White House Eyes $12 Billion in Clean Energy Cuts as Legal Fights Mount Over First Wave

Federal officials weigh axing major hydrogen and carbon-capture projects after scrapping $7.6 billion in awards now tied up in appeals and lawsuits

WASHINGTON — The Trump administration is weighing another round of clean energy funding cuts—this time as much as $12 billion—just days after pulling back $7.6 billion in awards spread across more than 300 projects. According to people familiar with the discussions, the next targets could include high-profile hydrogen hubs and ambitious carbon removal facilities once hailed as cornerstones of America’s climate strategy.

If the cuts move forward, they’ll strike at the very heart of emerging technologies the government had once championed. Large-scale hydrogen centers in Texas, California, and the Pacific Northwest could be shelved, along with two billion-dollar ventures designed to suck carbon directly out of the atmosphere in Louisiana and South Texas. Auto giants GM and Stellantis may also lose federal support for converting plants to electric vehicle production.

The exact timing and scale remain up in the air as officials weigh reviews and prepare for a wave of appeals. Still, the direction is clear: Washington is pulling back from some of the most experimental clean energy bets of the Biden years.

Politics Meets Energy Policy

The first round of cancellations, announced October 1, slashed funding from across several Department of Energy offices, including the Clean Energy Demonstrations and Energy Efficiency divisions. Companies and state agencies now have 30 days to appeal. Officials say the projects failed to meet economic standards or didn’t align with national energy priorities.

OMB Director Russ Vought made waves when he pointed out that nearly $8 billion of the canceled projects were in Democratic-led states. That fact has already fueled lawsuits from governors and developers, who argue that politics, not economics, drove the cuts.

Many of these projects weren’t yet finalized. They were still ironing out purchase agreements, seeking permits, or adjusting financing. Because these efforts require enormous upfront spending and long lead times, they’re especially vulnerable to shifting political winds.

Hydrogen Bets on the Line

Few areas show the stakes more clearly than hydrogen. The Texas hub, involving Exxon and Chevron, was a bet on “blue hydrogen,” made with natural gas and carbon capture. California’s ARCHES program and a Pacific Northwest partnership were trying to build regional hydrogen ecosystems.

Federal money was supposed to serve as seed capital, luring private investment. But many hubs hadn’t locked in the long-term contracts or infrastructure commitments needed to move forward. Even before the cancellations, analysts flagged delays and questioned the economics.

If several hubs disappear, America’s hydrogen buildout could collapse into a few Gulf Coast projects tied to existing oil and gas infrastructure, leaving other regions behind. Equipment makers banking on orders for electrolyzers now face shrinking backlogs and may shift their focus abroad, where governments in Europe and Asia are sticking to long-term hydrogen support.

Carbon Capture’s Future at Risk

The proposed cancellations also hit two of the country’s boldest carbon removal projects: Project Cypress in Louisiana and a South Texas hub led by Occidental’s 1PointFive. Together, they were supposed to capture millions of tons of carbon dioxide each year.

Direct air capture is notoriously expensive and energy-hungry, which is why Washington’s backing was critical. Pulling the plug now could stall U.S. leadership for years while competitors in Canada and Europe press forward. Those countries may gain the edge in patents, know-how, and cost reductions that come from being first.

Critics say the technology isn’t ready anyway. At today’s prices, pulling carbon from the air can’t compete with cheaper options like capturing emissions at the source or investing in renewable energy.

Manufacturing and the Grid in the Crosshairs

The government is also reconsidering support for auto plant conversions. GM and Stellantis have pledged to go electric regardless, but without federal help their U.S. buildout could slow.

Grid modernization is another vulnerable area. Some of the very projects meant to upgrade transmission lines, add transformers, and prepare the grid for surging demand now risk losing funding. That’s a sharp contradiction: Washington has stressed reliability but may pull back from the investments utilities say are essential to keeping the lights on.

A Narrow Path Through Appeals

Companies and states have until early November to appeal. Legal experts expect lawsuits on everything from procedural missteps to accusations of arbitrary decision-making. Projects that already had signed agreements or strong state backing may stand the best chance of survival.

California, Washington, and New York are even weighing temporary funding to keep top projects alive. But state coffers can’t match the billions in federal money that was originally promised.

Investors Adjust Their Bets

The policy shift is already reshaping where money flows. Projects tied mainly to tax credits face less risk because those incentives from the Inflation Reduction Act remain intact. By contrast, ventures built around federal grants now look shaky.

Investors are gravitating toward safer plays: adding carbon capture to existing plants, improving efficiency, or backing regulated utilities with guaranteed returns. Some are looking abroad, to Europe and Canada, where governments remain committed to first-of-a-kind demonstrations.

That may mean steadier returns in the short term but risks ceding technological leadership to others. The big breakthroughs—the kind that could open entirely new industries—may now happen overseas.

What Happens Next

For now, the administration appears to be consolidating its bets around fewer, more market-ready projects. If those succeed without endless subsidies, that could eventually look like a smart correction. But the abrupt reversal after billions in private money and engineering resources were already committed leaves scars.

Investors, developers, and foreign partners will remember this moment when deciding whether to trust U.S. backing in the future. The cost of these cuts may be measured not just in canceled projects but in the lost willingness of others to take the next leap.

As appeals and lawsuits play out, the administration must walk a fine line: cutting costs without undermining faith in America’s ability to deliver on big, long-term energy goals. How it balances those priorities will shape the country’s clean energy path for decades.

House Investment Thesis

Category	Details
State of Play (Oct 7, 2025)	- Done: $7.56B terminated across 321 awards (223 projects); 30-day appeal window open. - On the Table: ~$12B more in potential cancellations (Hydrogen Hubs, 2 DAC Hubs, Auto conversions: GM/Stellantis). Final list/timing unsettled. - Geography/Politics: Initial cuts skewed blue-state; led by OMB Dir. Russ Vought; legal challenges expected. - Named Projects Hit: ARCHES (CA, $1.2B), PNW Hub.
Base Case & Probabilities	1. Cuts proceed but partially soften: Appeals save some projects; DAC/H2 hubs shrink/consolidate; policy risk remains high (Q1-Q2 '26). 2. Hard follow-through on $12B: Broad cancellations hold; private capex shifts to IRA tax credits, Canada/EU. 3. Meaningful reversal: Injunctions/politics reinstate a few marquee projects, but no full pivot.
Root Causes	- Ideological Reset: Shift from grants to "ROI to taxpayers/energy reliability." - Execution Risk: Megaprojects (H2, DAC) faced offtake, inflation, and siting issues. - Budget Leverage: Cuts align with broader spending brinkmanship.
First-Order Effects (6-18 Months)	- Hydrogen: Fewer, bigger, Gulf-Coast hubs; electrolyzer OEMs face pushouts; blue H2 gains. - DAC/Carbon: Oxy/1PointFive timeline risks; scale-down to pilots; cost-curve learning slows; capital may migrate. - Auto: GM/Stellantis capex re-sequenced; slower NA EV tooling; supplier backlog eases. - Grid: Some GDO/transmission pauses; utilities re-prioritize; lead times may normalize.
Second-Order Effects	- Policy Beta = Stock Beta: Headline risk for stocks >30% reliant on grants. - Shift to Tax Credits: More CCS retrofits, CHP, efficiency, grid hardware. - State Substitution (Partial): CA/WA/NY can bridge, but not fully replace, DOE funds.
Positioning & Trade Ideas	- Overweights: Regulated grid contractors, O&G with CCS optionality, IRA-anchored plays (PVs, storage). - Underweights/Hedges: US-centric electrolyzer vendors, pure-play DAC developers, US auto-tooling suppliers. - Pairs: Long Gulf Coast infra owners vs. short hub-dependent OEMs; long rate-base assets vs. short grant-dependent FOAKs.
Mind-Changing Catalysts	- Appeal outcomes (through early Nov). - Finalized second cancellation list. - Company guidance (Oxy, GM, Stellantis) on capex. - State bridge funding packages.
Sharp Takes	- H2 Hubs: Consolidation is healthy; only hubs with anchor loads/offtakes ever made sense. - DAC Cuts: Short-sighted unless replaced with milestone-based pilots; cedes ground to other jurisdictions. - Grid Cuts: Contradict reliability pivot; bullish for rate base, bearish for system efficiency.
Scenario Paths	- If $12B Lands: H2: 4→2 hubs, OEM rev -20%. DAC: Megaton→pilots. Auto: EV capex slides to 2026. - If Appeals Win: Partial reinstatements; relief rally but policy risk discount remains.
Immediate To-Do	- Map grant vs. tax-credit dependency in coverage; haircut grant-linked revenues. - Engage IR on contingency plans (re-bids, state funding, offtakes). - Rebalance toward regulated-return and IRA-credit-driven models.

NOT INVESTMENT ADVICE

White House Eyes $12 Billion in Clean Energy Cuts as Legal Fights Mount Over First Wave