Biden Admin Finalizes Rules Favoring Labor Unions In Climate Bill

The Biden administration has cemented new rules governing subsidies in its major climate legislation, the Inflation Reduction Act (IRA), which are seen as a significant win for labor unions. The finalized rules, announced Tuesday, include prevailing wage and apprenticeship requirements for certain incentives in the IRA, which President Joe Biden signed into law in August 2022.

The new regulations, set by the Internal Revenue Service (IRS) and the Treasury Department, require private developers of IRA-funded projects to adhere to project labor agreements (PLAs) and pay prevailing wages to access lucrative tax credits. While the administration claims these rules will benefit blue-collar workers, critics argue they primarily advantage labor unions, which are strong supporters of the Democratic Party, and will drive up the costs of clean energy projects.

Ben Brubeck, vice president of regulatory, labor, and state affairs for the Associated Builders and Contractors (ABC), criticized the new rules, saying, “This bold weaponization of the IRS and end-run around Congress in an attempt to steer clean energy construction contracts to unionized labor and contractors — key election-year donors — by incentivizing private developers to require inflationary and exclusionary project labor agreements should be extremely concerning for taxpayers and clean energy advocates.”

The new rules require developers to abide by PLAs, which are collective bargaining agreements for the construction industry, and to offer apprenticeships to qualify for the IRA tax credits. Additionally, projects must employ apprentices for at least 15% of the total work hours to receive maximum subsidies.

John Podesta, a top climate official in the Biden administration, praised the rules, saying, “Meeting strong labor standards and building partnerships with unions will now be the norm for clean energy projects. Today’s final rules give clarity and certainty to developers and the workers they employ that clean energy jobs will be good jobs.”

However, critics point out that most American construction workers are not unionized — only about 10% in 2023, according to ABC. They argue that these rules favor a small minority of workers and could delay construction and reduce competitive bidding, especially amid a construction labor shortage of approximately 500,000 workers.

Pro-organized labor groups, including some major supporters of Biden’s reelection bid, have lauded the rules. Jason Walsh, president of the BlueGreen Alliance, stated, “One of the greatest promises of the Inflation Reduction Act is that it will create and maintain good-paying, union jobs in the clean economy, while building inclusive pathways into the highest quality training for lifelong careers in construction.”

The finalized rules highlight the administration’s focus on promoting labor unions and establishing strong labor standards in the implementation of its climate policies.