Tailwind To Turbulence: Why $8 Billion In Climate Projects Just Vanished

Forbes

01-05-2025

Here's a question climate policy watchers didn't expect to be asking in early 2025: What happens when the tailwind of America's Inflation Reduction Act becomes a headwind?
The answer, at least in part, is $8 billion in canceled, downsized, or shuttered climate tech projects in just the first three months of this year. That's not a typo. In one quarter, the United States saw 16 major clean energy and manufacturing initiatives collapse, according to a new report from E2, a nonpartisan environmental policy group. To put that in perspective: it nearly matches the total number of cancellations in the 17 months following the passage of the Inflation Reduction Act (IRA) in August 2022.
This isn't just a string of unfortunate headlines. It's a signal—flashing red—that the market is cooling, investors are hesitating, and federal policy is wobbling just as the U.S. was starting to cement its clean energy manufacturing renaissance.
Let's start with the policy problem. The IRA was the most ambitious climate investment in U.S. history, promising hundreds of billions of dollars to clean up everything from power grids to passenger vehicles to removing CO2 from the air. It did something crucial: it offered certainty. Companies could plan with confidence, knowing that tax credits, grants, and loan guarantees were coming.
But that certainty is gone.
In recent months, the White House has begun to revise and, in some cases, claw back previously announced incentives. Simultaneously, new tariffs on imports have been imposed, including critical components from China that dominate the supply chain for batteries, solar panels, and other clean energy infrastructure.
'If this self-inflicted and unnecessary market uncertainty continues, we'll almost certainly see more projects paused, more construction halted, and more job opportunities disappear.' says Michael Timberlake, communications director at E2.
Uncertainty is kryptonite for capital-intensive industries. It doesn't matter if the money's promised—if companies suspect that promises might be pulled, they won't break ground.
E2's report focuses only on large-scale projects. That means the real toll is likely higher. Smaller startups and mid-sized projects—already more vulnerable to shifting policy—aren't tracked as closely, and many may be quietly stalling or dying off entirely. For example, it does not include the hundreds of millions of dollars expected to be cut from the Department of Energy's direct air capture (DAC) hubs program.
Consider the case of Aspen Aerogels, which had secured a $670 million loan commitment from the Department of Energy last fall to build a factory in Georgia. That plant was supposed to manufacture advanced materials to make EV batteries safer—precisely the kind of domestic innovation the IRA was designed to supercharge. But the company pulled the plug in February. Instead, it's doubling down on existing facilities and exploring expansion in China and Mexico.
The broader context is telling: companies are hedging, looking abroad, recalibrating.
While the U.S. climate tech sector wavers under policy reversals and market hesitation, other nations are beginning to see an opening—and Canada, in particular, is stepping confidently into the vacuum.
In a surprise but decisive turn, Canada's recent federal election brought the Liberals back into power with a renewed climate mandate. Prime Minister Mark Carney—a former central banker with global economic clout and deep climate finance credentials—has signaled that Canada won't just play defense on climate. It wants to lead.
Central to Carney's platform was a bold proposition: to make Canada a global hub for carbon removal and sequestration. Their commitments weren't vague gestures or lofty aspirations—they were grounded in policy mechanisms and timelines. The full value of Canada's Carbon Capture, Utilization, and Storage Investment Tax Credit (CCUS ITC) will be extended to 2035. The government has pledged to accelerate offset protocol development, support a broad suite of removal technologies, and establish national carbon removal targets for 2035 and 2040.
In other words, where the U.S. is hesitating, Canada is placing long bets.
This could be more than just good climate policy—it could be good economics. Canada has vast geological storage potential, strong academic institutions, a resource-sector-savvy workforce, and now, a political framework that is signaling continuity and clarity. That's exactly the combination global investors and climate tech entrepreneurs are looking for.
For climate tech, talent and capital are fluid. If the U.S. creates headwinds, they will go elsewhere. And with Carney at the helm, Canada is sending a clear message: we're open for business—and we're in it for the long haul.
The irony, of course, is that this moment of American uncertainty comes just when momentum was starting to build. But history has shown again and again: industrial leadership is not about who moves first—it's about who stays the course.