Trump's budget bill increases fossil fuels and hits renewable energy

The U.S. Senate approved a budget bill on Tuesday, and now the House of Representatives will debate it for final approval. This would slow down the development of solar and wind power, eliminate climate funding, and increase oil, gas, and coal production.

Here are some details on the energy and environment provisions of the bill:

SOLAR AND WIND TAX CREDITS

The law drastically reduces the access to 30% tax credits for solar and wind energy projects, which were set to last until 2032 and on which developers relied for future projects.

For projects to qualify for the subsidy they must either start service before the end of 2027 (one year earlier than the House Bill proposed) or begin construction one year after the adoption of the House Bill.

The credits could also be used to improve domestic manufacturing, reduce dependence on China and boost the local economy.

These requirements are also applicable to clean manufacturing projects, such as the production of solar panels or batteries that will be eligible for a tax credit starting January 1, 2026.

NUCLEAR, HYDRO, AND GEOTHERMAL

The Senate bill maintains tax credits for projects that start construction before 2033. The Trump administration favors these forms of energy generation, partly because they are not dependent on weather conditions.

HYDROGEN, CARBON AND NUCLEAR CAPTURE

The House of Representatives proposed a two-year extension to the tax credits for clean hydrogen.

The Senate bill keeps the carbon storage and capture tax credit that was proposed by the Senate Finance Committee. This creates parity in credit levels between carbon utilization projects, and those that store captured CO2 underground. It also preserves credits for existing nuclear power plants.

TRANSFERABILITY

According to the Senate bill developers of renewable hydrogen, nuclear power and carbon capture can still sell credits to third parties to raise capital for projects.

GREENHOUSE GASOLINE REDUCTION GRANTS, OTHER IRA OTHER PROGRAMS

The bill cancels all funding that was not committed to the former president Joe Biden's Inflation Reduction Act, which is $20 billion Greenhouse Gas Reduction Fund.

The IRA will also cancel any grant funds that have not been spent by the Department of Energy for the deployment of transmission and site selection, low-carbon building materials, decarbonization programs, money to assist oil and gas companies in reducing their methane emission, and tribal energy loan.

Home Efficiency

Only projects completed by 2025 can be eligible for tax credits. Developers would have to begin construction on commercial buildings by June 30th 2026 in order to qualify for energy efficiency credits. The House version of the bill did not eliminate the tax credit for buildings.

ARCTIC OIL AND GAS

The bill requires four sales of drilling rights for oil and gas by 2032, in Alaska's Arctic National Wildlife Reserve. This reserve is home to threatened and endangered species like polar bears. Zero bids were received for a January ANWR leasing sale mandated by a law passed during Trump's first presidency. The bill requires five lease sales in the National Petroleum Reserve - Alaska by 2035 and cancels Biden's 2022 leasing limit.

Other Drilling

The Senate bill would permit drilling permits to be issued on federal land for a period of four years that are not renewable. Currently, such permits must be renewed annually. The bill streamlines leasing, and also prohibits certain measures to limit environmental damages.

The Gulf of Mexico leases must be sold 30 times over 15 years. The Trump administration has renamed the area as the Gulf of America.

Ice Breakers

The bill allocates $24.6 billion to the U.S. Coast Guard for the procurement of icebreakers. airplanes, and ports. A large portion of this money could be used to develop Arctic oil, gas, and minerals.

The Senators added a measure at the last minute that could be beneficial to coal miners for steel production. This would allow producers to claim a tax credit for advanced manufacturing production available for critical minerals. Coal companies could earn hundreds of millions of dollars from the credit of 2.5% on production costs.

The bill also reduced the royalty rate that coal companies must pay to mine on public land from 12.5% down to 7%, and expanded leasing on federal lands of 4 million acres (1.618,740 ha).

OIL RESERVE

The bill is in direct opposition to Trump's plan to replenish the Strategic Petroleum Reserve quickly, by reducing the money available to purchase. The bill offers funding for only 3 million barrels instead of 20 million.

The SPR also cancelled a mandatory sale of approximately 7 million barrels. After Russia invaded Ukraine, the U.S. made a historic 180 million barrel sale in 2022. Reporting by Valerie Volcovici, Timothy Gardner, Andy Sullivan and Alistair Bell

(source: Reuters)