• The bill promotes fossil fuel projects and shifts away from clean energy production.
• Benefits for sectors such as carbon capture, solar and wind energy, and EV production are being scaled down.
• China is expected to seize the opportunity and become a global leader in the EV industry.

On July 4, 2025, US President Donald Trump signed the One Big Beautiful Bill Act (OBBBA) into law, rolling back the clean energy tax benefits introduced in the Inflation Reduction Act (IRA) of 2022.

The changes are directed towards cutting back government support for clean energy production and increasing the use of fossil fuels in the country. The bill also aims to introduce stringent rules, set new deadlines, and slash funding for renewable projects.

Impacts of the bill across different clean energy sectors

An area that is most affected is carbon capture and storage, where the OBBBA changes the 45Q tax credit to treat carbon stored underground and carbon used for enhanced oil recovery (EOR) as the same, meaning projects using captured carbon to drill more oil get the same perks as those that store carbon to lower emissions, clearly signalling the government's intention to support the oil and gas industry.

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When it comes to low-emissions hydrogen, the bill, seemingly, is not as detrimental as some had expected. However, it offers relatively less support than the IRA, particularly for renewable hydrogen and US electrolyser manufacturers. Now with reduced backing domestically, hydrogen producers are subject to increased competition in the global market, where opportunities are limited.

The critical minerals sector is also on the back foot. The bill increases funding for mining and encourages the extraction of lithium and cobalt, but limits support for processing and manufacturing, which are integral to making batteries and clean technologies. Therefore, the US will depend more on China, which already leads the midstream parts of the supply chain, for example, processing and refining.

For electric vehicles (EVs), the OBBBA removes tax credits, which had motivated people to buy EVs and helped businesses invest in battery making. Sans these benefits, the US will see EV sales plummet and fewer new investments in the domestic supply chain. This will let China turn the tables in the international EV industry.

In the nuclear energy sector, it keeps the same dates for starting construction to qualify for tax benefits under the IRA. However, new constraints are in place, particularly for businesses having a stake in specific foreign countries, causing uncertainty for developers and future projects.

Also Read: Senate Bill Threatens Jobs and Capacity in Renewable Energy Sector

Lastly, the solar and wind energy sector is also at a disadvantage, facing cutbacks that subsequently impact IRA programmes dealing with climate change and increasing the renewable energy supply. For the government, this will save a lot of money. But, on the other hand, it will undermine the expansion of renewable power in the US.

On the whole, the OBBBA reflects the current US government's pivot to domestic fossil fuel production and a shift in energy policy, as well as a slowdown in the country’s progress towards climate goals.

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