America Closed For Business: Bill Rolling Back IRA Provisions Will Slash Investment

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Last Updated on: 13th May 2025, 01:16 am

The Inflation Reduction Act (IRA), enacted in 2022, marked a seismic shift in U.S. industrial and energy policy, promising clarity and stability to a previously fragmented clean energy landscape. It introduced comprehensive, decade-spanning incentives designed to catalyze investments across renewables, hydrogen hubs, electric vehicles, and domestic manufacturing. Almost immediately, this legislation became a magnet for institutional capital and strategic corporate commitments, prompting over $200 billion in clean energy and manufacturing investments in its first year alone. America appeared to be reclaiming its position as a global clean-energy leader, driven by a coherent industrial policy that many international investors applauded and enthusiastically embraced.

Perhaps most importantly, it was the return of big industrial policy, in fact almost any industrial policy, to the United States. The concept went out of favor in the country, and its intellectual close follower the United Kingdom, much more so than in the rest of the West. Europe certainly didn’t have the coherence and focus of China, but it did manage to have an industrial policy, hence the reason it still has heavy industry and commercial ship building. But with the IRA, the United States was back in the industrial policy game, and focused on the economy of the future.

But now, barely two years into this promising trajectory, a House Republican bill just released dubbed “The One Big, Beautiful Bill“—Trump and company appear to be going out of their way to make governance look silly—is going to hobble movement. The proposed rollback will dismantle key IRA provisions, including clean energy production and investment tax credits, domestic manufacturing incentives, and targeted hydrogen production support, ending some programs far ahead of schedule. This abrupt about-face in regulatory direction sends a jarring signal to global markets. After promoting a compelling narrative of stable, long-term incentives, the U.S. is doubling down on being fragmented and unreliable, effectively advertising itself as closed for business to international investors who had previously been attracted by precisely the kind of policy consistency the IRA initially represented.

The implications for institutional investors globally are significant. For instance, the proposed elimination of transferable clean energy credits would abruptly terminate a mechanism widely seen as revolutionary for project financing. Transferability had expanded market access, simplifying financial structures, attracting more diverse pools of capital, and opening pathways for non-traditional investors—such as foreign institutions—to participate directly in American clean energy projects. Now, under the proposed legislation, these opportunities vanish, reinstating barriers that limit investment primarily to large, tax-equity-driven domestic investors. International institutional capital, which recently found the U.S. clean energy market compellingly attractive, will be pushed back onto the sidelines and will redirect toward other regions offering more predictable returns and consistent regulatory frameworks.

This policy reversal also critically undermines recent progress in domestic clean manufacturing, a major growth segment, especially in red states and counties. Prior to the IRA, the U.S. had largely ceded all dominance in solar, battery production, electric vehicles, and advanced materials to China and other Asian economies. With IRA incentives, however, American manufacturing of solar panels, wind turbines, battery cells, and critical minerals gained traction, starting to reverse decades of offshoring. Billions of dollars flowed into regions such as Georgia, Ohio, and Michigan, promising a manufacturing renaissance anchored in clean technology and the energy transition. But with the new House proposal shortening or outright ending crucial manufacturing credits, projects that once looked profitable and secure now face existential threats. This sudden evaporation of incentives jeopardizes factory expansions and new plant developments, with multinational corporations likely to relocate and reconsider future investments in jurisdictions perceived as more stable, notably the European Union or Canada.

Hydrogen hubs and associated infrastructure are equally vulnerable, which is a mixed blessing. As I noted a month ago when especially blue state hubs were rumored to be on the chopping block, cutting hydrogen for energy plays would accidentally be the right thing to do, and it appears that’s being followed through on. The IRA established a generous production tax credit for clean hydrogen intended to help build a robust domestic hydrogen economy, essential for decarbonizing hard-to-electrify sectors like refining and ammonia. Numerous regional hydrogen hubs attracted major global players eager to capitalize on these incentives, driving planning and early-stage development across the nation. But the House Republican bill dramatically truncates these incentives, imposing unrealistic construction deadlines that effectively render the hydrogen credit irrelevant to most developers. Institutional investors, who typically seek stable policy environments, will likely respond by halting or reducing their exposure to the emerging U.S. hydrogen market. Instead, they’ll redirect their capital towards European and Asian markets that offer clearer, longer-term commitments and strategic certainty.

Unsurprisingly, carbon capture incentives, including those related to blue hydrogen, aren’t touched in the bill. While Trump’s steroid-addled stampede through the economic China shop has added significantly to the structural headwinds facing the United State’s oil and gas industry, he can’t be directly removing their subsidies after all. On a similar note, electric vehicle incentives are on the chopping block too.

This new American uncertainty is especially advantageous to global competitors, primarily China and the European Union. China, already dominant in renewable energy supply chains, battery production, and electric vehicles, stands to gain significantly from U.S. flailing. The country continues to offer clear, consistent, and strategically aligned policies that attract long-term investment, reinforcing its supply-chain dominance. European policymakers, similarly, have responded to the IRA not by retreating but by solidifying their own incentives under the European Green Deal and various national strategies. Countries like Germany and France are aggressively courting clean technology investors through predictable regulatory frameworks, tax incentives, and public funding. As U.S. regulatory unpredictability grows, the EU emerges as a natural beneficiary, becoming an increasingly attractive destination for investment that might have otherwise flowed to the United States.

Of course, this further eliminates any pretense that the United States is a leader or even a reliable partner on the most important file of the 21st Century, climate change. Europe and China will continue to lead on this crucial file as the United States further isolates itself.

From an innovation standpoint, the abrupt legislative shifts disrupts U.S. attempts at technological leadership in new clean technologies. IRA incentives created a predictable market environment that accelerated innovation in emerging technologies like advanced geothermal, long-duration energy storage, and next-generation battery chemistries. While I don’t think much of advanced geothermal electrical generation, and said so at length in a dozen-part series recently, advanced drilling techniques are strongly advantageous for geothermal heat exchange and seasonal heat storage. Venture capital firms and global investors began allocating funds to early-stage U.S. companies, banking on stable, policy-backed demand growth. As these incentives abruptly vanish, the U.S. will lose its position as a destination for innovative capital in the space, ceding technological breakthroughs and intellectual property generation to more stable policy environments, particularly in Europe and East Asia. The innovation ecosystem in the U.S., once considered unmatched, faces potentially significant setbacks, undermining decades of competitive advantages carefully nurtured through previous policy and funding programs.

This is on top of the Trump Administration’s attacks on research and academia, attacks most analogous to Mao’s Cultural Revolution, ironically. The gutting of secondary grants for lab space and administration, the ideological attacks on climate science, health research and similar areas, and the attacks on foreign residents of all non-white hues are leading to brain drain instead of brain gain. The global conveyor belt of hungry, innovative, intelligent talent to the United States is stopping. The One Big, Beautiful Bill is just another nail in the country’s innovation coffin.

Ultimately, the tabled legislative rollback represents far more than just a domestic policy change. It signifies the breakdown of a coherent U.S. industrial strategy that, for a brief but impactful period, successfully combined climate ambition with economic opportunity. It reintroduces uncertainty precisely when certainty is most critical, signaling to global investors that America is neither reliable nor consistent in its strategic priorities. The clear message now resonating throughout global financial centers is that the U.S. investment market, previously seen as open and inviting, is volatile and unpredictable, prompting a long-term exodus of capital and talent to regions offering clearer and more stable frameworks.

The bill isn’t law yet. But investors will already be reading it and changing their investment strategies. Chinese and European policy strategists will be rubbing their hands with glee, and contacting global institutional investors to invite them to divert money to welcoming economies with stable policies.

The House Republican bill represents not merely a shift in policy but a profound strategic miscalculation. It closes American access to many of the global capital and innovation flows necessary to compete economically in the 21st century. Meanwhile, China and Europe stand ready to capitalize on these mistakes, capturing the investment, manufacturing opportunities, and technological breakthroughs that were within America’s grasp, undoubtedly reshaping the global economic and geopolitical landscape for decades to come.