OPINION:
Congressional Republicans could seek a second reconciliation bill this year to build on the major first legislative victory of the One Big Beautiful Bill Act. Lawmakers should use this opportunity to immediately and permanently repeal all remaining energy subsidies.
This reform would save tens of billions of dollars that could be used to reduce the federal deficit or fund America’s defense. It would strengthen the American energy sector in the long term and stop letting politicians and bureaucrats decide where investments go.
Although the One Big Beautiful Bill Act successfully rolled back about $500 billion in green energy subsidies, it failed to terminate all of them. Certain subsidies remain available, including the clean hydrogen production credit, clean electricity production credit, clean electricity investment credit, advanced manufacturing production credit, nuclear power production credit, clean fuel production credit and carbon dioxide sequestration credit.
Subsidies allow the government to centrally plan the energy sector, rewarding industries that happen to be politically popular in Congress at the time. As a result, private sector investment flows toward projects that receive political incentives rather than toward innovative pursuits and the affordable and reliable energy sources that American households and businesses demand.
To make matters worse, subsidies also trap the energy industry into long-term dependence on politicians in Washington. Once companies begin relying on government support to remain competitive, the pressure to maintain or expand those subsidies only increases.
The fight over the rollback of green subsidies in the One Big Beautiful Bill Act last year illustrates this dynamic. Some Republicans pushed back against the repeals because businesses in their districts had become reliant on subsidies, and the renewable energy industry intensified its lobbying efforts.
The outcome was a meaningful rollback of energy subsidies, but the act fell short of the anticipated full and immediate termination of all subsidies created with the Inflation Reduction Act of 2022. As economist Milton Friedman famously quipped, “Nothing is so permanent as a temporary government program.” The longer Congress waits to repeal these subsidies, the harder it will be to eliminate them.
At the same time, leaving some subsidies in place could signal to certain lawmakers that they can enact new ones without facing full repeal, potentially creating an endless cycle of subsidies. That is why Congress should repeal them this year.
An immediate and full termination would strengthen the energy sector, where businesses would then compete based on market fundamentals rather than their ability to curry political favor on Capitol Hill. Competition and innovation will ultimately drive the generation of affordable and abundant energy.
In the absence of subsidies, domestic investment will continue to thrive. If there is one market that does not need government subsidies, it’s the energy market.
Americans spend more than $1 trillion on energy each year, creating enormous financial rewards for companies to meet that demand. Surging electricity consumption from AI data centers is encouraging more investments and driving innovation in energy efficiency, without the need for federal subsidies.
Repealing subsidies would also complement permitting reform, an issue with bipartisan interest in Congress. As long as subsidies remain in place, faster permitting would simply allow companies to collect more government handouts at taxpayer expense.
A more efficient permitting system should help companies expand the nation’s energy supply more quickly, but it should accelerate the development of all kinds of energy projects, not the distribution of subsidies.
A second reconciliation bill before the midterm elections would give Congress a chance to finish what the One Big Beautiful Bill Act started. By repealing the remaining energy subsidies, lawmakers can reduce special-interest handouts, strengthen America’s energy sector and reduce the government’s deficit.
• Austin Gae is a policy analyst in the Plymouth Institute for Free Enterprise at Advancing American Freedom.
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