Cipher roundup: Funding freeze, IRA, tariffs, layoffs and Russia

A drawing of a tornado filled with clean energy tech — a wind turbine, a solar panel, etc., and a woman with a green lasso around the tornado, pulling on it. She has a green swizzle above her head to suggest confusion.
Illustration by Nadya Nickels.

Although Donald Trump’s second term began just over a month ago, the nonstop flow of news from Washington has probably made this short period feel far longer for many people.

Through it all, Cipher’s reporters have been following the latest energy and climate developments. Here, in this new, semi-regular feature, we’re providing a high-level look at where things stand on several key topics, quick analysis from our reporters and links to the most relevant news stories we’ve come across so that you can keep up without having to wade through the daily news vortex.

In this edition, we’re looking at some of the most crucial topics that are emerging: the funding freeze for clean energy and climate programs, efforts to roll back the Inflation Reduction Act, tariffs, government agency layoffs and what’s going on with Russia and Ukraine as it relates to energy.

Keep reading to get caught up fast! We’ll keep following the news and share another high-level update in a few weeks.

1. Funding freeze

Where things stand: A federal judge on Tuesday indefinitely blocked a funding freeze required by one of Trump’s executive orders affecting a wide range of initiatives, including funding from Biden-era laws for clean energy and climate tech, while the administration evaluates contracts and projects.

Some funding is flowing again this week. A spokesperson for the U.S. Environmental Protection Agency told Floodlight on Wednesday it had unfrozen all funding from the 2022 Inflation Reduction Act and 2021 Bipartisan Infrastructure Law. Still, uncertainty remains.

In addition to freezing funds, the new administration has shown a willingness to try to claw back funding already awarded for climate projects.

Amena’s take: Despite the aforementioned federal judge blocking the White House from freezing federal funds, it remains unclear whether the federal government will actually comply. This means uncertainty for developers and investors alike and bad news for a burgeoning cleantech economy.

Go deeper:

  • Flabbergasted by the Funding Freeze? Here’s What Could Happen Next. — Heatmap News (subscription)
  • Court Blocks Federal Funding Freeze — Barron’s (subscription)
  • Here’s who’s losing out as Trump freezes the Inflation Reduction Act — The Washington Post
  • FBI investigating Trump EPA claims of fraud in $20B climate grant fund — The Washington Post

2. Inflation Reduction Act

Where it stands: The clean energy provisions in the Inflation Reduction Act (IRA) and the Bipartisan Infrastructure Law are undergoing a 90-day review set to be completed in April.

For now, the IRA — by far America’s largest climate law ever with some hundreds of billions of dollars in various kinds of federal subsidies — is in a state of flux, with many recipients unsure when, how or if they will receive tax credits in the law for clean energy projects.

Repealing the law, which Trump has referred to as the “Green New Scam,” will require an act of Congress. Republicans command a narrow majority in both the House and Senate, but the clean energy tax credits from the law have brought investments and jobs mostly to GOP-led states.

The House passed a Republican-led budget resolution on Tuesday, a blueprint that directed congressional committees to find places to cut federal spending. The resolution is the first step in Congress’ effort to pass a bill to reconcile Trump’s tax and spending agendas. The Senate has passed its own budget outline as well.

The renewable energy and electric vehicle tax credits in the IRA are at high risk of being cut considering they’ve been a political target, although it’s not yet clear which programs will be axed. “It’s gonna be somewhere between a scalpel and a sledgehammer,” Johnson told reporters on Wednesday when asked about cutting IRA provisions.

Amena’s take: Dozens of clean energy projects dependent on tax incentives are paused or even cancelled, such as KORE Power’s electric vehicle battery factory in Arizona and Freyr Battery’s plant in Georgia. While analysts say the solar industry can survive without tax credits, the same cannot be said for offshore wind projects, which Trump has targeted in executive orders.

Some attempts to repeal IRA provisions already are taking effect, with the passage on Thursday of a congressional resolution to overturn a methane fee imposed on oil and gas firms. Meanwhile, developers and investors are lobbying hard on Capitol Hill to save these tax credits, even as they pause clean energy projects.

Go deeper:

  • Johnson signals more aggressive approach to IRA repeal — E&E News (subscription)
  • Senior Republicans seeking to tear up IRA enjoy $130bn investment spree — Financial Times (subscription)
  • Why Trump’s Clean Energy Rollbacks Could Derail a Factory Boom — The New York Times

3. Tariffs

Where things stand: The Trump administration has imposed new across-the-board 10% tariffs on goods from China, with higher 25% levies still expected on certain classes of goods, including steel, lumber and semiconductors.

New tariffs were also announced — and then delayed until at least March 3 — on both Canada and Mexico, long-time U.S. trading partners. Trump said on February 26 he is planning to slap 25% tariffs on European Union goods “very soon.” And on Truth Social on Thursday, Trump wrote the tariffs on Mexico and Canada would indeed go into effect next week, along with an additional 10% on China.

Many of Trump’s tariff plans are aimed at metals key for clean technologies, including steel and aluminum, and possibly also copper, after the administration announced an inquiry this week that could eventually lead to tariffs on imports of the metal.

Perhaps most impactful to the U.S. economy, according to many economists, is Trump’s threat to institute reciprocal tariffs, responding in kind to countries that impose tariffs on imported U.S. goods. Which of these proposed tariffs will actually take effect remains uncertain.

Bill’s take: Trump’s trade war could ratchet up next week, when the delayed deadline the president set for 25% tariffs on nearly all goods from Canada and Mexico arrives. It’s not clear what will happen — Trump has already pushed back these tariffs once and he could do so again — but the president has already imposed a 10% tariff on goods from China and vowed to impose a 10% tariff on steel and aluminum imports starting next month.

Go deeper:

4. Agency layoffs

Where things stand: Trump’s targeting of the federal workforce in the first six weeks goes far beyond any particular office or person who may have sparred with Trump previously.

Some staff cuts have been aimed at specific initiatives, such as most of the U.S. Agency for International Development and any program or office related to Diversity, Equity and Inclusion work. Other layoffs have been more random or across-the-board, such as the release of tens of thousands of government employees in probationary periods, no matter their focus. Virtually all government agencies have been affected, including the Energy Department, the Environmental Protection Agency, the Interior Department and the National Oceanic and Atmospheric Administration. Some people have been rehired.

Numerous lawsuits have been filed against the administration for unlawfully closing offices and firing staff. This week, the administration ordered agencies to submit plans by March 13 to reduce staff and eliminate positions.

Cat’s take: Trump and billionaire advisor Elon Musk, charged with overseeing the Department of Government Efficiency, or DOGE, are trying to dramatically cut the federal workforce in an effort, Trump and Musk say, to reduce government spending and bloat.

But the entirety of the cost of the federal workforce is only about 4% of the total federal budget of almost $7 trillion. Eliminating a quarter of federal staffers would save about 1% of total federal spending, as The Washington Post has pointed out.

The speed and bluntness of the layoffs has been a shock and, in some cases, chaotic: some of the Energy Department workers who maintain the U.S. nuclear arsenal were fired and then rehired.

Go deeper:

  • Will Musk’s tactic of firing people to cut costs make the government more efficient? — NPR
  • Trump Fired, Then Unfired, National Nuclear Security Administration Employees. What Were Their Jobs? — The New York Times
  • DOE layoffs weaken security, economic growth: “Forget American energy dominance” — Federal News Network
  • Trump Said E.P.A. Would Lose 65 Percent of Staff. Then, a Correction. — The New York Times

5. Russia, Ukraine and energy

Where things stand: As part of its efforts to broker a peace deal in Russia’s war in Ukraine, the Trump administration demanded access to Ukraine’s critical mineral resources in exchange for U.S. support and as repayment for the aid America offered Kyiv since the war started. Ukraine rejected that idea at first, but ultimately agreed to a mineral-sharing deal on Tuesday, although specifics haven’t been released. Ukraine’s leader, Volodymir Zelenskyy, is expected to visit the White House on Friday to potentially sign it, describing it as a first step toward the security guarantees Ukraine is seeking.

Russia’s invasion of neighboring Ukraine three years ago upended global energy markets. Europe vastly scaled back its reliance on Russian oil and piped natural gas, pushing the Kremlin to dramatically increase its oil exports to India and China. Despite being shunned by the West, Russia has largely avoided costly damage to its energy economy.

In the Kremlin’s eyes, a deal to end the war could once again remake global energy flows. Russia appears to be courting potential investment by Western energy companies. Reports that Europe might consider letting Russian natural gas flow through pipelines into the bloc again would be a boost for EU industries struggling with high prices but also an astonishing turnaround.

Anca’s take: Europe’s energy relations with the U.S. have been on edge since Trump took office. European Union leaders, anxious to prevent a trade war, have been trying to appease Trump with promises to buy more liquefied natural gas (LNG) from the U.S. While that may look good on paper, the reality is more complex: LNG purchases are decided by the market and the EU will have to assess how future fossil fuel ties square with its wider climate goals.

Trump’s desire for Ukraine’s rare earth minerals as part of wider talks to end the Russia-Ukraine war and offer security guarantees to Kyiv add to this fragile geopolitical dynamic. It both highlights the global importance of yet-untapped critical minerals and also underscores the transactional nature of transatlantic relations under this U.S. administration.

Go deeper:

  • Draft of Minerals Deal Features Vague Reference to Ukrainian Security — The New York Times
  • Russia Is Wooing Western Energy Companies, but Will They Return? — The New York Times
  • How Russia’s war on Ukraine reshaped the energy world — Axios
  • Will Europe return to Putin’s gas? — The Economist