Tomorrow (16 August) marks the year anniversary of the US Inflation Reduction Act (IRA) being signed into law by president Joe Biden.
The IRA is the US response to climate change and energy security, aiming to accelerate investment in renewable and green technology by offering public and private entities US$369 billion (£289 billion) in subsidies through investment allowances, tax credits and other financial incentives for investment.
This was accompanied by the CHIPS and Science Act which aimed to support the reinforce American manufacturing and supply chains.
Seen to bring the US into the forefront of the net zero transition conversation in full force, the Act triggered a number of legislative responses which bolstered national competition. This includes the EU “Green Deal”, a €250 billion (£19 billion) package that will use subsidies such as tax credits, to increase investment in green technologies.
“The IRA changed everything. It put the U.S. on a path to meeting its commitments, kickstarted massive domestic investments in clean energy, and set the stage for other nations to ramp up their own investment agenda,” said Mark Williams, senior fellow at the Centre for American Progress, speaking during a media briefing led by the Energy and Climate Intelligence Unit (ECIU) this afternoon (15 August) to mark the IRA’s anniversary.
Discussing the domestic benefits of the IRA, Williams highlighted a few key areas of progress.
Increasing domestic manufacturing
According to Williams, US domestic manufacturing is currently at its highest level in 60 years with over 270 new clean energy projects announced in the past year over 44 states and totalling over US$270 billion (£212 billion) in new investments for local economies.
Alongside these projects comes a surge in green jobs. William noted that over 170,000 jobs have been created through these new renewable project in the past year, a figure that is only forecast to grow.
“The IRA is projected to create one and a half million good jobs through its clean energy investments. I want to lean into that word good, because the IRA contains strong labour standards that are attached to a number of the investments.
“This is especially relevant in the renewable industry and the battery industry for EVs, which, traditionally in the US, have not been as good as traditional and fossil fuel sectors. This is changing in US, we’re seeing solar jobs become more union, big utility-scale wind jobs become union, this is a huge, huge thing.”
Cheaper energy cleaner climate
The increased production of renewable energy thanks to the IRA has seen the cost of wind decrease by 54% and solar by 37% continued Williams, making clean energy cheaper tan oil and methane gas.
Cost benefits from the increased production of renewables will also be felt by families in the US as Williams quoted that the average family energy bill is projected to drop by $1,000 (£785) each year
“We’re on track to lower our emissions beyond what was even thought possible just a year ago, with some significant regulatory action that we hope and expect to happen from the Biden administration, we’re hopefully going to meet our Paris Climate commitments, and potentially exceed them if we can push even harder,” added Williams.
“The increase in solar and wind production new solar wind production has also meant that we have a much more reliable grid across the US, which is incredibly important if you’ve been following any of our climate impacts.”
What helped the IRA pass?
William also drew attention to the politics necessitated to pass the IRA almost one year ago. According to Williams the success of the legislation lay at its domestic nature. Focussing on domestic benefits such as jobs, increasing manufacturing and energy security – one of the UK’s primary energy policy drivers – the IRA was able to succeed in parliament.
“The IRA needed to be about domestic jobs, domestic manufacturing, it needed to be about supporting the American worker. Without that it wouldn’t have passed, it would be ephemeral, it would have been like every other climate bill we passed throughout the decades,” said Williams.
“Additionally, we would never have met any Climate Commitment without getting our own house in order. So without getting ourselves to a point of climate investments, climate regulation, without the IRA, we would never have been a legitimate voice, again, in international climate discussions, climate debates, climate negotiations, and multilateral trade functions where climate is on the table, we would have been an illegitimate voice.
“The IRA has brought us to that place where we can actually come to these tables with something behind us that says we’re actually doing our part.”
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