The US Congress is poised to bar companies with ties to China from gaining clean energy tax credits – a move that critics warn could jeopardise dozens of planned projects and freeze investment in a sector already struggling to decouple from the country.
The House of Representatives passed its version in May but would need to vote on the Senate’s changes before the bill could be sent to US President Donald Trump to sign into law. Republicans, who control both chambers, have set a deadline to finish a version for the president by Friday.
Trump’s signature budget legislation, which spans about 900 pages, includes strict foreign ownership rules that would disqualify clean energy companies from receiving tax credits. Among the many disqualifying relationships: cases in which a Chinese entity owns as little as 25 per cent of the company.
The bill also sets new “material assistance” thresholds that disqualify projects from receiving tax credits if too much of their content is sourced from China, Iran, North Korea or Russia, with the allowable share declining over time. For example, starting next year, a solar farm would be ineligible if more than 60 per cent of its materials by value came from China.
The bill additionally targets US-China licensing deals focused on transferring technology and processes, potentially imperilling high-profile deals like the one between Ford and the Chinese battery maker CATL.
Restrictions on foreign clean energy components, tech transfers and ownership – meant to reduce reliance on Chinese dominance in the sector – are not new. They were also in the Inflation Reduction Act, former president Joe Biden’s signature climate legislation that established many of the tax credits.
