Trump's Budget Bill Boosts Fossil Fuels, Hits Renewable Energy

WASHINGTON - The budget bill the U.S. Senate passed on Tuesday and the House of Representatives is now debating for final approval would dampen development of wind and solar power, kill climate funding and boost oil, gas and coal output.

Below are some details about the bill's provisions on energy development and the environment:

SOLAR, WIND TAX CREDITS

The legislation sharply reduces access to a 30% tax credit for solar and wind power projects that had been set to run until 2032, and which developers had relied on for future projects.

To access the subsidy, projects must now start service by late 2027, one year earlier than proposed in the House bill, or begin construction within a year of the bill’s adoption. Using the credits would also require new standards on the origin of manufactured components used in the projects, in part to boost domestic manufacturing and reduce dependence on China. Clean manufacturing projects such as solar panel or battery manufacturing seeking a production tax credit from January 1, 2026 onward also need to meet those material-sourcing requirements.

>> In Other News: Carbon Credit Retirements Hit All-time High, Quality Drives Market Evolution

A view of an agenda with the words "One Big Beautiful Bill Act" printed on it, on the day of a House Rules Committee's hearing on U.S. President Donald Trump's plan for extensive tax cuts, on Capitol Hill, in Washington, D.C., U.S., May 21, 2025. REUTERS/Nathan Howard/File Photo

NUCLEAR, HYDRO AND GEOTHERMAL

The Senate bill preserves tax credits for nuclear, hydropower and geothermal projects if they start construction by 2033. Those forms of power generation are favored by the Trump administration, in part because they do not rely on weather conditions to produce.

HYDROGEN, EXISTING NUCLEAR AND CARBON CAPTURE

Tax credits for clean hydrogen could be used until the end of 2027, two years longer than the House had proposed. The Senate bill maintains the carbon capture and storage tax credit proposed by the Senate finance committee that creates parity between credit levels for carbon utilization projects and those storing captured CO2 underground and preserves the credits for existing nuclear plants.

TRANSFERABILITY

Under the Senate bill, developers of renewable hydrogen and nuclear power, and carbon capture, can still sell their credits to third parties in order to raise capital to finance projects.

GREENHOUSE GAS REDUCTION GRANTS, OTHER IRA PROGRAMS

The bill rescinds all unobligated funding from former President Joe Biden's Inflation Reduction Act from the $20 billion Greenhouse Gas Reduction Fund. It also will rescind unspent grant funding allocated to the Department of Energy by the IRA for transmission deployment and siting, low-carbon construction materials, programs to decarbonize buildings, money allocated to help oil and gas companies to reduce their methane emissions, and tribal energy loans.

HOME EFFICIENCY

Tax credits for households that want to make energy-efficient home improvements can only be used for projects that are completed by the end of 2025. For energy efficiency credits for commercial buildings, developers would need to start construction by June 30, 2026. The House version did not include the elimination of the buildings' tax credit.

ARCTIC OIL AND GAS

The bill mandates four sales of oil and gas drilling rights by 2032 in Alaska's Arctic National Wildlife Reserve that's home to endangered and threatened species such as polar bears. A January ANWR lease sale required by a law passed in Trump's first administration drew zero bids. The bill mandates five lease sales by 2035 in the National Petroleum Reserve-Alaska and nullifies Biden's leasing limits set in 2022.

OTHER DRILLING

The Senate bill would allow four year non-renewable drilling permits on federal lands. Such permits are currently subject to annual renewals. The bill also streamlines leasing and prohibits some measures meant to limit environmental damage. It requires 30 offshore lease sales in the Gulf of Mexico over 15 years. The Trump administration has named the area the Gulf of America.

ICEBREAKERS

The bill provides $24.6 billion for the U.S. Coast Guard's procurement of icebreakers, airplanes and ports, much of which could be used in development of Arctic oil, gas and minerals.

COAL

Senators attached a last-minute measure that could benefit miners of coal for steel making. It would allow producers of metallurgical coal to claim an advanced manufacturing production tax credit available for critical minerals. The credit for 2.5% of production costs is potentially worth hundreds of millions of dollars to coal companies. The bill would also reduce royalty rates the coal industry must pay when mining on public lands from 12.5% to 7% and expand leasing on federal lands by 4 million acres (1,618,740 hectares).

OIL RESERVE

The bill runs counter to Trump's plans to quickly replenish the Strategic Petroleum Reserve, slashing the amount of money available for purchases. It offers funding that would now cover only about 3 million barrels of purchases, instead of about 20 million. It also cancels a mandated sale from the SPR of about 7 million barrels. The U.S. conducted a historic sale of 180 million barrels in 2022 after Russia's invasion of Ukraine.