What Trump means for the future of heat pump and EV incentives

If you’re thinking of buying an electric car or an energy-saving heat pump eligible for federal tax credits and rebates, now might be the time.

President-Elect Donald Trump has labeled the U.S. Inflation Reduction Act the “green new scam.” He’s pledged to rescind funding for the Biden administration’s signature 2022 climate law, which includes more than $8.5 billion in incentives for individuals and families to decarbonize their lives.

“Clawing back funds already dispersed would be difficult, but that doesn’t mean the Trump administration won’t try,” said Romany Webb, deputy director of the Sabin Center for Climate Change Law at Columbia University. “From a strictly legal perspective, there may be more avenues for the administration to withhold funds that haven’t been awarded yet.”

But “failing to move forward with announced awards may be politically unpopular,” she added.

The IRA’s benefits are manifold. The law offers up to $14,000 for low- and moderate-income households to install heat pumps, induction stoves and other high-efficiency electric appliances. Wealthier families can receive a $2,000 federal tax credit for replacing a fossil-fuel furnace or water heater with a heat pump. Some electric vehicles qualify for a $7,500 tax credit issued at the time of purchase, and a 30% tax credit is available for homeowners to install solar panels and battery storage systems.

U.S. Representative Ro Khanna, a California Democrat, said on Thursday’s Zero podcast that he doubts that the new Trump administration and Congressional Republicans will seek the wholesale repeal of the IRA, given the billions of dollars in benefits it funnels to their constituents.

IRA funding is distributed through the states through U.S. Department of Energy-approved rebate programs. The federal government has paid out $1.4 billion to nine states and the District of Columbia that have begun to offer up to $8,000 for a heat pumps and $1,750 for a heat pump water heaters. They also provide $840 cash back for induction stoves and heat pump clothes dryers and $4,000 for electrical system upgrades.

Another 10 states have received $1.2 billion but have yet to start issuing rebates. Nine more states are awaiting federal review of their applications, which usually takes about 60 to 90 days. The rest of the states are still preparing their applications except for South Dakota, which isn’t participating in the program. Florida initially declined $175 million in funding but now has submitted an application.

Short of repealing the IRA, though, taking those lucrative incentives away from taxpayers would prove legally difficult and politically problematic, according to David Friedman, senior policy director for Rewiring America, a nonprofit that advocates for community electrification.

“The law is pretty clear that once this money is authorized, this money is required to be spent,” said Friedman, a former acting assistant secretary for energy efficiency and renewable energy at the Energy Department. “Politically, it would just be a terrible move to roll these things back as every state and territory but one have applied for these rebates.”

The $7,500 EV tax credit is more vulnerable as it may be subject to a law that allows Congress to review and reverse recently enacted regulations, according to a September paper by Webb and her colleagues.

“If we end up with a Republican-controlled Congress, there may be attempts to repeal or revise the IRA tax credits themselves,” Webb said.

That too could prove politically perilous. The 30% tax credit for residential solar installations, for instance, dates to 2006 and was set to expire in 2023 before the IRA extended it until 2032. Homeowners claimed $6 billion in tax credits for solar installations and battery storage last year.

Friedman said now is always a good time for families to take advantage of the IRA and go electric. “Regardless of what's going to happen in the future, you should do it today because it's a great deal.”