US Inflation Reduction Act: Boosting the Clean Energy Industry
The Importance of the US Inflation Reduction Act
A few days ago, this coincided with the first anniversary of the US Inflation Reduction Act, which President Biden signed into law on August 16 last year.
But Biden considers this economic stimulus package the most important legislative achievement of his administration, which seeks to put the United States at the forefront of the global clean energy industry.
Goals of the IRA
The law, also known as the IRA, aims to achieve two main goals:
- Revive the American national industry
- Transform the American economic system towards a low-carbon economy for a sustainable future
Expected Impact on Greenhouse Gas Emissions
The US Department of Energy expects the IRA, along with the 2021 Infrastructure Act, to collectively reduce US greenhouse gas emissions by about 41% from 2005 levels by 2030. This forms the bulk of the Biden administration’s goals to reduce US emissions by about 50% over the same period.
Encouraging Private Sector Investment
The IRA incentivizes private sector investment by offering tax credits to energy and clean technology industries for ten years, reducing potential risks.
Since the law was passed a year ago, private sector investment in cleantech has amounted to about $270 billion, directed to sectors such as solar panels, wind turbines, and batteries for electric vehicles.
Potential Costs and Job Creation
While the Congressional Budget Office projects the cost of stimulating clean energy and climate technologies to reach about $391 billion by 2031, some experts, like Goldman Sachs, expect the final value to reach $1.2 trillion.
Furthermore, the law has the potential to create more than 9 million jobs over the next ten years, although concerns exist regarding the US labor market’s ability to absorb this demand.
Challenges Ahead
China’s dominance in the clean energy supply chains poses a significant challenge for the IRA, as Chinese manufacturers continue to invest heavily in the solar energy value chain.
Additionally, the United States faces internal challenges in streamlining project licensing processes, which remain a major obstacle for energy and industrial developers.
