Climate change is an existential threat to humanity, and the world is facing the consequences of the excess carbon emissions we’ve been producing for years. Governments and society are taking different actions to fight it, and the U.S. passed the Inflation Reduction Act (IRA) a year ago, offering a 30% tax credit for clean energy installations. This law has been promoting clean energy even in locations that still rely on coal, spurring the development of dozens of facilities in just one year.
The Inflation Reduction Act is considered America’s most significant response to climate change, as it spurred a massive investment in the clean energy industry across the United States. It is useful to note that the Clean Power Plan, a similar initiative, was proposed in 2015 but faced political opposition and judicial scrutiny, failing to gain momentum.
In contrast, the IRA has been capable of transforming the clean energy landscape in just one year, with nearly 80 major clean energy manufacturing facilities already announced.
One of the primary benefits of the IRA is the 30% discount it provides for clean energy installations, pushing it forward even in locations where coal still provides cheap energy. This cleaner alternative has allowed many businesses to cut their carbon footprint and contribute positively to the environment.
Consequently, clean energy manufacturing has been booming, with companies such as Tesla and General Motors announcing significant investments in EV manufacturing facilities.
Inflation Reduction Act (IRA) Clean Energy Investment:
Significant federal funding for climate efforts.
The IRA directs nearly $400 billion in federal funding to clean energy, with the goal of substantially lowering the nation’s carbon emissions by the end of this decade.1 The funds will be delivered through a mix of tax incentives, grants, and loan guarantees. Clean electricity and transmission command the biggest slice, followed by clean transportation, including electric-vehicle (EV) incentives.
Upgrade, repurpose, or replace energy infrastructure.
The US Department of Energy’s Loan Program Office will receive roughly $12 billion to expand its existing loan authority by tenfold and create a new loan program capped at $250 billion to upgrade, repurpose, or replace energy infrastructure.
Provide incentives for private investment.
The majority of the $394 billion in energy and climate funding is in the form of tax credits. Corporations are the biggest recipient, with an estimated $216 billion worth of tax credits. These are designed to catalyze private investment in clean energy, transport, and manufacturing. Many of the tax incentives in the bill are direct pay, meaning that an entity can claim the full amount even if its tax liability is less than the credit.
The clean energy facilities are not only creating job opportunities but also promoting regional development. For example, the IRA has boosted the production of solid-state batteries, a relatively new technology, in Massachusetts.
This technology builds batteries with a solid-state electrolyte that replaces the typical liquid or gel-like electrolyte used in the batteries. Solid-state batteries are more efficient than traditional batteries since they are not prone to lithium-ion battery explosions, face no memory effect, and have a higher power density.
It’s impressive to observe the IRA’s significant impact in just one year, equivalent to the previous seven years of clean energy investments combined. More importantly, it is helping the country meet its climate goals. The U.S. plans to cut its carbon emissions by 50% by 2030, making the development of clean energy facilities across the country crucial. With the aid of the IRA, we are moving closer to achieving carbon neutrality.
The Inflation Reduction Act has been a game-changer for the clean energy industry, with nearly 80 major clean energy manufacturing facilities announced in only one year. By offering a 30% discount off clean energy installations, the IRA has encouraged investment in the clean energy industry, allowing innovation and development of new technologies. This law has promoted clean energy even in regions where coal still dominates, providing a cleaner alternative to cheap energy. With this kind of development, we are a step closer to achieving our climate goals and creating a healthier planet.
