Signaling a significant shift from the previous administration’s energy policies, President Donald Trump has signed an executive order (EO) during his first day back in office which pauses major funding initiatives tied to the clean energy movement.
The “Unleashing American Energy” EO calls for the termination of the “Green New Deal,” and orders all agencies to immediately pause the disbursement of funds appropriated through the Inflation Reduction Act of 2022 (IRA) or the Infrastructure Investment and Jobs Act.
Included in the IRA were incentives for high-efficiency and electric HVAC equipment. The legislation extended and enhanced several existing tax credits for energy-efficiency projects in residential and non-residential buildings, and also set aside $8.8 billion in new, direct-to-consumer rebates for the purchase of qualified HVAC equipment.
Sec. 7 of the order states agencies “shall review their processes, policies, and programs for issuing grants, loans, contracts, or any other financial disbursements of such appropriated funds for consistency with the law and the policy outlined in section 2 of this order,” within the next 90 days.
Sec. 2 includes a clause calling to “safeguard the American people’s freedom to choose from a variety of goods and appliances, including but not limited to lightbulbs, dishwashers, washing machines, gas stoves, water heaters, toilets, and shower heads, and to promote market competition and innovation within the manufacturing and appliance industries.”
Trump’s new executive order also rescinds Executive Order 14082 of September 12, 2022 (Implementation of the Energy and Infrastructure Provisions of the Inflation Reduction Act of 2022).
What This Means For HVAC Contractors Utilizing The IRA
While this day-one order has sent ripples through the HVAC industry, it wasn’t exactly unexpected, but its full impact is yet to be determined.
For contractors who have discussed, or promised, IRA rebates to customers, things should be all right, according to experts from two major HVAC organizations.
“The EO does not impact tax credits, like Section 25C, that many contractors offer as available to taxpayers for installing more efficient systems,” Alex Ayers, vice president of government affairs at Heating, Air-conditioning and Refrigeration Distributors International (HARDI), said. “Taxpayers who qualify for the tax credit can apply it to their tax returns when they file.”
Contractors in the 11 states and D.C. who have launched at least partial programs prior to last week should have some confidence that those programs will continue, Sean Robertson, VP of Membership, Advocacy, and Events, ACCA, noted.
“Programs approved more recently, especially the $3.7 billion awarded last Friday (Jan. 17), are more likely to be impacted by the order to ‘pause disbursement of funds,’ although there is still some uncertainty,” Robertson said. “A pause does not necessarily mean that these programs will never resume. The new administration will at least want to make sure that program guidelines reflect its priorities – including removal of some unnecessary restrictions. These funds are likely to be targeted by Congressional appropriators, however, and should not be relied upon until states actually have money in hand.”
Robertson urged contractors to communicate openly with customers, explaining the evolving nature of these programs and confirming their commitment to providing cost-effective, energy-efficient solutions. Contractors can use this as an opportunity to highlight their expertise in navigating policy changes and identifying the best options for their customers.
Just before the end of the Biden Administration, the Department of Energy did award funds to all remaining states that have applied for Home Energy Rebates. This money goes through a reimbursement process operated by the Treasury Department, Ayers said.
“While there is uncertainty about whether the pause applies to rebate reimbursements, the EO cannot permanently stop these programs from operating,” Ayers said. “The funding was authorized and appropriated through federal statute, and executive orders cannot override federal statutes. We’re hopeful states will continue to reimburse contractors quickly for projects that have already been completed, as required by DOE guidance; however, we have heard complaints before the inauguration of states being slow to reimburse.”
On Jan. 23, HARDI issued an update on its website regarding the ongoing uncertainty and status of existing rebate programs.
“DOE’s Home Energy Rebate funds are deposited with the Automated Standard Application for Payments (ASAP) system, not directly into state coffers,” the post read. “This means that states can normally draw from their contractually obligated funds to do rebate reimbursements. If the executive order interrupts access to contractually obligated funds it would likely be considered a breach of contract. For states without active rebate programs, the process for rebate approval is likely to extend longer than the order’s pause in distributing funds.”
Potential Impact on Demand
There have been a number of elements that have been driving the consumer electrification and decarbonization movement, like enhanced environmental consciousness, but it’s no surprise that the immense incentives afforded by the federal government have been a large factor.
With this new uncertainty, the question becomes whether or not the drive to upgrade to energy-efficient products, like heat pumps, will keep its legs.
Ayers said that based on Section 25C data from the IRS released last year, the tax credit isn’t driving demand as much as was expected.
“In 2023, more air conditioners than heat pumps received the tax credit despite heat pumps having more than three times larger tax credit,” Ayers said. “Unfortunately, the Consortium for Energy Efficiency, which sets the qualification standard for HVAC systems in Section 25C, increased the requirements for air conditioners and heat pumps and made the qualification more confusing for heat pumps. CEE appears to be creating more uncertainty about the future demand for energy-efficient upgrades than the recent Trump executive orders.”
Robertson said that this ambiguity could lead to increased hesitation from consumers, but many will still recognize the long-term value of energy efficiency, including lower utility costs and enhanced indoor comfort.
“Contractors should continue educating consumers about the benefits of energy-efficient systems, positioning themselves as trusted advisors no matter the incentive situation,” Robertson said. “It’s important to stay informed and assure customers that major contracting associations like ACCA are monitoring the situation closely. By partnering with a knowledgeable professional, customers can feel confident they’ll receive the best guidance based on the latest information.”
A Monumental Shift?
With the new administration touting a drastically different energy policy than its predecessor, could this EO signal a reversal in the push for electrification and decarbonization?
Ayers said because it’s been individual states have been pushing for increased energy efficiency for years, the trend is likely to continue.
“With the newly started Trump Administration, we’ve already seen states lean in on more electrification and decarbonization policies,” Ayers said. “HARDI has been actively following these proposals, and we want to make sure the policies benefit the consumers rather than just meeting a political goal in response to who controls the White House.”
Robertson also agreed that while it may slow, the electrification/decarbonization moment isn’t likely to fade out of existence.
“While some policies may shift, the overall momentum toward electrification and decarbonization is unlikely to reverse completely,” Robertson said. “Contractors should focus on being adaptable, helping homeowners understand the broader benefits of these technologies, and positioning themselves as leaders in delivering the right solution for the consumer’s unique scenario.”
Other Significant Actions
Trump’s EO blitz also included actions that halted the issuance, publication, and implementation of new or pending rules across executive departments and agencies.
“This freeze ensures that any new regulations are reviewed and approved by presidentially appointed or designated leaders, with exceptions for emergencies and statutory or judicial deadlines,” ACCA’s website explains. “The order also permits a 60-day postponement of recently published rules to allow for a thorough review of questions of fact, law, and policy under the oversight of the Office of Management and Budget (OMB).”
“This action mirrors ACCA’s earlier request to the Biden administration following the Supreme Court’s Loper Bright decision, where we urged a comprehensive review of pending regulations to address inconsistencies and ensure alignment with industry realities.”
Trump’s directives also represent a “significant departure from the restrictive regulatory environment of recent years,” ACCA’s website noted, offering potential relief to contractors and consumers.
“For HVACR professionals, the newfound emphasis on consumer choice aligns with ACCA’s long-standing advocacy for practical, performance-based standards that do not limit market innovation or accessibility,” ACCA stated.
For instance, the DOE has already withdrawn a proposed consumer boiler rule and fan and blower rule, which could have potentially led to increased prices and decreased availability. Other regulations, like one banning non-condensing instantaneous gas water heaters, remain in effect for now, but efforts are currently being made to block it.
“While the inauguration marks the beginning of new leadership, it also signals the possibility of regulatory rollbacks or reforms,” ACCA stated. “ACCA is monitoring these developments and advocating for policies that reflect contractors’ operational realities and best interests.”