U.S. Congressional Budget Reconciliation and Its Impact on Climate and Energy Policy

The ongoing effort in the U.S. Congress to meet the July 4 budget reconciliation deadline under President Donald Trump has significant implications for climate and energy policy. The reconciliation bill passed by the House of Representatives and the companion bill under Senate consideration aim to repeal much of the 2022 Inflation Reduction Act (IRA), which was a key climate legislation under former President Joe Biden. Additionally, these bills propose cuts to funding for advanced energy technologies included in the 2021 bipartisan infrastructure law.

Key Legislative Changes and Their Implications

• Repeal of major provisions of the Inflation Reduction Act (IRA).
• Reduction of tax incentives for a wide range of clean energy technologies.
• Rescinding billions of dollars in climate-related investments.
• Potential deep spending cuts targeting climate-related programs.

House Speaker Mike Johnson described the Republican approach to the IRA as “somewhere between a scalpel and a sledgehammer.” While some moderate Republicans support maintaining certain clean energy funding, the overall future of climate and clean energy funding remains uncertain.

Impacts on Sustainable Development Goals (SDGs)

The proposed legislative changes affect several Sustainable Development Goals, including:

1. SDG 7: Affordable and Clean Energy – Cuts to tax incentives and funding for clean energy technologies threaten the expansion and affordability of renewable energy sources.
2. SDG 13: Climate Action – Repealing climate legislation and reducing investments undermine efforts to combat climate change and build resilience.
3. SDG 9: Industry, Innovation, and Infrastructure – Reduced support for advanced energy technology innovation may hinder industrial competitiveness and infrastructure modernization.
4. SDG 11: Sustainable Cities and Communities – Cuts to energy efficiency programs and resilience initiatives increase vulnerability to extreme weather events.

Expert Analysis on the Bill’s Effects

Climate Resilience and Preparedness

Alice C. Hill, David M. Rubenstein Senior Fellow for Energy and the Environment, highlighted that the House bill undermines U.S. resilience to extreme weather by:

• Reducing investments in energy efficiency.
• Ending tax breaks for rooftop solar installations.
• Reducing federal program funding that supports energy demand reduction.
• Cutting staffing and budgets at FEMA and NOAA, which are critical for disaster preparedness and climate risk assessment.

These reductions compromise the nation’s ability to manage climate risks, increasing exposure to natural disasters and undermining SDG 13 (Climate Action) and SDG 11 (Sustainable Cities and Communities).

International Climate Resilience and Assistance

David M. Hart, Senior Fellow for Climate and Energy, expressed concern about the impact of cuts to foreign assistance programs such as USAID, which had prioritized climate resilience. These cuts reduce global capacity to manage climate risks, affecting SDG 13 and SDG 17 (Partnerships for the Goals).

Clean Energy Innovation and Industry Competitiveness

Experts emphasized the importance of sustained investment in clean energy innovation to maintain U.S. competitiveness and contribute to global emissions reductions:

• Public financial support is critical to overcoming the “valley of death” in commercializing new clean technologies.
• The Inflation Reduction Act and bipartisan measures had established new capabilities like the Office of Clean Energy Demonstrations and expanded the Loan Programs Office.
• Proposed budget cuts and executive actions threaten to dismantle these advances.

Varun Sivaram, Senior Fellow for Energy and Climate, stressed the need for continued investment in next-generation technologies such as advanced nuclear power, long-duration energy storage, and digital grid management. He cautioned against punitive measures that could undermine specific clean energy sectors.

These issues directly relate to SDG 9 (Industry, Innovation, and Infrastructure) and SDG 7 (Affordable and Clean Energy).

Global Climate Change and U.S. Leadership

The experts discussed the broader implications of U.S. policy on global climate efforts:

• The repeal of the Inflation Reduction Act could increase U.S. emissions by 0.5–1 billion metric tons annually over the next decade, representing 1–2% of global emissions.
• While this may seem minor, the U.S. is the world’s largest historical emitter and a major current emitter, influencing international climate negotiations.
• U.S. withdrawal from the Paris Agreement and reduced climate action undermines global momentum, affecting SDG 13 (Climate Action) and SDG 17 (Partnerships for the Goals).
• Experts advocate for the U.S. to focus on developing and exporting clean technologies, enforcing emissions reductions globally, and advancing geoengineering research as alternative climate solutions.

Conclusion

The proposed budget reconciliation legislation and associated policy shifts present significant challenges to the United States’ ability to meet Sustainable Development Goals related to climate action, clean energy, innovation, and sustainable communities. Experts urge policymakers to prioritize investments in climate resilience, clean energy innovation, and international cooperation to mitigate climate risks and maintain global leadership in sustainable development.

1. Sustainable Development Goals (SDGs) Addressed or Connected

1. SDG 7: Affordable and Clean Energy
   • The article discusses tax incentives and funding for clean energy technologies such as solar power, advanced nuclear, geothermal energy, and energy storage.
   • It highlights the impact of repealing the Inflation Reduction Act and cuts to clean energy funding on U.S. energy innovation and deployment.
2. SDG 13: Climate Action
   • The article focuses extensively on U.S. climate policy, the effects of budget cuts on climate resilience programs, and the importance of reducing greenhouse gas emissions.
   • It mentions the U.S. role in international climate agreements and the risks of increased emissions.
3. SDG 9: Industry, Innovation and Infrastructure
   • Discussion on clean energy innovation, commercialization, and the role of government funding in supporting new technologies.
   • References to the Department of Energy’s Loan Programs Office and the Office of Clean Energy Demonstrations.
4. SDG 11: Sustainable Cities and Communities
   • Investment in energy efficiency and rooftop solar to improve resilience to extreme weather and reduce grid stress.
   • Programs like Building Resilient Infrastructure and Communities are mentioned.
5. SDG 17: Partnerships for the Goals
   • Emphasis on international cooperation, working with allies and partners on trade and climate policies.
   • Discussion on the U.S. role in global climate negotiations and technology export.

2. Specific Targets Under Those SDGs Identified

1. SDG 7: Affordable and Clean Energy
   • Target 7.2: Increase substantially the share of renewable energy in the global energy mix.
   • Target 7.a: Enhance international cooperation to facilitate access to clean energy research and technology.
2. SDG 13: Climate Action
   • Target 13.1: Strengthen resilience and adaptive capacity to climate-related hazards and natural disasters.
   • Target 13.2: Integrate climate change measures into national policies, strategies, and planning.
   • Target 13.3: Improve education, awareness-raising and human and institutional capacity on climate change mitigation, adaptation, impact reduction, and early warning.
3. SDG 9: Industry, Innovation and Infrastructure
   • Target 9.5: Enhance scientific research, upgrade the technological capabilities of industrial sectors, and encourage innovation.
4. SDG 11: Sustainable Cities and Communities
   • Target 11.b: Increase the number of cities and human settlements adopting and implementing integrated policies and plans towards inclusion, resource efficiency, mitigation and adaptation to climate change.
5. SDG 17: Partnerships for the Goals
   • Target 17.6: Enhance North-South, South-South and triangular regional and international cooperation on and access to science, technology and innovation.
   • Target 17.17: Encourage and promote effective public, public-private and civil society partnerships.

3. Indicators Mentioned or Implied to Measure Progress

1. SDG 7 Indicators
   • Proportion of population with access to electricity (implied through discussion of rooftop solar and energy efficiency).
   • Renewable energy share in the total final energy consumption (implied by clean energy deployment and tax incentives).
   • Investments in clean energy research and development (implied by funding for Department of Energy programs and innovation offices).
2. SDG 13 Indicators
   • Number of countries with national and local disaster risk reduction strategies (implied by references to FEMA, NOAA, and resilience programs).
   • Greenhouse gas emissions per capita and total emissions (discussed in terms of U.S. emissions trajectory and global emissions).
   • Climate change adaptation and mitigation policies in place (implied by discussion of policy shifts and budget cuts).
3. SDG 9 Indicators
   • Research and development expenditure as a proportion of GDP (implied by discussion of innovation funding and clean energy demonstration projects).
   • Number of clean energy technologies commercialized and scaled up (implied by discussion of innovation ecosystem and technology commercialization).
4. SDG 11 Indicators
   • Number of cities implementing climate resilience and energy efficiency measures (implied by Building Resilient Infrastructure and Communities program).
   • Reduction in energy demand due to efficiency measures (implied by discussion of energy efficiency subsidies).
5. SDG 17 Indicators
   • Number of international agreements and partnerships on climate and clean energy (implied by discussion of international cooperation and climate negotiations).
   • Volume of technology transfer and export of clean energy technologies (implied by export and licensing of next-generation technologies).

4. Table: SDGs, Targets and Indicators

Source: cfr.org