Federal policy and executive actions have a direct impact on private investments in communities across the U.S. - either hindering investments or catalyzing them. CATF tracks private investments in clean energy projects that are eligible for federal incentives as well as the status of federal policies that may impact them. Each quarter, CATF highlights changes to federal policies and new executive actions and analyzes how these changes have affected investments across U.S. states and districts.
What's impacting investments in Q4?
Uncertainty remained a key driver of investment activity in Q4. The quarter started with what would become the longest federal government shutdown in history, which slowed timelines for projects requiring federal approval. Investors also faced uncertainty while awaiting Treasury guidance that would determine energy tax credit eligibility for current or prospective projects relying on tax credits narrowed by the One Big Beautiful Bill Act (OBBBA). Many federal agency actions also exacerbated this uncertainty, including changes or pauses to permits and announced federal funding cuts for clean energy projects.
Key takeaways from Q4 2025:
- Investment in renewables, including solar and wind, remain steady, signaling federal policy shifts have not been solely determinative for the industry although it is continuing to narrow investments.
- Growing emphasis on battery storage co-located with data centers indicates the storage industry is repositioning to market opportunities, as it shifts to align more closely to current federal policy priorities.
- Recent policies supporting technologies like nuclear fission are likely to translate into increased private investments in future quarters, but will require effective tax credit guidance from Treasury, including workable prohibited foreign entity (PFE)/foreign entity of concern (FEOC) restrictions, to access incentives to fully deploy. Future investments in technologies like hydrogen, SAF, and carbon management will depend on how Treasury administers key tax credits, including how data is reported and verified to qualify for tax credits - which to date has been addressed by the GHGRP. These industries continue to face uncertainty in the current political environment.
Federal Policy
43-day government shutdown. The federal government entered a 43-day shutdown - the longest in history - at the start of Q4 2025. During the shutdown, agencies including DOE, IRS, EPA, and BLM ceased many federal activities, which slowed timelines for projects that require federal action. EPA ceased issuing permits, and Treasury slowed its issuance of guidance including PFE/FEOC guidance, which industry had previously expected in December. Activities related to oil and gas, coal, and mineral leases generally continued. Amid the shutdown, investors faced additional uncertainty when evaluating investments that require federal approvals.
Prohibited Foreign Entities (PFE)/Foreign Entity of Concern (FEOC) guidance. OBBBA narrowed energy tax credit eligibility, which continues to impact projects relying on certain IRA credits for bankability. PFE/FEOC restrictions, which OBBBA applied to six energy tax credits (Section 45U, Section 45Y, Section 48E, Section 45X, Section 45Q, and Section 45Z), increase compliance burdens and impacted projects claiming those credits, including enhanced geothermal and advanced nuclear projects. These restrictions impacted investments as uncertainty about Treasury and IRS guidance weighed on prospective investors and companies. Industry awaits full implementation guidance from Treasury; initial guidance, which was positively received by the industry, was released after the period covered by this Q4 analysis (February 12, 2026).
Executive Actions
August 2025 Department of the Interior (DOI) Memorandum. DOI announced a full review of offshore wind energy regulations to ensure alignment with the Outer Continental Shelf Lands Act and America's energy priorities under President Trump. DOI's refusal to approve solar and wind permits on federally managed lands as a result of DOI's August 2025 memorandum continued to have downstream effects of slowed and/or stalled permitting processes for renewables like solar and wind.
Changes to NEPA implementing regulations and procedures. While difficult to quantify at this time, new changes to agency NEPA processes may impact project investments. The removal of NEPA regulations managed by the Council on Environmental Quality and shift from agency-specific NEPA regulations to agency NEPA procedures could increase compliance costs for projects that must navigate new processes, particularly for those projects that involve multiple agencies, each with its own respective process. In addition, changes to agency NEPA processes that prompt litigation expose projects to additional uncertainty and may deter investment. Because the changes to NEPA processes were made through executive action rather than legislation, they are less durable and may be reversed by future administrations, creating uncertainty for projects already under review.
Proposed EPA Rule: Reconsideration of the Greenhouse Gas Reporting Program (GHGRP). Uncertainty over EPA's proposed rollback of GHGRP continued to impact Q4 2025 investments. Treasury and IRS rely on the GHGRP to administer Section 45Q Carbon Sequestration Tax Credit, Section 45V Clean Hydrogen Tax Credit, and Section 45Y Clean Electricity Tax Credit. EPA's proposal could hinder compliance with tax credit reporting requirements reliant on GHGRP data, and therefore the ability to claim the credits, unless IRS regulations are revised, and/or sufficient alternatives for measurement, reporting, and verification and lifecycle analysis are implemented. The proposed rollback may also hinder investments intended for exports, putting U.S. companies at a competitive disadvantage in rapidly evolving global markets and frameworks that require verified emissions data. Treasury did provide a safe harbor for taxpayers claiming 45Q on December 19, 2025, for calendar year 2025 (discussed below).
DOE announced project funding cuts and an unconfirmed list of additional cuts considered for existing awards. In early October, DOE announced the termination of 321 awards for energy projects worth approximately $7.56 billion in obligations. A leaked list including an additional ~300 projects was reported later in October but remains unconfirmed by DOE, suggesting there are hundreds of projects in limbo. The announced and reported cuts include projects spanning energy, industry, and manufacturing sectors, such as hydrogen, carbon capture, near-term infrastructure, and vehicles and transportation. Each project represents local jobs and economic development, partnerships, supply chain investments, and up to 50% non-federal cost share from project partners.
DOE Organizational Realignment. The reorganization announced in November suggests a shift in DOE focus areas for research, development, and demonstration (RD&D). Nuclear fission, fusion, next-generation geothermal, artificial intelligence (AI), fossil fuels, and critical minerals are clear priorities for DOE while renewables (specifically solar and wind) have been deprioritized. The DOE reorganization introduces additional uncertainty for how federal programs will be resourced, as the congressional appropriations process has not yet adopted the DOE reorganization in its budgeting and therefore the funding for some of these organizational shifts remains unclear. The realignment is significant for private sector investments, as DOE's priorities influence and signal which technologies are financeable, and changes which technologies receive RD&D grant, demonstration, and loan support.
Preview for 2026
The following executive actions taken at the end of Q4 in December may provide investment insights into Q1 2026.
- 45Q Safe Harbor Guidance. On December 19, 2025, the Treasury Department released safe harbor guidance for 45Q (Notice 2026-1) in light of EPA's proposed GHGRP rollback. The notice provides guidance and a safe harbor for determining the section 45Q tax credit eligibility and credit amount for carbon dioxide capture and geological storage that occurred during calendar year 2025. Although this represents a step forward for taxpayers who claim the credit, it does not address the longer-term uncertainty for the industry driven by the GHGRP rollback, which would upset an effective and longstanding program without an adequate replacement in place. The notice also indicates that Treasury intends to issue forthcoming revisions to existing 45Q regulations, which may or may not impose additional administrative burdens relative to the firmly-established GHGRP methodology.
- Offshore wind lease order. On December 22, 2025, DOI issued a stop work order for five offshore wind projects that had received all approvals and begun construction. One project, Vineyard Wind 1, was already sending power to the grid. The stop work orders were overturned in litigation, although Sec. Burgum has publicly stated that the administration intends to appeal.
