Right now, the American economy is experiencing two important trends at the same time.
First, we are witnessing a manufacturing boom. After decades of offshoring, new factories and plants are opening in communities across the U.S. to build cutting-edge technologies that are in growing global demand, with domestic supply chains and good jobs quickly springing up in their support.
At the same time comes a sharp increase in U.S. energy usage. It’s a sign of a dynamic economy, due in part to the rise of major innovations like artificial intelligence and data centers to support it, but it brings real risks. Power supply is simply not keeping up with demand. Consumers and businesses will face less reliable electricity and higher prices if we don’t quickly add new, affordable power to the grid.
Both stories exemplify the importance of federal clean energy tax credits. And I’ve been thinking about this connection as Congress begins to formally debate tax policy in the coming weeks. The tax credits – which propel the manufacturing and deployment of homegrown, affordable clean technologies here in the U.S. – are a potential target for repeal as lawmakers seek ways to fund other priorities.
Let’s be clear: Repeal would have profoundly negative impacts on each of the two economic dynamics mentioned above. It’s a recipe to hurt U.S. manufacturing while further exacerbating our national energy crunch, increasing costs for businesses and consumers.
Federal clean energy tax credits – which have enjoyed a long history of bipartisan support – were most recently extended and expanded in 2022. The long-term extension gave the private sector policy certainty to plan and execute its investments, reshoring supply chains and manufacturing accordingly. And the results have been impressive. In under three years, the U.S. has seen some 750 new clean energy manufacturing and deployment projects take shape, unleashing more than $400 billion in private-sector investment and creating some 300,000 new jobs.
Those figures include nearly 200 new factories, expected to employ 100,000 people, with many in states that for too long have seen their economies hollowed out by deindustrialization and disinvestment. Meanwhile, the tax credits are encouraging the rapid build-out of the most affordable and quickest to build sources of electricity – solar energy and battery storage, to be specific – at the exact time we need as much affordable power to come online as quickly as possible to power our economy.
Imagine the disruption if this policy was suddenly upended. The entire financial outlook for factories that have already broken ground and begun hiring employees in communities around the U.S. would be dramatically altered, potentially threatening their completion and canceling new local jobs, putting America’s manufacturing boom at risk.
It would also discourage the build-out of new affordable clean power that we so badly need as demand surges. In fact, a recent report from the Clean Energy Buyers Association found that eliminating federal tax credits would result in a 7% spike in residential electricity prices by next year, and the right-leaning organization ConservAmerica found that figure would double to 14% by 2035.
And those aren’t the only risks. Importantly, the tax credits are technology neutral – meaning they apply to any pollution-free power source. Repealing them would therefore hurt efforts to innovate with new forms of energy. Moreover, repealing the tax credits would also set the U.S. back in the global race to lead in development of clean technologies, including electric vehicles – a point emphasized by U.S. automakers who fear losing to competitors in countries across the world, including China, which has seen an explosive growth in EV production.
These are all enormous economic risks, which go to show why nearly 3,000 investors and companies publicly supported the clean energy tax credits when they last passed into law in 2022. They knew then what we are seeing now: Strong clean energy policy is strong economic policy, promising more jobs, greater affordability, and innovative technologies.
Now, dozens of large companies are taking to Capitol Hill this week as part of LEAD on a Clean Economy 2025, the seventh annual Washington, D.C. advocacy event organized by Ceres in support of business-friendly, innovative 21st century energy policies. Businesses such as Akamai Technologies, Ford Motor Co., Franklin Energy, IKEA US, Michelin, Schneider Electric, and many others will meet with lawmakers – primarily Republicans – to call for maintaining clean energy incentives during the upcoming tax debate, because it is sound fiscal policy.
Some Republicans have already aligned with this view. Last year, following several meetings with American business leaders and job creators, 18 Congressional Republicans signed a letter to House leadership, urging that the tax credits be preserved in any future GOP legislation. They cited the economic benefits they bring to their districts and the policy certainty they provide to the private sector. Most of those members remain in Congress this session.
It’s a good sign that this forward-looking energy policy can be preserved. But with the tax debate just beginning in earnest, and several competing interests emerging, the economic case for the tax credits must continue to be made loud and clear.
If lawmakers are going to consider repealing them, its members should first be fully aware of the vast benefits they are delivering: the investments and jobs they are bringing to Congressional districts across the country, their effect on keeping power reliable and affordable, and their role in maintaining U.S. energy and economic leadership. Business leaders – so keenly aware of economic realities and the impacts of rising prices – are ideally suited to make that case. Congress would be wise to listen.
