Climate advocates across all states and sectors are facing uncertainty about the future of climate, environmental, and clean energy progress as we head towards a change in federal administration in January. One consequential question mark is the fate of the Inflation Reduction Act (IRA) — and its billions of dollars yet to be disbursed.
We invited a panel of speakers to explore the most important things for state climate actors to know when it comes to the future of the IRA. Our expert speakers included Jillian Blanchard, Director of the Climate Change and Environmental Justice Program at Lawyers for Good Government; Nestor Perez, Clean Energy Staff Attorney at Lawyers for Good Government; and Shara Mohtadi, Co-Founder of S2 Strategies.
In this recap article, we’ll provide highlights from our expert’s presentations, including potential changes to federal environmental governance, the vulnerability of the IRA’s grant funding and tax incentives, what NGOs are doing to support state actors starting today, and what you can do as a climate advocate.
Jillian Blanchard and Nestor Perez, Lawyers for Good Government
Jillian Blanchard is the Director of Lawyers For Good Government’s Climate Change Program and a nationally recognized attorney in energy and natural resources law. As director of the Climate Change and Climate Justice Program at L4GG, she has managed over 400 lawyers to help provide critical guidance to cities, states, and nonprofit partners to help expedite the country’s shift to a clean and equitable green economy and to address environmental justice.
Nestor is a Clean Energy Attorney focused on achieving a rapid and equitable transition from fossil fuels to 100 percent clean energy. He is passionate about ensuring the most vulnerable communities are protected first and making sure these communities are not left behind in the shift to a green economy.
What to Expect from Trump 2.0
There are many climate policy dynamics that may change with the incoming presidential administration. At the broadest level, it is likely that the U.S. will withdraw from multinational climate agreements, including not only the Paris Accord, but potentially the UNFCCC and the Kyoto Protocol as well. We can also expect the repeal of federal agency protections across the board, especially with the newly-created Department of Governmental Efficiency.
We’re anticipating deregulation and many new regulations coming into place as well, with opportunities for public notice and comment that state actors could engage with. More broadly, we need to stay abreast of efforts to repeal or amend the Impoundment Control Act, which governs the role of Congress in the U.S. budget process, and efforts to rescind federal funding.
Appointments to various federal positions are another important arena to keep an eye on — including Lee Zeldin as the new EPA administrator and Russell Vought as Director of the Office of Management and Budget (OMB), who is especially interested in shifting the power of the purse from Congress to the President. President Trump’s picks for these and other positions have made it clear they are interested in dismantling the EPA and even relocating EPA employees, with the intent of getting civil servants working on environmental and climate issues “be traumatically affected” and to quit their jobs.
Climate advocates can also expect efforts to claw back federal funding and repeal parts of the Inflation Reduction Act (IRA). As early as day one, there could be attempts to cut entire programs, defer payments, and even introduce rescission bills to Congress, which rescind previously-appropriated funding under an expedited process. The IRA’s tax credits may be some of the more protected aspects of the law, but we may lose momentum in other areas, including green bank funding coming from the Greenhouse Gas Reduction Fund and clean energy manufacturing through Solar for All.
More generally, there will likely be direct attacks on efforts related to the use of environmental, social, and governance (ESG) factors, as well as diversity, equity, and inclusion (DEI) processes across the country. This can certainly be expected for efforts and funding related to environmental justice and supporting frontline communities, with potential executive orders that rescind the Justice40 Initiative and the Biden-Harris whole-of-government approach to tackling climate change as early as January 20th.
Vulnerabilities to the IRA’s Grant Funding
There are two main buckets of potential changes to the IRA’s climate funding: (1) clawbacks to grant programs and (2) repeals of tax credits and direct pay.
Potential clawbacks to federal grant programs fall into a spectrum of vulnerability. At the highest level of vulnerability are funds that have been announced, but are not yet awarded or obligated — essentially, grant awards that do not yet have a signed contract between the agency and grantee. These funds are not protected in any way from being cut, and in this interim before the administration gets into full swing, L4GG and other organizations are working to get as much money obligated as soon as possible. Once the funds are awarded and obligated, a legally binding contract has been signed, and it is very difficult to pull that money back, though not impossible.
Grant funding is even more protected when it’s already been allocated or disbursed, although again, it is still vulnerable. Already, House Republicans have launched investigations, inquiries, and audits to question compliance and undermine the authority and popularity of programs, and this can continue to happen for funds that are not yet allocated or disbursed.
In addition to these potential attacks, there will be decreased staffing capacity at EPA and other administering agencies, generally “gumming up the works” of climate and environmental funding operations, which require staffers to answer questions, process invoices, and complete other key tasks.
Vulnerabilities to the IRA’s Tax Credits and Direct Pay
Tax credits are likely more insulated from attacks than other parts of the IRA. In part, this is because of a letter sent earlier this year by 18 House Republicans, urging the Speaker not to repeal the IRA’s clean energy tax credits due to key innovation, investment, and job creation in their own districts. Of course, there is still the possibility of attempts to repeal various tax credits regardless of proven benefits. In addition, deployment of tax credits may be delayed due to IRS staffing cuts.
While the IRA’s tax credits are certainly still vulnerable, it will take an act of Congress to completely repeal the law. Tax credits are popular with industry actors and have been a part of the code for decades, and they are receiving less attention in terms of attacks than the IRA’s grant programs. In terms of applying these credits, projects placed into service in 2024 and eligible to claim in 2025 should not be affected. All entities are encouraged to file for every credit they’re eligible for in relation to 2024 projects, and it would be fiscally irresponsible not to claim them.
In 2025, there are potential changes to the tax code that could apply to new projects, but even these are likely to be safe, as precedent is that amendments to the tax code cannot be applied retroactively, and tax codes are traditionally set on the first of every year. Of course, precedent is not set in stone, and it is more difficult to predict these outcomes right now.
L4GG’s Plans to Support States on IRA Funding
L4GG, with partners at the Environmental Protection Network (EPN), NRDC, and Communities First Fund, are working to support actors eligible for the IRA’s climate funding, through application assistance and one-on-one technical support. They are working with federal agencies to obligate funds as quickly as possible, building grantee capacity in managing and reporting funds, and defending and supporting grantees with compliance with grant requirements.
All actors can communicate with their elected officials to help them understand the benefits this funding has brought to constituents, countering negative narratives on the efficacy of these programs. They can also continue to utilize tax credits and other IRA funding. Attempts to repeal the Affordable Care Act show how this can work — the sheer volume of Americans using the benefits from the ACA made it more difficult to repeal.
L4GG has tools to support climate actors:
- The Clean Energy Tax Navigator – get free advice on how to file for relevant tax credits.
- The Federal Funding Protection Clinic (launching in February 2025, intake form active now) – access services like legal assistance regarding grant compliance and defense against potential and actual attacks to federal funding.
- The Green and Equitable Communities Clinic – get paired with pro bono attorney teams to implement climate, water, infrastructure, and resilience projects.
Overall, all actors are encouraged to stay aware of subtle efforts with big impacts, including OMB’s attempts to undermine the power of the purse, staffing changes in federal agencies, and the removal of online federal resources around climate science, mapping resources, and technical assistance. Continue to highlight success stories around benefits of the IRA and communicate those to elected officials, provide facts to defend against misleading attacks on frontline EJ organizations, and support local entity tax credit uptake.
Legal Disclaimer: The information provided in this presentation does not, and is not intended to, constitute legal advice; instead, all information, content, and materials available from this presentation and associated materials are for general informational purposes only. Information contained in any associated materials or website may not constitute the most up-to-date legal or other information.
Shara Mohtadi, S2 Strategies
Shara has spent her career in state and federal climate policy, international climate diplomacy, and philanthropy, and is currently the Co-Founder of S2 Strategies. Co-founded in 2023 with Sam Ricketts, S2 is an advisory firm working with NGOs, philanthropic funders, and companies on climate infrastructure implementation strategies, with a focus on providing tools for states, cities, tribes and communities to seize new clean energy and economic opportunities.
Optimism under the New Administration
When thinking about the vulnerability of various components of the IRA, it’s important to note that many of the foundational tax incentives — the production tax credit (PTC), investment tax credit (ITC), and the direct pay provision — will all remain. There are a number of industry and business interests in these incentives, and governors of all political affiliations have utilized direct pay and plan to continue to do so.
It’s extremely important for all actors to continue to use these incentives, which in turn will make them more difficult to repeal. An estimated 80 percent of IRA investments have been deployed in Republican districts, and there is strong bipartisan support for the law across voter groups in recent polls, so there are many reasons to believe that the momentum of the clean energy economy can continue to move in a steadfast way.
This next chapter of the federal government will not be the end of the clean energy transition. On the side of driving progress, there are 13 state-level Democratic trifectas — more than double the number there were eight years ago, at the start of the first Trump administration. This presents opportunities with state legislatures, administrative directives through governor’s offices, and public utilities and public service commissions, in addition to increased interstate coordination. There are also opportunities for deeper engagement and interest from businesses that are moving to the U.S. from overseas, businesses that need rapidly increasing amounts of power and electricity, and businesses with their own clean energy mandates.
Post-election, at the local and county levels, elected officials are indicating that securing energy affordability is key to meeting the needs of their constituents, and with renewable costs coming in lower than fossil fuel alternatives, clean energy may continue to be a winning issue in terms of meeting everyday needs.
Storytelling is an important strategy that will be key in protecting climate progress in the coming months and years. There are so many great projects that kicked off in 2024 thanks to direct pay, and sharing these narratives through the right messengers to Congress will prove essential. Those messengers include businesses, trade associations, and other industry groups benefiting from direct pay. It will also be crucial to share information across groups and build up your peer networks. Groups like the U.S. Climate Alliance and the National Association of State Energy Officials (NASEO) are designed to connect peers in similar positions across states.
Q&A
Q: How vulnerable are projects that already have obligated budgets?
Jillian Blanchard: As I was mentioning, things that are awarded are safer, but they are potentially still subject to a rescission bill. What a rescission bill would look like, is that the administration would come up with a rescission bill, would propose it to Congress, and Congress would have about 45 days to respond. At which point, if they agreed, they could just go ahead and claw back anything that is not out the door. So, it’s really important to get things that were in the rescission bill — let me be clear, things that were proposed to be rescinded, essentially. The reasoning would be something ridiculous, like, this is not the intent of Congress to do X, Y and Z. Those claims have already been made by House Republicans regarding grants that went to environmental justice organizations; that they were too partisan, or one was claimed to be a terrorist organization, all these things in an effort to try and be justifications for rescinding those funds. So, it’s not that the obligated funds are more protected, but could be still subject to rescission.
There could also be the gumming up of the works if you have a draw down fund situation, even if it’s obligated. In a lot of cases within EPA, the funds are within ASAP [Automated Standard Application for Payments]. That’s within the four walls of the federal government, but it’s this separate house for the funds, and you have to draw down from there. That money could be subject to rescission. There could be all sorts of monkey business to try and delay payments of invoices, claims of non compliance, etc. So it is safer, but it’s not guaranteed. And I’ll add to that, there were challenges to the obligated funds — are they still vulnerable? They are subject to that rescission. But there’s also Russell Vought [who may be] trying to do creative things, like he tried to do in Trump 1.0. In that situation, he tried to not pay down on a health and human services grant, and he was actually taken to court. And he did lose that litigation at the Supreme Court level. It was brought by public citizens, and it was a successful litigation. So I’m sure there will be those litigations as well when there are attempts to flout the law, and it just remains to be seen how this U.S. Supreme Court will respond.
Q: What is the broader definition of obligated funds?
Jillian Blanchard: I would look at it as, you go from announcement, to then signing your contract to say that it’s awarded, and when you sign that contract, you created this legally binding obligation on the part of the federal government to get you that money. So you really just want to get into contract, is probably the simplest way to say it. And Shara, I know you have a lot of familiarity with these processes too. Do you want to add [information] on the practical side of things? What does that look like?
Shara Mohtadi: As Jillian said, there’s the press release, or you’ve been notified by the federal agency that you have been selected for an award for a federal grant, but you still have to go through a kind of contract negotiation process. For example, in an EPA case, you’ll receive a kind of final terms and conditions, which in a lot of cases is their form of the contract, and you have 21 days to object to anything in those terms. If you don’t [object], basically, that contract becomes legally binding. Often it doesn’t even require a signature from your end, just that EPA often becomes the trigger point for the Treasury, defining those funds as obligated. So probably for any federal grant that you’ve been working on, you have a procurement or contracts officer you’ve been working with, and they can answer the question of if the funds for this grant are considered obligated. And all this to say, for example, if you were just awarded a Community Change Grant, it’s really important to work with the EPA to get to that final contract before the end of this administration.
Q: What are the types of credits, programs, and topics that are more vulnerable to clawbacks, specifically around Solar for All and EV tax credits?
Jillian Blanchard: On the EV side, we’re all hearing it directly from the mouth of the next president that EVs credits are in trouble. Elon Musk has said he doesn’t really benefit from them, so he’s happy to let some of them go as well. So I think of all the tax credits, you know, there are 12 eligible credits for direct pay, a lot of different clean energy technologies, carbon sequestration, manufacturing, hydrogen. Those are likely going to be a lot safer than the electric vehicle credits. But again, this is where I would kind of parrot what Nestor and Shara were saying as well: deploy, deploy, deploy. The number one tax credit used in 2023 projects, in our experience, with all the folks we work with direct pay, were electric vehicle credits: 45W. The more that this administration understands the dollars that were brought back into these red districts, as someone said, 80% went to these red districts, the safer that credit will become. And the more that you can show that this fleet transition that a city is maybe hosting in a red district is going to bring back money and is fiscally responsible, the safer it will be. But again, if there is one that we are hearing on the chopping block more than all others., it probably is the electric vehicles, which is why it’s so important to deploy and to tell the story.
Nestor Perez: In general, in the Greenhouse Gas Reduction Fund and in the grants, there is a whole spectrum of the safety of the funding. On the one end, it’s just been announced, all the way on the other end, to when you’ve been invoiced and received disbursement. And I would say that the funds that are safest from the delay, deferral, and rescission tactics that may be employed, are those for which a recipient has already invoiced and received this. So to that end, I would say that the most important item that the recipients can control is to timely and correctly perform all their obligations under the award.
Jillian Blanchard: Yeah, and I just want to pitch that we can put in a couple of links here. One is to EPN, if you need help getting an award, they’re available right now to help you. And then I’m going to give you our intake form. If you have a legal question about compliance around your award, that’s going to be really, really important. In fact, one of the things we are working on today that I will share with Kristen to share out with you all, is a grant compliance checklist. If you are expecting to receive money in the new year, we want to give you this checklist to prep you so that you’re not trying to set up your reporting, your budgeting and compliance, all the things you’re going to need when you first get the money. So we want to give people that to start planning now.
Q: What extent are funds under Justice40 protected by being given to regional or national grantmaking organizations, is the funding control of the grantmaking entities safe from clawbacks?
Jillian Blanchard: I’m guessing they’re talking about the Grantmakers grants, which are kind of new. Okay, unfortunately, they fall into the same category that other EPA grants would fall into. So we are working with the grantmakers right now to make sure they’re at the award stage. The good news is, they are more sophisticated, as you might imagine, and so they are farther along in getting to award, and are going to be looking to try and disburse, that’s the next thing. As soon as you have your award, the sooner that you can disburse your funding in compliance with your grant, the better. So I think they’re going to be looking to try and do that, but unfortunately, not entirely safe, because they are EPA grants that will be potentially a target.
Q: In addition to our groups and the U.S. Climate Alliance, what are the other coalitions and sub-national organizations that are working to protect the IRA?
Jillian Blanchard: Kristen, you probably have the best answer to this. I’ll just say that we’ll continue our work and kind of in response to that other question that someone just asked about the Justice40 piece, it is critical now to just move all these things forward. If you have that funding coming to you — states have funding available — to leverage that for equity and climate. We have our Disadvantaged Communities Report, which Kristen has plugged before to this network, that’s available to folks with model policies within it. I’ll put that in the chat as well. Kristen and Shara, I’m sure you have great ideas as well.
Kristen Soares: Yeah, definitely. I sent a link to EPN, but I will just highlight them again. The Environmental Protection Network (EPN) is a group of tons of former EPA alumni, and so I think they’re a really great resource. They have direct technical assistance, pro bono technical assistance that they are working on, but also as a group of former EPA staffers, I think they have a really great perspective on some of the things you might anticipate.
They also recently polled voters on how much folks support EPA in terms of being an organization that protects the environment and protects health, and overwhelmingly, a lot of voters do support EPA as an organization, even Trump voters. I will also say that we have a bi-weekly newsletter, and we highlight a lot of what we’re watching, feel free to look to that.
Another organization I’ll highlight is the Climate Program Portal, that’s run by Atlas Public Policy. They have a great dashboard that tracks how much federal funding is being disbursed, and how much hasn’t yet. They have a newsletter that rounds up what applications are open and when there’s other ways for states to plug into accessing federal climate funding. If you have more specific, targeted questions like, ‘I’m working on this, who are the actors that can support me,’ definitely feel free to reach out to me, and the other speakers here today.
Shara Mohtadi: And Kristen, I mean, one more thing to add is that a number of you I saw in the chat also work in or around state governments that may not be represented by the U.S. Climate Alliance, but have done a great job in drawing down federal resources. And so, feel free to reach out to us. We can connect you to groups, their state member associations like NASEO and NACA, that, depending on the award and agency that you work with, can support you. So feel free to be in touch. I’ll also put my information in the chat if you are in maybe a more red or purple state, or just one that’s not represented by the Alliance.
Kristen Soares: I’ll also mention that, communications is a big piece of all of this moving forward, not just for the IRA, but just kind of generally. And there’s a lot of resources from organizations that are polling on what types of climate messaging works, what are actually bipartisan talking points? I would look at the Yale Program on Climate Change Communications. I would also look to George Mason University and Pew, they have some great resources as well. Ground your communication strategy in what data is saying works. For example, we’ve seen a decline in how important jobs and the economy are in voters’ minds as a reason for climate change funding to be protected, and an increase in, protecting future generations, protecting the environment, moving as a more important thing than jobs and the economy. So I would also say, ground your communication work, not just in maybe what is common sense, but in what the data is showing is actually working, and what the bipartisan points are.
Q: How likely do you think Solar for All grants, including those with existing agreements, will be vulnerable to clawbacks?
Jillian Blanchard: Of the three pots of money from the Greenhouse Gas Reduction Fund, Solar for All is the most vulnerable. The other two pots of money, the NCIF and CCIA, have been transferred into third party ownership, so the funds are essentially disbursed outside of the federal coffers, so they’re safer. And we know that Solar for All is going to be a target, but it is so job-creating that if we can focus on that messaging of how many jobs will be created, there is hope, and it also has been disbursed evenly across the country into many red states. We’re more concerned for the 17 nonprofit grants for Solar for All; they may be more of a target and have a harder time reaching compliance. It’s really a big push, to get everyone to that point of signed contracts for Solar for All is going to be very important, but that could be one of the programs that gets included in a proposal for rescission. So stay tuned to see if that happens. It’s not a guarantee by any stretch, so, but we’ll keep you informed.
Shara Mohtadi: I think we feel a little more confident about the Solar for All program. I do agree with Jillian of the three pots, it is more vulnerable, but probably out of all the EPA programs, it’s also one of the least [vulnerable] overall. But I would say, on paper, the funding has already been obligated due to the statutory deadline. Contracts for many of those that have already finished their work plans will be wrapped up before the end of the administration. The whole contract termination process is where, in a worst case scenario, the EPA claims that an awardee is not meeting terms and conditions, and maybe there’s poor performance being claimed. The termination process is really time consuming for the federal government. Often, agencies don’t have the manpower to really administer it. So I think there’s a lot of directions it can take, and I would say having also been on the agency side of things, we should all expect a bit of a lull for the first three to six months of the incoming administration, just as they also make some decisions on the direction of already-obligated programs such as this. The steps that they’re willing to take, versus the political costs and administrative burdens associated with that.
