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THE IRA IS RESHAPING THE WORLD IN ITS FIRST YEAR

8/23/23

The Inflation Reduction Act (IRA), signed into law in August 2022, has had a transformative impact on the U.S. economy and global clean technology markets since being enacted. Designed to be private-sector-led and government-enabled, the IRA offers tax breaks to companies that deploy clean technologies across the United States. This approach has swiftly catalyzed investment in clean energy projects, electric vehicle technology, and other low-carbon solutions. According to a report from the American Clean Power Association, over $270 billion has been invested in U.S.-based clean energy projects (e.g. solar, wind, and batteries), totaling 184,850 MW of projects. Additionally, per White House data, there has been more than $130 billion in electric vehicle (EV) technology investment since the law’s enactment. This surge in capital has not only driven economic growth, but has also reshaped industries, with lithium-ion battery factories, solar manufacturers, and even oil companies embracing clean technologies.

The IRA’s impact reaches beyond economic growth; it has also shifted the narrative around clean energy and has led to a diversification of industries pursuing clean energy incentives, from manufacturing to transportation. The law’s influence also extends to job creation and community revitalization, creating 114,000 clean energy jobs over the last year, particularly in states like Kentucky, Tennessee, and Georgia – an area being referred to as an emerging “battery belt”.

Furthermore, the IRA’s impact is not limited to the U.S. It has created international repercussions. Despite some international concerns about the IRA’s U.S.-domestic industry focus, other countries are now emulating the IRA’s principles to bolster their own clean industries.

Ultimately, the IRA’s effectiveness in achieving emission reduction targets will be a key measure of its success. Analysis from the Rhodium Group shows that with the IRA and other existing climate policies, U.S. emissions will decline somewhere between 29% and 42% by 2030 from 2005 levels. While some challenges like policy streamlining remain, the IRA has demonstrated its resilience and potential for lasting impact on the U.S. economy, job market, and global clean technology landscape.

Some highlights from the past year include: