Highlight
- The Inflation Reduction Act (IRA) was signed into law on August 16, 2022. This is the largest investment made to-date by the federal government with approximately $369 billion for programs tackling climate change in the form of tax incentives and rebates, clean energy manufacturing jobs, and pollution reduction. It is estimated that the IRA can cut U.S. net greenhouse gas (GHG) emissions by 31–44 percent below 2005 levels by 2030, compared to 24–35 percent under current policy without the IRA.59 The legislation is also projected to have non-trivial impacts on California’s green economy, with White House estimates projecting that the IRA will generate $21.2 billion in secondary investment in the clean power and energy storage sectors alone.60
59 King, B. et. al. “A Congressional Climate Breakthrough.” Rhodium Group. July 28, 2022. Available at: https://rhg.com/research/inflation-reduction-act/
60 “The Inflation Reduction Act Delivers Affordable Clean Energy for California” The White House. August 17, 2022. https://www.whitehouse.gov/wp-content/uploads/2022/08/California.pdf
Opportunities
- Before the IRA was announced, there was informed optimism that it would unleash a new era of green manufacturing. Credit Suisse estimated up to $800 billion worth of investment would flow into tax credits for green energy and ZEVs, an amount that almost doubled estimates from the Congressional Budget Office.61 In the months since the Act was signed, there have already been up to $28 billion committed to green manufacturing by the likes of Hyundai, First Solar, and Panasonic.62
- The IRA represents a significant commitment to the commercialization of green building materials. The concrete industry is estimated to be responsible for some 8 percent of global carbon emissions, largely due to the combustible chemical process required for cement.63 The act will encourage the adoption of concrete substitutes with $5.8 billion in matching funds for private sector construction and retrofitting,64 as well as $3.375 billion for federal buildings alone.65
61 “The Climate Economy is About to Explode” The Atlantic. October 5, 2022
https://www.theatlantic.com/science/archive/2022/10/inflation-reduction-act-climate-economy/671659/
62 “$28 Billion In New Clean Energy Manufacturing Investments Announced Since Inflation Reduction Act Passed” Forbes. October 12, 2022
https://www.forbes.com/sites/energyinnovation/2022/10/12/roughly-28-billion-in-new-clean-energy-manufacturing-investments-announced-since-inflation-reduction-act-passed/
63 “Toward electrochemical synthesis of cement—An electrolyzer-based process for decarbonating CaCO3 while producing useful gas streams” Ellis et al. Proceedings of the National Academy of Sciences. https://www.pnas.org/doi/abs/10.1073/pnas.1821673116
64 “Inflation Reduction Act Summary: Energy and Climate Provisions”, Bipartisan Policy Center. August 4, 2022.
https://bipartisanpolicy.org/blog/inflation-reduction-act-summary-energy-climate-provisions
65 “GSA Seeks Industry Input on Clean Construction materials” October 4., 2022. Available at:
https://www.gsa.gov/about-us/newsroom/news-releases/gsa-seeks-industry-input-on-clean-construction-materials-10042022
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Assessing the Impacts of Climate Investments
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