Jimmy Samartzis, CEO of the Inflation Reduction Act (IRA), attributes significant influence to the legislation, highlighting its role in steering developments within the energy sector. Notably, LanzaJet, a clean energy company, views the IRA’s tax credits as a catalyst for its expansion plans in the United States.
Enacted by President Biden in August 2022, the IRA, alongside the Bipartisan Infrastructure Law (BIL) passed in November 2021, aims to inject substantial federal funding into clean energy initiatives. The overarching goal is to curb greenhouse gas emissions, stimulate private investment, and foster the growth of green industries, laying the groundwork for a revamped US economy.
With a 10-year duration and an initial projected cost of $391 billion, now potentially surpassing $1 trillion, the IRA offers enhanced tax credits, loans, and loan guarantees to facilitate the deployment of emission-reducing technologies. These tax credits are available for domestic production of clean energy or the manufacturing of equipment pivotal for energy transition, such as electric vehicles (EVs) and batteries. Consumers also stand to benefit from tax incentives, including those for purchasing EVs or installing heat pumps.
Complementing the IRA is the BIL, which allocates direct investments, predominantly in the form of government grants, toward research and development and capital projects. Approximately $77 billion is earmarked for clean energy technology ventures under the BIL, with beneficiaries like EV battery recycling company Ascend Elements reaping substantial grants.
According to Adie Tromer from the Brookings Institution, these legislative efforts signify a robust commitment to steering the US towards a greener economy. Trevor Houser from the Rhodium Group notes that while certain tax credit regulations are still in flux, substantial public spending, primarily through tax credits, is already invigorating the economy.
The Clean Investment Monitor (CIM), jointly managed by Rhodium Group and the Massachusetts Institute of Technology, reveals that the federal government funneled around $34 billion into clean energy investments during the 2023 fiscal year. This influx of funds has contributed to a record-breaking $239 billion in total clean energy investments in the US in 2023, representing a 38% increase from the previous year.
Houser emphasizes two main impacts of the IRA: amplifying investments in mature technologies like solar, EVs, and batteries, and catalyzing significant growth in emerging climate technologies such as clean hydrogen and sustainable aviation fuel (SAF).
However, challenges persist, with certain sectors of the green economy, like wind and heat pumps, yet to witness a surge in investments despite IRA incentives. Concerns loom over the fate of these laws in the face of potential political shifts following the November elections, with the possibility of Republican control posing a threat to the legislation’s continuity.
While some, like the Heritage Foundation, advocate for the repeal of the IRA and BIL, citing fiscal concerns, proponents argue that the US cannot afford to backtrack on its clean energy commitments. They maintain that the loans program is designed to take calculated risks to unlock innovative solutions at scale, acknowledging that setbacks are inherent in such endeavors.