Impact of the One Big Beautiful Bill Act (OBBBA) on Federal Sustainability Incentives and the Energy Economy
AUTHOR: CARLI SCHOENLEBER
REVIEWERS: KATIE TEARE, VANESSA VLASAK
AUGUST 6, 2025Highlights
The One Big Beautiful Bill Act (OBBBA) of 2025 significantly reduces federal tax incentives for solar, wind, electric vehicles, and energy-efficient buildings, including commercial real estate (CRE) tax deductions and credits like Section 179D and 45L. [1]
Select clean energy tax credits — for geothermal, battery storage, hydropower, and nuclear — retain long-term federal support.
Reduced investment in wind, solar, and energy efficiency may lead to higher energy costs, with average U.S. household bills projected to rise by $130–$280 annually by 2035, according to estimates from Princeton University and Energy Innovation.[2] [3]
Introduction
On July 4, 2025, President Donald Trump signed the OBBBA into law — a sweeping tax and spending package that rolls back key clean energy and sustainable real estate incentives established under the 2022 Inflation Reduction Act (IRA).[1] In direct opposition to the IRA, the OBBBA increases subsidies for domestic oil and gas, signaling the administration’s prioritization of fossil fuel consumption and decreased reliance on foreign supply chains over climate action.[4]
This article summarizes how the OBBBA affects federal sustainability incentives for companies, particularly in CRE, highlighting key policy changes and projected economic impacts.
OBBBA Impacts on Federal Sustainability Incentives
The OBBBA of 2025 eliminates a range of tax incentives that support sustainability and climate action in the built environment:
Tax Incentives for Clean Energy and Energy Efficiency
Tax credits for wind and solar (Section 48E and 45Y) — are now limited to projects that begin construction within one year of enactment (July 4, 2026) or are operational by December 31, 2027. These wind and solar credits were previously slated to phase out beginning in 2032 or later, depending on U.S. greenhouse gas emissions reductions. Credits for other clean technologies beyond wind and solar will be phased out later under the OBBBA (original IRA schedule), between 2034 and 2035.[1] [5] [6] [7]
Tax deductions for energy-efficient commercial building upgrades (Section 179D) — previously made permanent in 2019 by President Trump — are now only applicable to projects that begin construction by June 30, 2026. [1]
Tax credits for new energy-efficient homes and multifamily construction (Section 45L) — must now be claimed by June 30, 2026, six years earlier than the original 2032 expiration. [1] Both 45L and 179D were originally enacted through the bipartisan Energy Policy Act of 2005. [8]
These changes reduce the financial viability of both retrofit and new construction projects that were previously modeled around long-term federal support.
Tax Incentives for Electric Vehicles (EVs)
Post-OBBBA Actions Further Tighten Eligibility
On July 8, 2025, four days after signing the OBBBA, President Trump issued an Executive Order (EO) directing the Treasury Department to provide additional guidance on clean energy tax credits within 45 days of the OBBBA being enacted. The order focuses on two major areas: project timing and foreign supply chains. [11]
“Beginning of Construction” Eligibility
The EO directs the Treasury to issue new guidance that would limit eligibility for 48E and 45Y tax credits for wind and solar projects. While the OBBBA allows projects to claim the credits if they begin construction by July 4, 2026, the EO instructs the Treasury to prevent abuse of this safe harbor provision by clarifying that only projects where “a substantial portion of the subject facility has been built” should qualify.[5] [11]
“Foreign Entity of Concern” Restrictions
The EO also reinforces Foreign Entity of Concern (FEOC) restrictions introduced in the OBBBA, which disqualify projects that use materials or components linked to adversarial nations like China. While not adding new FEOC rules, the EO requires the Treasury to take “prompt action” to “implement the enhanced FEOC restrictions,” impacting credits like 48E and 45Y, as well as credits that remain intact, such as 45Q (carbon sequestration), 45U (zero-emissions nuclear), and 45X (advanced manufacturing). [5] [7] [11]
Interior Department Adds Permitting Barrier
More recently, an internal memo obtained by POLITICO shows the Interior Department has imposed a new requirement: all wind and solar projects on federal land must receive personal approval from the Interior Secretary. This adds a significant hurdle for approvals beyond the tax credit guidance outlined in the EO. [12]
Positive Outcomes for Clean Energy Under OBBBA
While the OBBBA significantly rolls back wind, solar, and energy efficiency incentives, several clean energy technologies and financing tools remain supported:
Geothermal Heat Pumps for Commercial Buildings
Still eligible for Section 48(a) tax credit through 2034
Not subject to FEOC restrictions (explained above) [1]
Battery Storage, Hydropower, and Nuclear
Retain eligibility under Section 48E and 45Y tax credits through 2033, with a phasedown starting in 2034. [1] [7]
Other Maintained or Enhanced Incentives
Economic Impacts of Policy Shift Away from Clean Energy
While supporters of the OBBBA may argue that eliminating clean energy tax credits reduces federal spending, independent analysis suggests that the IRA’s incentives were high-return investments — not just costs. According to the American Clean Power Association, the IRA’s energy tax credits were projected to generate a fourfold return on investment by stimulating economic growth, lowering electricity costs, and creating millions of jobs.
The repeal of IRA provisions risks not only slowing clean energy deployment but also missing out on long-term economic and climate benefits that would have outweighed their fiscal cost. [13]
Cancelled Clean Energy Projects and Job Losses
More than $22 billion in clean energy investments have been cancelled so far in 2025, resulting in 16,500 jobs lost, according to analysis from E2; most of these are in Republican congressional districts, which were previously poised to benefit disproportionately from the IRA. [14]
The climate policy think tank Energy Innovation estimates that the OBBBA will result in the loss of 760,000 jobs by 2030 and total GDP loss of $980 billion. [3]
According to July 2025 estimates from the REPEAT Project at Princeton University, the OBBBA’s significant cuts to renewable energy will cumulatively result in a $500 billion capital investment loss by 2035 towards U.S. electricity and clean fuels. [2]
Asset Stranding and Undermined Investor Confidence
These abrupt changes are also disrupting long-term sustainable investment strategies. Many developers had already made major wind and solar commitments based on the long-term policy certainty provided by the IRA. The sudden shift has triggered investor withdrawals from projects at various stages of development.
With just one year to qualify for wind and solar tax credits, many projects now face tight deadlines to secure equipment, permits, and construction milestones. [15]
Higher Energy Costs and Capacity Shortages
Multiple analyses predict that the OBBBA’s reduced wind, solar, and energy efficiency investments could significantly increase energy costs for American households and businesses:
REPEAT Project (Princeton University):
Estimates that the OBBBA will increase total U.S. energy expenditures by over $50 billion annually by 2035, raising average household energy bills by more than $280 per year. [2]
Energy Innovation:
Projects that wholesale electricity prices could rise by 74% by 2035, leading to retail bill increases of 10–18%. Average households may see annual increases of $130–$170, with some states facing hikes of over $400.
Warns of a 340 GW decline in electricity generation capacity, raising concerns about whether new factories, data centers, and commercial buildings will be able to secure affordable electricity. [3] [15]
This policy shift comes at a time of rising global electricity demand due to factors like AI, electrification, and more air-conditioning use. [16] In states like Texas, rapid solar and wind adoption has already helped meet this demand. [17] Compared to coal and natural gas, wind and solar tend to be faster and cheaper to bring online, making them a key solution for addressing future energy needs. [18]
Conclusion
The OBBBA marks a turning point in federal clean energy policy, rolling back billions in incentives for solar, wind, and energy efficiency established under the IRA of 2022, in addition to long-standing incentives from the Energy Policy Act of 2005. Firms that act decisively in the near term can still capture remaining wind and solar credits, while pivoting to alternative technologies with retained incentives — such as geothermal, battery storage, and nuclear.
While the federal policy landscape has shifted, the business case for sustainability, high-performance buildings, and renewable energy remains strong. Lower operating costs through efficiency, more affordable clean technologies, growing state and city regulations, and sustained tenant and investor demand all reinforce sustainability-led investments as a strategic choice.
Authors and Reviewers
Carli SchoenlebeR
SENIOR COMMUNICATIONS MANAGER, CONTENT AND ENGAGEMENT SPECIALISTCarli is a Senior Communications Manager at Verdani Partners, where she leads thought leadership, chairs the Engagement Committee, and serves as primary author for Verdani's nonprofit, the Verdani Institute for the Built Environment. With over a decade of experience in the sustainability field, she bridges research and communications to translate complex issues into persuasive messaging and actionable strategies that drive business value and positive impact. Carli holds a B.S. in Environmental Science, Policy, and Management from the University of Minnesota and an M.S. in Forest Ecosystems and Society from Oregon State University.
katie teare
SENIOR SUSTAINABILITY MANAGERKatie is a Senior Sustainability Manager with 11 years of experience advancing sustainability in the built environment, with a focus on green building, construction, and commercial real estate. At Verdani Partners, she leads SFDR and GRESB reporting for a major client and serves as Chair of Verdani’s Regulatory Committee. Katie holds Master’s degrees in Business Administration and Public Administration from Presidio Graduate School and a B.S. in Environmental Studies from University California, Santa Barbara.
vanessa vlasak
ASSOCIATE ESG MANAGERVanessa is an Associate ESG Manager at Verdani Partners, supporting one of Verdani's largest clients in advancing their ESG program. She has over four years of experience in sustainable real estate and clean energy and is passionate about driving meaningful sustainability initiatives in the commercial real estate sector. Vanessa holds a B.S. in Environmental and Ocean Sciences from the University of San Diego.
References
[1] USGBC. (2025, July 8). The budget reconciliation bill undermines federal green building policy. https://www.usgbc.org/articles/budget-reconciliation-bill-undermines-federal-green-building-policy
[2] Jenkins, J., Farbes, J., & Haley, B. (2025, July 3). Impacts of the One Big Beautiful Bill on the US energy transition — Summary report. Princeton University ZERO lab. https://zenodo.org/records/15801701
[3] Energy Innovation. (2025, June 29). Economic impacts of U.S. senate One Big Beautiful Bill Act energy provisions. https://energyinnovation.org/wp-content/uploads/One-Big-Beautiful-Bill-Senate-Reconciliation-Analysis_July-2025.pdf
[4] Engelland, B. (2025, July 17). Economic & global trade impact of the One Big Beautiful Bill Act. Thomas Reuters. https://www.thomsonreuters.com/en-us/posts/corporates/economic-impact-big-beautiful-bill/
[5] DiGangi, D. (2025, July 9). Trump seeks tighter restrictions on wind and solar with executive order. Utility Dive. https://www.utilitydive.com/news/trump-executive-order-obbba-wind-solar-48e-45y-tax-credits/752559/
[6] U.S. Department of the Treasury. (2025, January 15). Section 45Y clean electricity. Production credit and section 48E clean electricity investment credit. Federal Register, 90, 4006. 26 CFR Part 1. https://www.govinfo.gov/content/pkg/FR-2025-01-15/pdf/2025-00196.pdf
[7] Sidley. (2025, July 15). The One Big Beautiful Bill Act — Navigating the new energy landscape. https://www.sidley.com/en/insights/newsupdates/2025/07/the-one-big-beautiful-bill-act-navigating-the-new-energy-landscape
[8] Reott, J. (2025, April 8). Want to cut household energy bills in half? Give ‘em credit. Alliance to Save Energy. https://www.ase.org/blog/energy-efficiency-credits-cut-energy-bills
[9] U.S. Department of the Treasury. (2023, April 17). Section 30D new clean vehicle credit. Federal Register, 88, 23370. 26 CFR Part 1. https://www.govinfo.gov/content/pkg/FR-2023-04-17/pdf/2023-06822.pdf
[10] Galinski, C.R. & Golds, J.L. (2025, July 11). One Big Beautiful Bill: Effect on energy credits. The National Law Review. https://natlawreview.com/article/one-big-beautiful-bill-effect-energy-credit
[11] The White House. (2025, July 7). Executive order 14315: Ending market distorting subsidies for unreliable foreign controlled energy sources. Federal Register, 90(130), 30821–30822. https://www.federalregister.gov/documents/2025/07/10/2025-12961/ending-market-distorting-subsidies-for-unreliable-foreign-controlled-energy-sources
[12] Siegel, J. & Colman, Z. (2025, July 16). Trump administration taking new steps to block wind and solar projects, undisclosed memo says. POLITICO. https://www.politico.com/news/2025/07/16/interior-requires-burgum-sign-off-for-solar-wind-projects-00458999
[13] The American Clean Power Association. (2024, December 19). New report: Inflation Reduction Act delivers massive economic boost and 4X return on investment. https://cleanpower.org/news/economy-wide-benefits-of-energy-tax-credits
[14] E2. (2025, July 24). $22 Billion in Clean Energy Projects Cancelled in First Half of 2025; $6.7 Billion Cancelled in June. https://e2.org/releases/may-25-clean-economy-works
[15] John, J. (2025, July 9). Wind and solar developers face a year of hard calls with new GOP law. Canary Media. https://www.canarymedia.com/articles/clean-energy/wind-solar-construction-trump-tax-credits
[16] International Energy Agency. (2025). Electricity 2025: Analysis and forecast to 2027. https://iea.blob.core.windows.net/assets/38a95939-ae3f-4e6b-8b33-f203cc18e02d/Electricity2025.pdf?
[17] Guo, K. (2025, March 6). With Texas facing soaring electricity demand, the politics quietly shift at the capitol. https://www.texastribune.org/2025/03/06/texas-legislature-energy-renewables-power-grid/
[18] International Energy Agency. (2024, May 30). Rapid rollout of clean technologies makes energy cheaper, not more costly. https://www.iea.org/news/rapid-rollout-of-clean-technologies-makes-energy-cheaper-not-more-costly
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