweeping climate law, the Inflation Reduction Act (IRA). At his speech before the Economic Club of New York in September, he called the legislation the “greatest scam in history.”

Yet, as the president-elect prepares to return to the White House in January, he faces pressure to keep the law largely intact from lawmakers in his own party, none of whom voted for the IRA.

“About 75% of the job creation and the capital spending on new manufacturing and other clean energy resources has gone to red states or red counties in blue states,” said James West, senior managing director at Evercore ISI. “So we don't expect a whole lot to come from a new administration.”

The perception that there could be a wholesale shift in energy policy sent clean energy stocks lower in the immediate aftermath of Tuesday’s election. Solar panels and equipment manufacturers First Solar (FSLR) and Enphase (ENPH) plummeted, while the Invesco Solar ETF (TAN) declined 11% Wednesday.

West said trade volumes surged threefold the day after the presidential election, leading to “total chaos.” That knee-jerk reaction fails to recognize the scope of the largest climate investment in US history and the nuances of a potential impact, he said.

In a recent note to clients, West warned investors against lumping all clean energy plays together, saying “different segments of the clean energy economy face different degrees of Trump-related risks.”

'A scalpel, not a sledgehammer'

The 2022 legislation unleashed billions of dollars in grants, loans, and tax provisions to accelerate the US transition to clean energy over 10 years. In total, the Biden administration committed more than $350 billion to projects aimed at reducing harmful greenhouse gas emissions, with the goal of halving 2005 emissions levels by the end of this decade.

While no Republican lawmaker voted to pass the law, their constituents have overwhelmingly benefited from the provisions tied to clean energy investments.

According to data from the Department of Energy, $10.8 billion in investments in solar energy have gone to red states, while just $4.1 billion have gone to blue states. And $35 billion tied to electric vehicle spending has gone to Republican districts, while $22 billion has gone to Democratic ones.

Rescinding money that has already been allocated would require congressional approval. At least 18 Republican lawmakers have already warned House Speaker Mike Johnson against repealing the IRA, making a complete reversal unlikely.

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