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.

After all, the law, which for short is called the IRA, was designed to achieve two main goals: the first is to revive the American national industry, and the second is to start the process of transforming the American economic system towards a low-carbon economy. future to achieve zero targets.

The 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. over the same period by about 50%.

The IRA encourages private sector investment by reducing potential risks through tax credits for many energy and clean technology industries for a period of ten years.

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.

Although the Congressional Budget Office projects that the cost of stimulating clean energy and climate technologies under this act will reach about $391 billion by 2031, some believe the bill will be much higher. Goldman Sachs expects the final value to reach $1.2 trillion.

Some justify this increase on the grounds that the law does not set any limits on the amount of tax credits that can be granted and that the demand for them may exceed all government expectations. and problems.

Challenges and Concerns

A year after the law was passed, it is still unclear how much clean hydrogen projects will benefit from the credit stimulus packages.

In addition, industry is still waiting for more clarification on the proportions of local content needed in various industries to determine opportunities to maximize the benefits of incentives.

In addition, according to some studies, the law could provide more than 9 million jobs over the next ten years. While job creation is a positive, in this case it may raise some concerns about the ability of the US labor market to absorb this demand, which is suffering from an aging and labor shortage.

Another challenge for the IRA is the response from China, which is at the helm of clean energy supply chains. In the first half of this year, Chinese manufacturers announced more than 514 gigawatts of new investments in the solar energy value chain in China and Southeast Asia, according to one organization representing US industrialists, meaning the United States will face a tough Chinese competition in the global clean energy technology market.

However, the last problem, which may be the biggest one. This is an internal challenge posed by the United States itself. Because developers of energy and industrial projects in America still face a major problem with the time it takes to license projects. Which American legislators and regulators have not yet been able to speed up. Meanwhile, a year after its adoption, this dilemma is still considered the Achilles’ heel of this law.