President Donald Trump’s signature tax and spending bill, which is named “One, Big, Beautiful Bill,” has officially been passed by both houses of Congress. The Senate passed the bill earlier this month with some key changes from the House version. Among others, that version struck down the controversial proposal to put a moratorium on states from regulating artificial intelligence (AI) for 10 years. However, the bill axes subsidies for the clean energy sector while promising millions of dollars in new subsidies for the coal industry.

AI Regulations in Trump’s Tax Bill

A previous version of the bill said that no state “may enforce any law or regulation regulating artificial intelligence models, artificial intelligence systems, or automated decision systems during the 10-year period beginning on the date of the enactment of this Act.”

The future of that proposal always looked bleak, as many believed it wouldn’t withstand the Senate’s Byrd Rule, which restricts the inclusion of “extraneous” provisions in reconciliation bills like Trump’s tax and spending bill. It was eventually removed by the Senate with a resounding 99-1 vote.

How Did the AI Moratorium Make Way into the Spending Bill?

Senator Ted Cruz, who chairs the Senate Commerce, Science, and Transportation Committee, proposed the AI moratorium in the “One Big Beautiful Bill Act.” Cruz has advocated a pause on state-level AI regulations, arguing it would hinder innovation – an assertion many AI executives also echo.

Amid opposition to the proposal, Cruz offered a compromise formula that narrowed the moratorium from 10 years to five, and carve-outs for some categories of AI regulations, especially related to the country music industry and child safety. However, these concessions failed to cut ice, and Cruz also voted with the majority. Sen. Thom Tillis (R-N.C.) was the lone senator who cast his vote against the amendment that was sponsored by Sen. Marsha Blackburn (R-Tenn.)

“Despite the so-called carve-outs, the AI moratorium would still give Big Tech free reign to expand AI’s role in our lives regardless of the consequences. It’s a reckless gift to Big Tech that would put the industry unaccountable to the law, public, and lawmakers themselves,” said Accountable US Executive Director Tony Carrk. The organization is nonpartisan and aims to hold public officials accountable for their actions.

Those batting for curbing the ability of states to regulate AI argue that confusing regulations between different states can impede the pace of AI development in the US at a time when China is fast catching up and is launching low-cost AI models in a flurry. Conflicting regulations between states and a lack of uniform law can stifle innovation at a time when the US needs to maintain its lead over China in AI.

Many Saw the AI Moratorium Provision as an Infringement on the Authority of States

Opponents, however, saw it as an infringement on the authority of states. Notably, the Senate Commerce, Science, and Transportation Committee (headed by Cruz) altered the House text on AI regulations to state that states would need to forgo their ability to regulate AI if they want access to federal broadband funding. It was seen as an arm-twisting tactic to get support for the proposal.

Moreover, there is still no federal law regulating AI, and the bill sought to bar states from having their own regulations without providing an alternative.

Some also questioned Cruz going overboard with the proposal on AI regulation moratorium and saw it as a ploy to placate his donors, some of whom happen to be from the tech industry that often bats for fewer regulations.

Trump’s Mega Bill Ends Incentives for Clean Energy Sector

Separately, while the final draft of the Republican budget bill removed the proposed tax on clean energy, it proposes to phase out the tax credits for renewable energy projects much sooner.

At the same time, the bill provides subsidies for the fossil fuel sector, particularly coal, and allows metallurgical coal (that’s used in steelmaking) to claim the 2.5% advanced manufacturing production tax credit that is otherwise available for critical minerals. The bill also cuts the royalty rates the coal industry needs to pay when mining on public land. It also adds new hoops for clean energy firms to jump through to get subsidies, making the government’s policy even more strict than before Biden’s Infrastructure Investment and Jobs Act.

Among those who criticized the proposal was Tesla CEO Elon Musk, who until a few weeks back was a key Trump confidante. “The latest Senate draft bill will destroy millions of jobs in America and cause immense strategic harm to our country!” said Musk on X.

The world’s richest person added, “Utterly insane and destructive. It gives handouts to industries of the past while severely damaging industries of the future.” Amid their escalating feud, Trump has asked the Department of Government Efficiency, which Musk headed until the end of May, to look into all the subsidies that Musk’s companies have been getting. Other critics argued that the bill will effectively hand China full dominance over the fastest-growing and potentially the most important energy sectors.

AI Is Expected to Drive Up Energy Demand

Notably, driven by AI, the power consumption of data centers is expected to explode, which will only increase the technology’s carbon footprint, especially if the share of clean energy in the overall mix comes down following the withdrawal of supportive policies.

As the Trump administration phases out the subsidies for clean energy sectors, power-hungry data centers would need to pivot to other energy sources, namely fossil fuels and nuclear. The former has a much higher carbon footprint, and coal is particularly among the dirtiest energy sources.

Nuclear power has emerged as an alternative, with companies ranging from Meta Platforms, Amazon, Alphabet, and Microsoft looking to source nuclear power for their data centers. Some researchers argue against the “green” element in nuclear energy, pointing to emissions from uranium enrichment and radiation from reactors. While these factors are still vanishingly small when compared to fossil fuel emissions, the disposal of nuclear waste is another problem area that environmentalists cite to counter the argument for nuclear energy.

Along with the concerns over AI pivot degrading the environment as it relies less on clean energy, there are fears that it might lead to more blackouts in the future, as the grid might not be able to cope with the increase in electricity demand, making future outages more frequent and longer-lasting.