The US has doubled the pace of cutting carbon emissions since President Joe Biden’s Inflation Reduction Act (IRA) passed in 2022, analysts and scientists said, with more than 80 solar, wind and energy storage projects taking advantage of the law’s mix of direct payments and tax credits.
The IRA and the Bipartisan Infrastructure Law last year provided $239 billion for clean energy, electric vehicles (EVs), electrification of buildings, and carbon management in the U.S., up 38% from 2022, according to the Clean Investment Monitor, a joint project of the policy researcher Rhodium Group and MIT. Still, experts said there is a long way to go before the law can achieve Biden’s wider climate ambitions of net-zero by 2050.
Ultimately, analysts expect U.S. government direct spending and tax credits under the law will far exceed the initial $400 billion estimate. Goldman Sachs Group has projected up to $1.2 trillion spending through 2031.
Two years after passage of the landmark climate law, early winners have been sectors such as electrical power, battery manufacturing and traditional clean energies like wind and solar. The law encouraged Asian and European companies to invest more in the U.S., which in turn prompted Europe to develop its own Green Industrial Plan over worries the U.S. would pull away clean-energy projects and talent.
Still, state and local regulations have hindered development of new transmission lines, opens new tab, and new EV charging stations have not sprouted up as quickly as some had hoped. Also, the IRA has been much slower to encourage other types of projects, especially hydrogen, carbon sequestration, geothermal and nuclear energy, noted Jigar Shah, head of the loan programs office at the Department of Energy.
Those sectors “continue to struggle around figuring out how exactly to put all the pieces together,” Shah said last month at the CERAWeek energy conference in Houston.
Oil companies have bristled at the criteria for tax credits for hydrogen fuel plants. Exxon Mobil Chief Executive Darren Woods warned in an interview that he might scrap a multibillion-dollar plan to build the world’s largest hydrogen plant in Texas.
“The challenge has been translating the legislation of the IRA into regulation,” Woods said, noting the proposed regulation favors hydrogen fuel from plants powered by renewable energy rather than natural gas.
Even in sectors like electric vehicles, companies are discovering “a host of practical barriers to putting the IRA tax breaks to work”, said Jason Bordoff, founding director of the Center on Global Energy Policy at Columbia University.
For instance, he cited a lack of transmission lines that would connect new clean energy projects to the grid and local-content requirements for EVs.
Tax breaks for EV purchases under the law have U.S. automakers worried about cheap Chinese vehicles flooding the market, triggering rules for U.S. content and calls in Washington for steeper tariffs. China has protested U.S. content rules on EVs to the World Trade Organization.
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