Texas Poised to Lose Billions in Investment if Donald Trump Elected

Texas and other Republican states that benefit disproportionately from the Inflation Reduction Act (IRA) would lose billions of dollars of investment in their economy were Donald Trump to be re-elected in November and seek to repeal the landmark Biden administration deal.

In November, a Trump campaign official told the Financial Times the former president would "cut a lot of that spending" if he wins, while in February allies of Trump indicated the IRA was firmly in his crosshairs—with Myron Ebell, a climate change denier who led Trump's Environmental Protection Agency transition team, telling the Guardian he would "undo everything Biden has done."

However, experts say that not only would repealing the act—which was passed in 2022, and provides $500 billion in investment for infrastructure necessary for a transition to a green economy—be hard to do, but would likely see states like Texas lose out economically to foreign countries like China, and could inadvertently keep the price of domestic fossil fuels higher.

"The Inflation Reduction Act is really industrial policies sort of masquerading as climate policy—and we've seen this wave of new manufacturing," Doug Lewin, a leading consultant on the energy industry in Texas, told Newsweek. "This is really starting to give us a share in the United States of the clean energy economy."

According to analysis by energy consultancy RMI, Texas benefits the most from the IRA; by 2030, it will have received $131 billion in investments.

It is also among GOP states which will receive the most per-capita funding, including Wyoming ($12,300 per person by 2030), North Dakota ($10,700 per capita) and West Virginia ($9,100 per capita).

The investments have incentivized projects such as large battery storage facilities in Georgia and Arizona, as well as solar farms in Texas and Alabama.

As such, lawmakers may be hesitant to remove this economic stimulus.

"The IRA would be hard to repeal because he'd need 60 votes in the Senate, or—if they get control of Congress and decide to pass a big reconciliation bill—he'd need to hold together almost all Republican senators, since they're not likely to have more than a few votes to spare in the Senate in that scenario," Roger Karapin, a professor of political science at Hunter College, City University New York, who specializes in environmental policy, told Newsweek.

"As is widely known, the IRA gives disproportionate benefits to Republican states and areas, so some Republican senators might defect," he added. "This would not be surprising. In Trump's first term, we saw that relatively little of his policy priorities were supported and passed in Congress even with unified Republican control during 2017-18."

An attempt by Trump to axe the IRA may also invite a backlash from certain corners of the business sector. Many energy infrastructure projects are premised partly or entirely on investment afforded by the IRA, while some are thought only to be economically viable with the tax credits it allows for.

"I don't think that there's any way to argue that repealing the Inflation Reduction Act would somehow be good for Texas's energy industry in particular. And so I would hope and expect that a lot of members of the business community would speak up about that," Lewin said. "But...what is their influence within Trump world?"

He noted there was a burgeoning rift in the Republican Party between "business conservatives," who prioritize a low-tax, low-regulation economy, and social conservatives who were more ideologically driven on particular issues—even if it costs businesses.

Karapin said that while even a partial repeal of the IRA would upset certain sectors, "the Republican Party is increasingly willing to ignore what business wants in specific policy areas.

"Business, for its part, is on the whole willing to tolerate this because they like the relatively low-tax, low-regulatory environment that Republican control of the federal government tends to bring."

How China Could Profit

Assuming Trump is able to fend off irate business leaders and push through a repeal bill, it could come back to bite him by inadvertently countermanding some of his policy positions.

In 2020, the then-president offered tax credits to entice firms to move their manufacturing bases from China, vowing to "end our reliance" on the east Asian nation. On the 2024 campaign trail, he has called for jobs to be brought back to America.

Newsweek approached the Trump campaign via email for comment on Thursday.

Lewin said he had spoken to a solar power developer in Texas recently who said they were starting a joint venture to set up a manufacturing base outside of Houston after "buying Chinese panels forever," thanks to the economic climate the IRA had created.

"So to abandon that would basically just [mean] the future of solar is going back to China and the future of batteries [is] going back to China," he said.

Lewin also noted Texas's growing hydrogen energy industry, which seeks to make combustible gas from splitting water through electrolysis and can draw on several different tax credits from the IRA. In a November report, the Center for Climate and Energy Solutions said it had "unleashed potentially transformative financial and technical support for the development of clean hydrogen."

Texas is already among the largest producers of hydrogen from fossil fuels, giving it the infrastructure to enlarge its clean hydrogen output, which is expected to cost less than that from China and other global producers by 2030, and make it a key player in the global market.

As the fossil fuel refining industry is already a major consumer of hydrogen, generating clean hydrogen would also aid in its aims to reduce its carbon footprint.

While Lewin said it was "hard to tell" how much of a role clean hydrogen would play in the transition to a green economy, "if it does turn into a boom, Texas is going to be right at the heart of it, because we have so much wind and solar, because of the way our rate structures are set up to allow big users to avoid transmission charges... I think we're going to end up being a real hub."

He added that repealing the benefits afforded to the industry by the IRA could have a "chilling effect" on commercial investments, potentially costing the state tens of thousands of jobs.

Higher Gas Prices

Trump has premised his energy policy on the fossil fuels industry, vowing to approve more extraction in order to drive down domestic prices if re-elected in November. In January, he told supporters at a rally in January that "we're going to drill, baby, drill."

Aside from appalling environmentalists, who have called for a sharp decrease in oil production, getting rid of the IRA might do the opposite of his intention: keeping oil and gas prices higher for longer.

Lewin said the industry in Texas had "a very large appetite" to be connected to the grid, which is increasingly benefiting from the state's many renewable energy projects, having just four gigawatts of its 10-gigawatt consumption covered by the grid, with the rest being generated using diesel.

"Effectively, what's going on is the oil and gas industry wants to connect to the grid to get that sweet, cheap wind and solar to power their operations to get off of diesel," he added, which he understood to cost 10-20 times more than electricity from the grid.

Job Losses

While the IRA is primarily targeted at energy infrastructure, repealing it would likely not only detriment the energy industry, but have a knock-on effect on costs in other sectors—particularly manufacturing, which accounts for around three quarters of all industrial energy consumption.

Lewin said that while it was "hard to estimate the number of jobs that would be lost" if the IRA was taken away, "I don't think it's unreasonable to assume that we could be, over the long term, talking about hundreds of thousands of jobs."

Even if Trump is unable to repeal the IRA—or is dissuaded from gutting it over the potential ramifications—there are levers he can pull to trim it down without needing to refer the matter to Congress.

Karapin said that a new Trump presidency could use administrative actions to undermine it, singling out Internal Revenue Service guidance on eligibility requirements for electric vehicle purchase credits and tax credits for charging station construction as an example.