Climate change legislation in the United States now rests on a narrower federal footing than it did just a few years ago. The Clean Air Act still authorizes the Environmental Protection Agency to regulate greenhouse gases, and infrastructure spending from 2021 continues to flow, but the One Big Beautiful Bill Act, signed on July 4, 2025, terminated or accelerated the phase-out of most Inflation Reduction Act clean energy tax credits. The executive branch has again moved to withdraw the country from the Paris Agreement. State programs, particularly in California and the Northeast, have taken on greater weight as federal climate policy contracts.
Federal Regulation of Greenhouse Gases Under the Clean Air Act
The Clean Air Act, at 42 U.S.C. § 7401 and following, remains the primary federal statute for controlling air pollution, including greenhouse gases.1Office of the Law Revision Counsel. 42 USC Chapter 85 – Air Pollution Prevention and Control The statute was not written with climate change in mind, but the Supreme Court held in Massachusetts v. EPA in 2007 that its definition of “air pollutant” is broad enough to cover greenhouse gases and that EPA cannot refuse to regulate them without a scientific basis.
Two years later, EPA issued its Endangerment Finding, concluding that six greenhouse gases threaten public health and welfare: carbon dioxide, methane, nitrous oxide, hydrofluorocarbons, perfluorocarbons, and sulfur hexafluoride.2U.S. Environmental Protection Agency. Endangerment and Cause or Contribute Findings for Greenhouse Gases Under Section 202a of the Clean Air Act That finding triggered EPA’s obligation under Section 202 to set greenhouse gas emission standards for new motor vehicles, which now function as tailpipe and fuel economy limits enforced through manufacturer penalties and credit purchases.3Office of the Law Revision Counsel. 42 USC 7521 – Emission Standards for New Motor Vehicles or New Motor Vehicle Engines
Stationary sources such as power plants, refineries, and large factories are regulated under Section 111, which requires new facilities to meet performance standards reflecting the best available emission reduction technology, while existing plants follow guidelines that states implement.4Office of the Law Revision Counsel. 42 USC 7411 – Standards of Performance for New Stationary Sources The Supreme Court narrowed this authority in West Virginia v. EPA in 2022, holding that EPA could not design caps that would force the power sector to shift generation from coal to gas or renewables. Under the major questions doctrine invoked by the Court, regulatory actions of such sweeping economic and political significance require clear congressional authorization.5Supreme Court of the United States. West Virginia v. EPA, No. 20-1530 Standards for existing power plants must therefore be based on measures a facility can apply at the source.
The penalties for noncompliance are substantial. Civil penalties can reach $124,426 per day per violation under the current inflation-adjusted schedule.6eCFR. 40 CFR 19.4 – Statutory Civil Monetary Penalties, as Adjusted for Inflation, and Tables A knowing first violation can bring up to five years in prison and fines under Title 18, and a second conviction doubles both maximums.7Office of the Law Revision Counsel. 42 USC 7413 – Federal Enforcement
What the One Big Beautiful Bill Changed About Clean Energy Tax Credits
The Inflation Reduction Act of 2022 directed roughly $369 billion toward energy and climate programs over a decade, mostly through tax credits.8U.S. Department of the Treasury. Treasury Announces Guidance on Inflation Reduction Act’s Strong Labor Protections The One Big Beautiful Bill Act, enacted July 4, 2025, cut many of those credits well ahead of schedule. What survives depends on the technology and the timing.
Electric Vehicle Credits Are Gone
The Section 30D credit for passenger clean vehicles and the Section 45W credit for commercial clean vehicles were both terminated for vehicles acquired after September 30, 2025.9Internal Revenue Service. FAQs for Modification of Sections 25C, 25D, 25E, 30C, 30D, 45L, 45W, and 179D Under Public Law 119-21 Before termination, the commercial credit had offered up to $7,500 for vehicles under 14,000 pounds and up to $40,000 for heavier trucks and buses.10Office of the Law Revision Counsel. 26 USC 45W – Credit for Qualified Commercial Clean Vehicles No federal tax credit currently exists for purchasing an electric vehicle.
Wind and Solar Face a Narrow Safe Harbor
The technology-neutral clean electricity credits under Sections 45Y and 48E replaced the older Section 45 production tax credit and Section 48 investment tax credit for qualifying projects, offsetting 30 to 50 percent of costs when wage, apprenticeship, and domestic content requirements were met.11Office of the Law Revision Counsel. 26 USC 45 – Electricity Produced From Certain Renewable Resources The 2025 law terminated those credits for wind and solar facilities placed in service after December 31, 2027. A last-minute Senate amendment preserved the full credit for wind and solar projects that begin construction before July 4, 2026.9Internal Revenue Service. FAQs for Modification of Sections 25C, 25D, 25E, 30C, 30D, 45L, 45W, and 179D Under Public Law 119-21
For non-wind and non-solar technologies, including energy storage, geothermal, and hydropower, the original phase-out schedule remains intact. Full credits are available through 2033, with a gradual step-down through 2035.
Clean Hydrogen
The Section 45V credit for clean hydrogen production, sliding up to $3.00 per kilogram for the lowest-emission hydrogen, was terminated for facilities that begin construction after December 31, 2027.12Department of Energy. Clean Hydrogen Production Tax Credit (45V) Resources Developers have a compressed window to break ground.
Building and Residential Efficiency
The Section 179D deduction for energy-efficient commercial buildings does not apply to property where construction begins after June 30, 2026. The Section 25C credit for home energy improvements such as heat pumps and insulation, along with the Section 25D residential clean energy credit, were terminated effective at the end of 2026.9Internal Revenue Service. FAQs for Modification of Sections 25C, 25D, 25E, 30C, 30D, 45L, 45W, and 179D Under Public Law 119-21
Environmental Justice Grants and the Methane Charge
The IRA had appropriated $2.8 billion for Environmental and Climate Justice Block Grants under Section 138 of the Clean Air Act, codified at 42 U.S.C. § 7438.13Office of the Law Revision Counsel. 42 USC 7438 – Environmental and Climate Justice Block Grants The funds supported community-led pollution monitoring, resilience projects, and low-emission technology investments in disadvantaged communities.14U.S. Environmental Protection Agency. Inflation Reduction Act Environmental and Climate Justice Program The 2025 law rescinded the unobligated balance. Grants already awarded remain in place, but no new grants will be made from that appropriation.
The IRA’s Waste Emissions Charge on methane from oil and gas facilities, added as Section 136 of the Clean Air Act, was originally scheduled to take effect for emissions reported in 2024. The One Big Beautiful Bill pushed the effective date to 2034, shelving the program for the foreseeable future.
Federal Climate Spending That Survived
The Infrastructure Investment and Jobs Act of 2021 authorized $1.2 trillion for transportation and infrastructure, with $550 billion in new spending beyond baseline projections.15Pipeline and Hazardous Materials Safety Administration. Bipartisan Infrastructure Law / Infrastructure Investment and Jobs Act A significant share targets climate-related infrastructure, including grid modernization, electric vehicle charging networks, and carbon management technologies.
Carbon management provisions alone total roughly $12 billion over five years, covering regional direct air capture hubs, carbon capture demonstration projects, and carbon dioxide transportation infrastructure.16Department of Energy. The Infrastructure Investment and Jobs Act – FECM Factsheet Unlike the IRA tax credits, these appropriations were not targeted by the 2025 law and continue to fund projects through their authorized period.
The Paris Agreement and U.S. International Commitments
The Paris Agreement, adopted in 2015 under the United Nations Framework Convention on Climate Change, requires each participating country to submit Nationally Determined Contributions setting out its emission targets.17United Nations Framework Convention on Climate Change. Nationally Determined Contributions (NDCs) In December 2024, the United States submitted an NDC committing to cut net greenhouse gas emissions 61 to 66 percent below 2005 levels by 2035.18United Nations Framework Convention on Climate Change. Reducing Greenhouse Gases in the United States: A 2035 Emissions Target
On January 20, 2025, an executive order directed the U.S. Ambassador to the United Nations to submit formal notification of the country’s withdrawal from the Paris Agreement, with the administration asserting the withdrawal was effective immediately.19The White House. Putting America First in International Environmental Agreements Whether that assertion holds under the agreement’s usual one-year notice period is an open question. As a practical matter, federal agencies are no longer aligning domestic policy with Paris targets.
Permitting Timelines for Clean Energy Projects
Federal permitting is a persistent bottleneck for energy infrastructure. Two reforms are worth knowing about. The Fiscal Responsibility Act of 2023 imposed the first statutory deadlines on environmental reviews under the National Environmental Policy Act: two years for a full Environmental Impact Statement and one year for an Environmental Assessment.20Council on Environmental Quality. NEPA Amendments in Fiscal Responsibility Act of 2023 Before this change, NEPA reviews for large projects routinely ran four to seven years.
The FAST-41 process, run by the Federal Permitting Improvement Steering Council, offers an expedited pathway for major infrastructure projects, including renewables. Under the standard pathway, a project must be subject to NEPA and involve total investment above $200 million. Participation is voluntary and provides coordinated scheduling across involved federal agencies plus a public dashboard tracking each milestone.21Permitting Council. FAST-41 Covered Project Eligibility
State Climate Programs That Now Carry the Weight
With federal policy contracting, state programs have become the more stable framework in much of the country. They differ in design but share a common approach: use market mechanisms or mandates to push toward lower-carbon energy.
Cap-and-Trade
California’s Global Warming Solutions Act established the most comprehensive state cap-and-trade program, originally requiring the state to reduce greenhouse gas emissions to 1990 levels.22California Air Resources Board. AB 32 Global Warming Solutions Act of 2006 Covered industrial facilities must hold an allowance for every ton of carbon they emit, with allowances distributed through auctions and secondary trading.
The Regional Greenhouse Gas Initiative runs a similar carbon market among northeastern and mid-Atlantic states, focused on power plants. Recent quarterly auctions have cleared between roughly $20 and $27 per allowance, generating hundreds of millions per auction that participating states reinvest in efficiency programs and consumer rebates.23The Regional Greenhouse Gas Initiative. Allowance Prices and Volumes
Renewable Portfolio Standards and Fuel Rules
Most states with renewable energy mandates now require utilities to source at least 40 percent of their electricity from renewable resources. Roughly two dozen states plus several territories have set goals of 100 percent clean or renewable energy, with deadlines ranging from 2030 to 2050. Utilities that miss annual targets typically face alternative compliance payments that can run into the millions.
Several states also impose low-carbon fuel standards, requiring fuel providers to lower the carbon intensity of transportation fuels over a multi-year schedule. Providers comply by blending biofuels, buying credits from EV charging networks, or investing in other low-carbon pathways.
Corporate Climate Disclosure Requirements
Two reporting regimes matter for businesses, and they now point in opposite directions.
In March 2024, the Securities and Exchange Commission adopted rules requiring public companies to disclose material climate-related risks, including Scope 1 and Scope 2 greenhouse gas emissions for large accelerated filers.24Securities and Exchange Commission. SEC Adopts Rules to Enhance and Standardize Climate-Related Disclosures for Investors The rule never took effect. It was stayed almost immediately in litigation, and in March 2025 the SEC voted to withdraw its legal defense of the rule.25Securities and Exchange Commission. SEC Votes to End Defense of Climate Disclosure Rules The Eighth Circuit placed the case in abeyance. Companies subject to SEC reporting have no federal climate disclosure obligation as of mid-2026.
California has moved ahead on its own. The Climate Corporate Data Accountability Act applies to all business entities with annual revenues above $1 billion that do business in the state, regardless of headquarters location. It requires annual disclosure of Scope 1, Scope 2, and Scope 3 emissions, phased in beginning in 2026 and 2027. Noncompliance can bring administrative penalties of up to $500,000 per reporting year.26California Air Resources Board. California Corporate Greenhouse Gas Reporting and Climate Related Financial Risk Disclosure Programs A companion law requires companies with revenues over $500 million to publish biennial reports on climate-related financial risks. Both laws face their own legal challenges, but unlike the federal rule, the implementing agency is actively developing compliance frameworks.
For companies operating nationally, California’s thresholds effectively set the reporting standard, since most billion-dollar enterprises have some business activity in the state.
Where This Leaves You in 2026
The Clean Air Act’s regulatory authority over greenhouse gases remains intact, anchored by the Endangerment Finding and the statutory framework courts have upheld. IIJA infrastructure spending continues. But the IRA’s tax credit architecture has been substantially dismantled for wind, solar, and electric vehicles, with only a compressed safe-harbor window for projects breaking ground before mid-2026. If you are weighing an energy investment, the operative questions are whether your project can meet the surviving federal timing rules, which state programs impose obligations or offer incentives where you operate, and, for larger businesses, whether California’s revenue thresholds pull you into mandatory emissions reporting.