What Congress’ ‘Big’ Policy Bill Means for Global Climate Change

The effort to meet President Donald Trump’s July 4 budget reconciliation deadline is just heating up in Congress, with potentially significant ramifications for U.S. climate and energy policy. 

The reconciliation bill that passed the House of Representatives last month, and a companion currently under consideration in the Senate, would effectively repeal much of the 2022 Inflation Reduction Act (IRA)—former President Joe Biden’s signature climate legislation—and curtail funding for advanced energy technology included in the 2021 bipartisan infrastructure law. House Speaker Mike Johnson (R-LA) said that Republicans’ approach to the IRA was “somewhere between a scalpel and a sledgehammer.” If President Trump signs the combined bill, tax incentives for a wide swath of clean energy technologies will be slashed and billions of dollars in climate-related investments will be rescinded.  

More than twenty moderate Republicans voiced initial support for maintaining some clean energy funding—and the draft legislation in the Senate has eased some of the most stringent House provisions—but the future of climate and clean energy funding is far from certain. Congressional leaders are seeking deep spending cuts in the reconciliation package, and as President Trump has voiced steady opposition to policies that he has dubbed a “Green New Scam,” climate-related spending is a prime target for repeal.   

Members of the Council on Foreign Relations’ Climate Realism Initiative—Varun Sivaram, a senior fellow for energy and climate and the director of the initiative; Alice Hill, the David M. Rubenstein senior fellow for energy and the environment; and David Hart, a senior fellow for climate and energy—gathered recently to discuss what effect the bill and other energy funding cuts could have on U.S. efforts to address climate change and build a competitive clean energy industry. 

VARUN SIVARAM: Thanks for joining me, Alice and David. If passed, this reconciliation bill will have obvious effects on domestic clean energy industries—the solar power company Sunrun stock was down nearly 40 percent following the vote, for example—among other things. I’m interested in your takes on what this means for U.S. foreign policy in the context of our Climate Realism Initiative.

Preparing for the Risks of a Warming World

ALICE C. HILL: Hi Varun, the House bill undermines U.S. resilience to extreme weather by reducing investments in energy efficiency and ending tax breaks for rooftop solar. For example, the bill’s proposed cuts to federal programs focused on energy efficiency will result in Americans requiring more energy to power their businesses and homes. This will occur as artificial intelligence (AI) and data centers demand ever more electricity. 

At the same time, the bill derails tax breaks for installation of solar panels on homes. Like energy efficiency measures, rooftop solar can reduce demand on the grid, which means fewer brownouts and blackouts, and it can give households a backup power supply when the grid is stressed. 

But it’s not just what is in the House bill that leaves Americans less safe. It’s also the Trump administration’s efforts to shrink staffing at the Federal Emergency Management Agency (FEMA) and the National Oceanic and Atmospheric Administration, as well as proposed budget cuts to programs essential to building resilience to more extreme weather events and sea-level rise. I’m talking about programs like Building Resilient Infrastructure and Communities that help communities improve building codes, the congressionally mandated National Climate Assessment that provides an analysis of climate risks across the nation, and the tracking of disasters that cost the United States more than a billion dollars. By reducing investments in resilience and choking off information vital to understanding climate risk, the Trump administration is leaving the nation increasingly exposed to natural disasters.  

DAVID M. HART: Thanks, Alice. It’s really concerning! It seems likely to me that proposed and actual administration policies will have similar effects worldwide. Have the dismantling of the U.S. Agency for International Development (USAID) and other cuts to foreign assistance hit climate resilience programs, too?

HILL: The short answer is yes. USAID followed a strategy designed to ensure that its projects were resilient to climate impacts. Its investments in climate risk reduction had the potential for huge returns, saving up to $15 in disaster recovery for every dollar spent. Greater resilience also means that extreme events displace fewer people from their homes.

SIVARAM: I agree with your excellent recent piece, Alice, which lays out why budget cuts to U.S. weather forecasting and global climate research will dull both our and our partners’ ability to forecast climate effects, prepare effectively, and contend with natural disasters as they unfold. Nor will they offer much budget relief. In dollar terms, these cuts are miniscule compared to the scale of the United States’ fiscal emergency, so they won’t in any way advance the critical goal of reducing the U.S. national debt burden and preserving fiscal space for Washington to contend with increasingly severe climate outcomes in the future. 

On your other points focused on how the House reconciliation bill repeals much of the Inflation Reduction Act, I understand why you might argue that cuts to rooftop solar subsidies and energy efficiency subsidies might harm U.S. preparedness in the face of climate disasters. However, I’m skeptical that climate resilience is the principal goal of those subsidies. There are far more targeted ways to improve preparedness, and I hope U.S. policymakers take the changing climate as seriously as a grave national security threat

HILL: I agree with you, Varun, that the bill’s cuts to energy efficiency measures will not prove significant for resilience. However, as you point out, other actions by the Trump administration will be much more significant—actions like ongoing and proposed staffing and budget cuts to FEMA and to resilience programs through the Department of Housing and Urban Development, eradicating the term ”climate change” from core security planning documents and strategies, and the removing climate change curricula from armed services academies. These and other cuts reveal a policy shift away from preparedness for emerging climate risks like extreme heat, rain bombs, deeper droughts, and wildfires. 

This shift puts the country at a significant disadvantage. In other countries, militaries and civil institutions are actively incorporating climate change in their planning and decision-making. The United States has become an outlier in its denial of climate risk.

Accelerating Clean Energy and Innovation

HART: I’m very concerned about U.S. innovation capabilities in the wake of this bill and other recent policy developments at the federal level. For large-scale technological innovations, like clean power plants and manufacturing facilities, the path from prototype to widespread adoption is perilous under any circumstances. 

The costs and risks of first-of-a-kind commercial-scale operations discourage all but the most aggressive private investors. Public financial assistance, whether in the form of grants, loans, or guaranteed offtake, is almost always necessary to cross this so-called “valley of death.” State-supported competition from China has made the walls of this valley much steeper.

Congress passed several measures between 2020 and 2022 that sought to address this challenge. For example, with bipartisan support, it established and funded a new Office of Clean Energy Demonstrations at the Department of Energy, and it also dramatically expanded the department’s Loan Programs Office. While not every investment made by these offices and others like them have been effective, they represented important new capabilities in the U.S. energy innovation ecosystem. 

Executive actions taken by the White House and the Department of Energy, along with the proposed reconciliation bill and the president’s fiscal year 2026 budget, would strip away this progress.

SIVARAM: I agree with you, David, that the U.S. clean technology innovation ecosystem needs more—not fewer—investments.

U.S. policymakers can play a critical role in helping U.S. companies commercialize and export world-changing technologies, including advanced nuclear power and solid-state batteries. I will note that most of the Department of Energy’s investments under the Biden administration, as well as the bulk of the funding available through the landmark energy and climate legislation, aimed to deploy existing technologies and scale up manufacturing of existing technologies and supply chains, in which there is no route to U.S. competitiveness. 

I am relieved that among the tax incentives to receive more gradual phase-outs in the House reconciliation bill are measures that could support the manufacturing of next-generation American technologies, such as long-duration energy storage, advanced nuclear and geothermal energy production, digital grid management tools, and applied AI in clean technology domains. But I am dismayed to see some overreach, such as a proposed punitive tax on solar and wind in the Senate bill under consideration. Lawmakers seeking to unleash American energy dominance in all its forms should avoid kneecapping any particular technology—and the excise tax would not even provide any meaningful fiscal benefit.

I believe that in the coming years, there could be bipartisan support for legislation that advances a far more targeted set of measures than the Inflation Reduction Act enacted. This could include policies focused squarely on next-generation U.S. technology innovation as well as the commercialization and scale-up of technologies that add compelling economic value and rest on U.S. comparative advantage that the United States has a hope of exporting around the world. 

HART: No doubt that energy innovation policy in the last four years could have been better focused, but it’s tragic that we will have to wait—probably for years—to rebuild the capacity that is currently being dismantled. It’s a loss to the world as well as to the nation. The United States is the largest cumulative emitter of greenhouse gases. Our innovations offer one of the most important channels for us to contribute to global reductions in emissions in the future. They also represent an important source of U.S. “soft power,” not to mention economic growth and exports.

Averting Catastrophic Global Climate Change

SIVARAM: I think it’s important to put the effects of domestic policy on emissions in context. If the Inflation Reduction Act was fully repealed, an outer limit for the increase in annual U.S. emissions over the next decade would be about 0.5–1 billion metric tons, or about 1–2 percent of global annual emissions. 

I don’t know if climate scientists can discern with any confidence that changes to the U.S. emissions trajectory alone can be linked to a measurably different risk of climate effects. I also am skeptical that there is a magical signaling mechanism under which the emissions and energy decisions of other countries track U.S. policy decisions. To be sure, I am in favor of the United States aggressively reducing domestic emissions, but only in concert with every other major current and future emitter reducing their emissions in an enforceable and credible manner—which is not the case today under the current voluntary and unenforceable international framework.

HILL: The level of future U.S. emissions may be minor in isolation as you note, Varun, but as emissions accumulate, they compound, contributing to long-term risk. In addition, the fact that the United States is the world’s largest historical emitter, the second largest current emitter, and the biggest producer of oil and gas, matters to other nations. They often cite these facts in climate negotiations. 

When the international community sees the United States rejecting climate action, they feel less pressure to cut their pollution. Indeed, foot-dragging on climate action appears to be underway in many countries. The Paris Agreement rests on the assumption that every five years countries will “ratchet up” their voluntary commitments to reduce emissions. The latest round of commitments was due in February. As of today, only 21 nations out of 197 have met their submission requirements. With the Trump administration moving to withdraw from that agreement, the United States will join just three other nations—Iran, Libya, and Yemen—who are not parties. 

This fall’s UN climate summit in Brazil will reveal how much damage the United States has inflicted on international efforts to cut greenhouse gas emissions. Of course, reduced momentum for climate action leaves all of us, as well as future generations, in harm’s way.  

SIVARAM: We’re in total agreement that the world needs to do more to avert catastrophic global climate impacts, but I continue to believe that the most important ways that the United States contribute to that goal are: (1) develop next-generation clean technologies, exporting and licensing them around the world in collaboration with allies and partners, to make net-zero transitions cheaper and swifter; (2) work with allies and partners on trade and other policies that create incentives for large and growing emitters to decarbonize, and disincentives if they do not; and (3) advance geoengineering research to develop alternative tools that could avert catastrophic climate change in the eventuality that such tools become necessary.

HILL: As you point out, Varun, these are some of the things the United States can focus on to have better outcomes, but I believe that the United States should continue to reduce its own emissions. Doing so can not only spark the development of next-generation clean technologies, but also spur other countries to slash their emissions, thereby reducing future reliance on unproven geo-engineered solutions.