Clean Energy Credits Are Needed to Beat China | RealClearPolicy
In the final push to pass the Big Beautiful Bill, Congressional Republicans slashed clean energy tax credits created under the Inflation Reduction Act of 2022. It’s easy to see why. Over the last several years, billions in taxpayer subsidies were thrown to Biden insiders with little or no oversight. But the corrupt actions of the previous administration shouldn’t stand in the way of sound policy, and Congressional Republicans should understand that the elimination of these credits would be a tremendous mistake . America First conservatives should instead focus on reworking these incentives, to secure our energy independence and fortify America’s supply chains to strike a strategic economic blow against our international rivals.
The current structure of these credits is deeply flawed. It too often remunerates companies that import the cheapest available foreign components, do the bare minimum domestically, and then slap on a “Made in America” label. This not only misleads consumers, it leaves our supply chains vulnerable to economic coercion, geopolitical instability, and even forced labor. Unfortunately, barring foreign companies from accessing the tax credits under Section 45X of the IRA misses the heart of the problem.
The solar industry is a perfect example. Here China dominates the supply chain for critical components like polysilicon, wafers, battery materials, and rare earth minerals, and it holds much of the intellectual property as well. Sourcing elsewhere is a practical impossibility. Even companies based in allied nations like South Korea and India still depend heavily upon Chinese inputs. The end result is that Chinese origin produced components continue to flood the U.S. market and American taxpayers foot the bill.
On paper, the “foreign entities of concern” (FEOC) provisions in the “One Big, Beautiful Bill” sound like a political slam dunk. Ban materials from countries we don’t trust. Sounds good! But in practice, these measures backfire, crippling domestic supply chains and undercutting American jobs.
The FEOC rules impose rigid sourcing restrictions on critical components like polysilicon and battery materials. These are the building blocks of our energy future, and deep red states like Mississippi that have invested heavily in manufacturing will take the hit. There, Amplify Energy is seeking to launch a battery manufacturing facility that could support 2,000 good American jobs. Ill-considered blanket restrictions would impede these developments. Industry insiders estimate that these restrictions jeopardize over $200 billion in energy investments nationwide.
We need a way forward that protects those who would be the backbone of an America First energy policy. Instead of eliminating the tax credits, Congress should restructure them to reward companies that source from within the United States. Specifically, boosting the credit for polysilicon and wafer production would generate the level of investment needed to compete with China. A bonus credit for vertically integrated or fully domestic supply chains would further motivate domestic investment.
Of course, obstacles remain. To encourage the mining of rare earth minerals, the refining of lithium, and the production of polysilicon, our tax policy must be designed to encourage long-term investment. The Trump administration should invoke the Defense Production Act to speed up permitting and approval, while emphasizing the adoption of AI-powered manufacturing to bridge the gap where the United States isn’t yet ready to compete on the cost of labor.
Finally, IRA tax credits were tied to manufacturing, but not to the domestic control of the technology behind it. Republicans in Congress should introduce a targeted credit for domestic technology innovation while providing incentives for companies to assign or license core manufacturing intellectual property to an American entity.
Supply chain security, workforce development, and economic independence are essential to America’s future. When designed with America’s national interest at heart, the IRA tax credits can deliver energy independence and an industrial revival. This is the kind of strategic use of federal power that serves the people, not the elites. It’s how we rebuild the middle class and strengthen our sovereignty. Congressional Republicans who consider themselves champions of the America First agenda should naturally lead the charge on this front.
Bret Manley is executive director of the Energy Fair Trade Coalition. He previously worked on Capitol Hill as chief of staff to a senior member of the Congressional Climate Solutions Caucus. Follow on X: @bretmanley