Federal Energy Innovation Investment: Congress Reasserts Itself

The U.S. Congress has rejected  extreme cuts in the federal energy research and development (R&D) budget proposed  [PDF] by the Trump administration for fiscal year 2026 (FY26). The new budget, combined with key provisions in last summer’s One Big Beautiful Bill Act (OB3), shows Congress beginning to reassert its constitutional role as a coequal branch in making policy. With R&D funding trimmed, but not gutted, the revised budget provides hope that the United States will not cede the future of vital energy technologies to China and other global competitors.  

Affordable, accessible energy underpins U.S. security and prosperity. Federally funded energy innovations, from the invention of nuclear power to the development of shale gas, have created many opportunities to advance those goals. Such advances can mitigate ever-evolving threats as well, including climate change, which is damaging societies and ecosystems worldwide and will worsen in the years to come. New technologies that are cheaper and cleaner than those that predominate today are creating markets that will be worth trillions of dollars. China has seized this opportunity aggressively, taking commanding positions in rapidly growing industries like solar power and lithium-ion batteries. 

President Donald Trump has dismissed climate science. But many of his priorities for energy policy, including meeting the insatiable demand for power from artificial intelligence and data centers, making energy more affordable for average Americans, and catalyzing a renaissance in nuclear power, as well as responding to a rising China, would be advanced considerably by sustaining federal innovation investments. Instead, the incoming administration proposed [PDF] massive, across-the-board cuts in the Department of Energy’s FY26 R&D budget. (See Table 1.) It also sought to pull back billions of dollars for large-scale, first-of-a-kind demonstration projects that were funded with bipartisan support in the 2021 Infrastructure Investment and Jobs Act.  

In the bipartisan, bicameral package released last week, Congress took a more reasonable approach. It reduced the total cut in federal energy R&D spending to just 2.6 percent, compared to 32.5 percent proposed by the president. It transferred a small portion of unexpended infrastructure funding to annual appropriations. This accounting maneuver allows budget hawks to claim a minor victory while preserving the bulk of energy infrastructure funding for future investment, rather than returning it to the treasury. Nuclear energy R&D (increased 23.5 percent), not surprisingly, did much better than energy efficiency and renewable energy R&D (reduced 11.3 percent) in the final bill. (The main demonstration program for nuclear power, which is not included in these figures, will also receive a bump in FY26.) Such incremental adjustments are consistent with historic shifts in partisan control of the federal government, not a radical break from the past. 

The budget outcome echoes that of OB3. That massive tax and spending bill [PDF] cut incentives to deploy mature energy technologies, notably solar and wind, but it retained or expanded them for many emerging low-carbon energy technologies, including geothermal, nuclear, carbon capture, and advanced energy storage. OB3 passed with only Republican votes, yet many of the policies it reaffirmed had previously been included in bills passed by Democrats in the prior Congress. 

The bipartisan compromise expressed in the FY26 budget and OB3 is far from ideal.  A recent report [PDF] from Clean Tomorrow calls for a sustained expansion and significant realignment of federal investment in energy R&D to meet the Chinese challenge to U.S. leadership. Nonetheless, by refusing to cede control of energy innovation policy to hardcore budget cutters in the executive branch, Congress has preserved key foundations that would allow such growth to resume in the future, such as national lab and academic infrastructure, science and engineering students and faculty, clean energy start-ups, and corporate research labs.  

The next step for Congress will be to ensure that the Trump administration executes its policy in good faith. Oversight and accountability should be the watchwords, particularly in light of Office of Management and Budget Director Russell Vought’s refusal to acknowledge legislative primacy in matters of taxing and spending. Congress’s reassertion needs to have practical, not merely rhetorical, effect if U.S. energy innovation policy is to fulfill its potential. 

David M. Hart is a senior fellow for climate and energy at CFR, affiliated with the Climate Realism Initiative.

Claire C. Cody is the Senior Policy Analyst for Innovation at Clean Tomorrow, where she researches and advances federal funding, programs, and policy supporting the innovation and commercialization of emerging energy technologies.