The Climate Impact of the ‘One Big Beautiful Bill’

Author

Tim Mohin
July 11, 2025

What’s in this week’s newsletter:

  • The Big Beautiful Bill is now law and will reverse clean energy trends in the U.S.

  • More EU simplifications, with the EUDR, the Taxonomy, and carbon credits

  • EFRAG proposes to cut >60% of data points and gets more time to simplify

  • California is taking its time with climate rulemaking, and why that might be strategic

  • The catastrophic Texas floods were made worse by climate change and staff shortages 

After narrowly making its way through the Senate and House, President Donald Trump signed his cornerstone tax cuts and spending bill, ‘The One Big Beautiful Bill Act’, on July 4th.

The law claws back unobligated funding, expands new oil and gas leasing, changes or eliminates energy and manufacturing tax credits, and repeals some Clean Air Act programs. Analyses of the laws’ impact indicate that it will:

The more than 800-page mega bill will have wide-reaching implications on a wide range of issues. Focusing in on a climate and clean energy perspective, while it preserves many of the programs established under former President Biden’s Inflation Reduction Act (IRA), the scopes and timelines of most tax credits are substantially reduced. The worst affected clean technologies will be wind and solar energy, as well as electric vehicles. 

Here is what's going and what's staying in from the IRA:

What’s Staying:

  • Credits for Carbon Capture, Utilization, and Storage (CCUS)  will remain largely intact, and even slightly expanded in the case of utilization, but some foreign entities will not be eligible to apply for them.

  • Tax credits for nuclear, geothermal, and battery storage, Hydrogen, and other clean fuels will be less affected, but will have strict rules on foreign entity involvement.

What’s Going:

  • Wind and solar projects will have to start construction by July 1st, 2026, to be eligible for tax credits, or if later, be in service by December 31st, 2027. The levelized cost of energy is expected to increase by 50%.

  • The $7,500 tax credit for new and used electric vehicles will be phased out by September 1st this year, as opposed to 2032.

  • Most home energy efficiency tax credits will be phased out by the end of 2025, but some will stay until June 1st, 2026. 

On Monday, Trump signed an additional Executive Order further limiting the ability for wind and solar projects to win tax credits. The “Ending Market Distorting Subsidies For Unreliable, Foreign Controlled Energy Sources,” Executive Order will close loopholes and restrict safe harbors that would have allowed projects to secure eligibility by starting minimal early construction. It also directs federal agencies to revise land leasing rules to prioritize fossil fuel development over wind and solar.

In addition to reversing some clean energy initiatives, the bill also provides extensive tax breaks to fossil fuel exploration and production and expands land leasing for oil and gas exploration in Alaska, the Gulf of Mexico, and the American West. 

According to a series of analyses, the bill will reduce the expected US wind and solar capacity by 70GW by 2030 (More than the total energy capacity of the UK), increasing average U.S. household energy costs by $165 per year in 2030, and by as much as 29% in some states. It will also reduce the forecasted number of EVs on US roads by around 8 million over the same time period. 

Taken together, these changes will add an estimated 7 billion tons of CO2 to U.S. emissions by 2030 (roughly the annual emissions of India and the U.S. combined). According to Carbon Brief, this will put the U.S. on track to reduce emissions by just 3% by 2030, as opposed to the 40% target set by the Biden administration. This will have real-world implications, “scientists are warning that the result would increase the likelihood that the Earth will heat up by an average of 3 degrees Celsius above preindustrial levels by the end of this century.”

Other analysts claim that the law will cede clean energy dominance to China. China is already the world leader in solar and wind development. Research released this week found that China is currently building 74% of the world’s wind and solar capacity. As developing nations electrify at a pace much quicker than the U.S., fueled by cheap, clean technology from China, the gap between the U.S. and China will widen further.

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2. More EU Simplifications

EU Parliament Voting Session

The EU continued its regulatory simplification drive this week, focusing on the EU Taxonomy, the Deforestation Rule (EUDR), and applying carbon credits to its 90% emissions reduction goal. Here’s what changed:

  • EU Taxonomy: Both financial and non-financial companies will no longer have to categorize their activities under the Taxonomy if they are deemed non-material. Under this simplification, materiality is defined as any loan or investment representing more than 10% of a financial institution’s portfolio, or more than 10% of a non-financial company’s total revenue. Additionally, reporting templates are streamlined by cutting the number of reported data points by 64% for non-financial companies and by 89% for financial companies. These changes and others will be debated by the EU Council and Parliament before being implemented for 2026 reports (based on 2025 data).

  • EUDR: The EU Parliament voted to reject categorizing countries based on their risk of deforestation. The centre-right European People’s Party brought the motion, saying the risk classification system was based on outdated information, and that more risk categories should be added. Adding a new risk categorization methodology would push back the 2026 deadline for this bill, which had already been delayed a year.

  • More Credits Allowed for Reduction Goal: A draft amendment to the EU Climate Law would allow member states to offset their emissions starting from 2036. They will not be able to buy carbon offsets from the normal market, but would have to buy into emissions reduction projects in poorer countries. These offsets are limited to only 3% of the overall 90% target. The credits were one of 18 target ‘elements’ aimed at making the goal more achievable.

3. EU Sustainability Standards Cut, Timeline Extended

In a first amended ESRS draft, the European Financial Reporting Advisory Group (EFRAG) announced that they would go even further than the 50% reduction in data points they had committed to a couple of weeks back. Instead, they have proposed cutting 66% of datapoints, with a 50% reduction in mandatory data points and the complete removal of all 277 voluntary data points. This is not the finalized draft - that will be released for public comment at the end of the month.

Also, EFRAG has been given an additional month to finalize their simplification efforts after they issued a statement “...that a longer timeline could contribute to a more secure management of quality.” The Commission agreed and extended the deadline from 31 October to 30 November.

The extension will allow EFRAG to extend the public consultation period to 60 days, running from the end of July until the end of September 2025. Outgoing EFRAG Sustainability Reporting Board Chair Patrick de Cambourg said, “We welcome the European Commission’s support and the extension granted. This additional time will allow for a more inclusive and robust consultation process.”

4. Why California Climate Reporting Rulemaking Delay Helps Their Case

California’s Capitol Building

The July 1st deadline for the California Air and Resources Board (CARB) to release guidance for companies to comply with California’s climate disclosure law (SB 219) came and went, but that could be by design. 

Last month, in the first workshop on the rules, CARB representatives were coy when answering the most common question: “When will the full rules and guidance be released?” Saying that they will be released by the end of the year. 

This week, CARB chair Liane Randolph repeated that line, adding that they won’t be releasing any updates in the short term either. By delaying the rules, lawyers attacking the climate law in court are denied possible arguments in their First Amendment (free speech) case. In a hearing last week, California’s Deputy Attorney General Caitlan McLoon used the lack of rules as a defense, saying, “If there is no requirement to speak, there can be no First Amendment harm.”

The plaintiffs, which include business groups, like the California Chamber of Commerce, clapped back, saying their “members are incurring costs, and are on the cusp of having to engage in unconstitutional speech.” The case will likely go into next year, after businesses are expected to start their first disclosures. 

5. Climate Cuts And Disaster

Floods in Kerrville, Texas, the epicentre of recent catastrophic flash floods

It’s too early to say that climate change was a factor in the tragic central Texas flood. What we do know is that rainfall intensity has increased by 19% over the last 54 years in Austin - near the site of the catastrophe. In 115 years of tracking rainfall, 9 out of the top 10 largest rainfall events in the U.S. have occurred in the last 30 years.

Source: Climate Central

The Texas Hill Country is so prone to floods that it’s nicknamed “Flood Alley.” However, the lack of warning and communication to rescuers on the ground may have been due to staffing shortages. Former National Weather Service (NWS) officials said that meant there was a “loss of experienced people who would typically have helped communicate with local authorities in the hours after flash flood warnings were issued overnight.”

The views expressed on this website/weblog are mine alone and do not necessarily reflect the views of my employer. 

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