House Republicans this week are advancing a radical new tax and budget proposal that would increase taxes on clean energy, stripping almost all federal clean energy investment support from households and businesses. This disinvestment will require households and businesses to buy more gasoline and electricity at higher prices, delivering a windfall of new revenue to the oil and gas industry.
The result of the House Republican tax bill’s plan to terminate almost all federal clean energy investment is a staggering increase in household expenditures on electricity and gasoline. Americans will pay the price, while the oil and gas industry reaps the profits.
The House Republican bill would:
- Raise gasoline prices by 25 cents to 37 cents per gallon by 2035 as demand for oil increases due to the termination of federal electric vehicle affordability programs, fuel economy standards, and tailpipe emission standards.
- Repeal the financial support for buying new, used, or leased electric vehicles, which would keep between 22 million and 40 million more gasoline-powered cars and trucks on the road through 2035, as roughly one-third of families who would have tried to switch to an electric vehicle can no longer afford one.
- Increase electricity prices for households and industry as roughly two-thirds of the wind and solar that was previously expected to be deployed this decade is not built. This would cause annual home electric bills to jump $70 by 2031. This corroborates other analysts who found, in some cases even higher electricity price increases. The Clean Energy Buyers Association forecasts an increase of $110 in household electricity spending by 2026.
- Force Americans to pay the oil and gas industry an additional $339 billion for gasoline and $75 billion for electricity by 2035.
About this analysis
This new analysis is based on modeling conducted by the energy systems analysts at Rhodium Group about the implications of the House Republican proposals to repeal, terminate early, and bury under new unimplementable requirements a huge range of clean electricity investments, electric vehicle affordability programs, fuel economy standards, home efficiency incentives, and clean energy manufacturing investments. Rhodium previously published results comparing the incoming administration’s executive and legislative plans against the policies of the last administration, and again this week isolating the effects of the House Ways and Means Committee proposal from the effects of the administration’s ongoing executive rollbacks. Rhodium generously shared the previously unpublished data underlying these reports with the Center for American Progress, enabling a deeper investigation of energy costs. These data are on file with the author.
More expensive gas at the pump
Although many Americans are interested in switching to electric vehicles, the House Republican tax bill would strip away $190 billion over the next decade from households who are trying to buy one, abruptly cutting off the financial support that makes new, used, and leased cars more affordable. Those who do have an electric vehicle would soon be hit with a brand-new federal registration tax of $250 every year. Other sections of the bill terminate federal incentives for building electric chargers and bury the tax incentive program for onshoring battery manufacturing under unimplementable requirements. This creates significant financial pressure to slow electric vehicle sales.
As a result of the termination of these investments, Rhodium’s model finds that there will be between 22 million and 40 million fewer electric vehicles on the road in 2035. That means that roughly one-third of the families who would have switched to an electric vehicle in the coming decade will instead continue to drive gas-powered cars or trucks for lack of the financial support offered by these tax incentives. Considering that operating and maintaining an electric vehicle costs half as much as a gasoline-powered vehicle, this is a significant financial loss for the millions of drivers who will be denied their preferred choice of vehicle.
As for the millions of Americans who will buy new gas-powered cars and trucks in the years to come, this legislation will lead to worse gas mileage. For half a century, the federal government has set fuel economy standards for new cars, but the House Republican bill would repeal both the fuel economy and tailpipe emission standards. Another bill that recently passed the House would make state tailpipe pollution standards illegal. These changes would be an astounding legislative reversal of long-standing policies and would make it harder to find new models with improved gas mileage.
This all adds up to a lot more demand for gasoline. Millions of drivers who wanted to have an electric vehicle will instead continue to pull into the gas station every week, and new internal combustion vehicles will get fewer miles to the gallon than required under current policy. Supplying so much more oil is expensive, and this volume of additional demand is enough to move prices. The House Republican tax bill will raise gas prices 25 cents to 37 cents per gallon by the end of the decade, according to Rhodium’s model—up to double the entire federal gasoline tax that pays for federal highway funding.
As a result of this legislation, Americans will pay the oil industry an additional $339 billion in gasoline revenues by 2035, according to Rhodium’s central forecast. All told, these policy choices are projected to cost the average household $2,400 in unnecessary gasoline expenditures over the next 10 years.
Higher electric bills
The House Republican bill would terminate clean energy investment incentives early, resulting in lower energy supply and higher energy prices for American households and businesses.
Clean energy is the most affordable source of electricity and the primary driver of new power generation, accounting for more than 90 percent of new capacity added to the grid last year. With electricity demand projected to rise significantly in the next few years, in part due to a boom in data centers, continued growth of clean energy will be essential to meeting demand and preventing electricity costs from skyrocketing. By 2040, the U.S. is expected to need more than 700 gigawatts of new renewable energy just to maintain grid reliability. If clean energy incentives are terminated early, new projects will be harder to finance, and the United States risks not meeting the rising demand. In the first three months of 2025, nearly $8 billion in clean energy investments have already been canceled or downsized amid the uncertainty of tax credit continuation.
The House Republican proposal amounts to sabotage of an entire industry, effectively repealing the incentive effect of federal clean energy tax credits.
The House Republican tax bill would sabotage federal clean energy investment in several ways. To convince an investor to finance a project based on the full value of the tax incentive, a project would now need to accurately predict that not only can it commence construction, but that it can actually be placed into service by 2029, despite the uncertainty of the Trump administration’s chaotic permitting regime. Further adding to uncertainty, the proposal requires project planners to anticipate how and when the Trump administration may issue guidance for complicated new requirements about copyright holders, residency, and methods of accounting for so much as a molecule of various minerals for every component involved in the project’s supply chain. And, by curtailing provisions that allow projects to transfer their tax incentives to a wider variety of investors, more clean energy projects would need to seek pricey tax equity financing from Wall Street. The House Republican proposal amounts to sabotage of an entire industry, effectively repealing the incentive effect of federal clean energy tax credits.
The result of terminating federal clean energy investment is that the United States would build about one-third as much wind and solar over the next decade as currently expected. The grid would struggle to keep up with increased demand, which could lead to new factories or data centers being denied access to electricity. This would severely harm the competitiveness of American industry and technology.
For the average household, the termination of federal clean energy investments means that annual home electric bills would jump $70 by 2031, according to Rhodium’s model, due to a persistent increase in the price of electricity generation. That amounts to $75 billion over the next decade in unnecessary expenditures on home electric bills due to the House Republican tax bill. Other analyses predict even higher increases, with the Clean Energy Buyers Association forecasting an increase of $110 in annual household electricity spending by 2026, and Resources for the Future forecasting an increase of up to $145 in annual household electricity spending by 2035.
In addition to paying higher electric rates, many homes may require more electricity than they might have otherwise, as the bill also proposes to eliminate $105 billion in tax incentives for home energy efficiency improvements and for installing rooftop solar. At the same time, the administration is canceling programs such as Energy Star, which informs consumers about which appliances are the most energy efficient, and proposing to repeal several of energy efficiency standards.
Fossil fuels, meanwhile, would continue to receive billions of dollars in subsidies and face no new requirements about their foreign entanglements or supply chains, despite their volatility as an energy source that is vulnerable to manipulation by international cartels and causing terrible harm to the climate and public health.
See also
Conclusion
Slowing the construction of the clean energy economy will accelerate climate change, worsen air pollution, jeopardize American manufacturing, and raise the price of gasoline and electricity. By canceling federal clean energy investment, House Republicans are offsetting tax giveaways to billionaires and offering a massive windfall to the oil and gas industry at the same time. Both come at the expense of American household energy spending.
The author would like to thank Ben King of the Rhodium Group for the data that made this paper possible, as well as Jamie Friedman, Shannon Baker-Branstetter, Lucero Marquez, Akshay Thyagarajan, and Christian Rodriguez at the Center for American Progress.