The US gets serious about climate protection: Biden’s IRA at one

In August 2022, the US Congress passed the Inflation Reduction Act (IRA), ultimately the Biden administration’s climate protection package. The investment into the hundreds of billions was billed as a “moonshot moment,” and applauded almost everywhere. Let’s take a look at what’s happened thus far. Paul Hockenos reports.

(Photo by Vivint Solar, Unsplash)

The IRA is many things at once, none of which really addresses inflation. It’s old-fashioned industrial policy: devoting massive sums of money to buildout a number of new industrial sectors. It’s an economic stimulus package intended to grow quality jobs for the middle- and lower-middle classes. And, not least, it’s the Biden administration’s climate protection act.

The IRA is the single-most important measure ever in terms of climate protection in US history. Its rollout will determine whether the US meets its goal of turning 80 percent of its electricity clean and cutting greenhouse gas emissions by 50-52 percent below 2005 levels by 2030.

First, I want to point out that the White House settled upon a massive spending plan as its climate tool of choice because it didn’t have another choice. The kind of laws and regulations that most other countries have in one form or another are next to impossible in the US because of legislative gridlock. In the past, serious climate legislation had failed again and again: from President Bill Clinton’s proposed carbon-dioxide tax to President Barrack Obama’s cap-and-trade plan.

Today, with the House of Representatives in Republican hands and the Senate just barely under Democratic control, there is no chance of getting substantial legislation passed. But a spending bill was possible and only by a hair’s breadth: one vote. Whereas in the 2021 Democrat-controlled House, all 220 Democrats voted for the bill, all Republicans voted against it. In 2022, the Biden administration had to scratch and claw to get that one vote in the Senate, in the form of West Virgina senator Joe Manchin.

Thus, the US path to decarbonization is through spending: the subsidizing of clean tech is meant to crowd fossil fuels out of the market. This entails anywhere from $370 billion to more than one trillion dollars in new spending and tax breaks over a decade, the figure hinging upon how many stakeholders take advantage of its offers. The idea is not just to stimulate clean energy generation but to build a whole future-oriented economy around it.

The US has seen an unprecedented wave of clean energy & EV investment announcements since 2021. Source: RMI/White House

The breadth of projects qualified to benefit from the act includes clean energy generation and manufacturing, nuclear energy, electric vehicles (EV), home energy efficiency upgrades, home energy supply improvements, building efficiency, advanced manufacturing, zero-emissions industrial tech demonstrations, smart grids, heat pump manufacturing, hydrogen-manufacturing facilities, carbon capture, wave energy, and EV charging stations, among others.

“We’re trying to do industrial physical transformation at a speed and scale unheralded in American history,” exclaimed Ezra Klein on his New York Times podcast.  “This is bigger than anything we have done at this speed ever.”

Rolling out the IRA

With the notable exception of US Republicans and Manchin, who changed his mind again and now objects to the program, the IRA’s first year has exceeded expectations. “The renewable energy sector has exploded under the IRA,” enthuses the media outlet GreenBiz. According to the White House: in one year, the law created over 170,000 “good-paying and union jobs” in clean energy manufacturing in 44 (predominately Republican-voting) states, and it is projected to create more than 1.5 million additional jobs over the next decade.

The private sector, according to the White House, has announced more than $110 billion in new clean energy manufacturing investments, including more than $70 billion in the EV supply chain and more than $10 billion in solar manufacturing. Since 2020, the private sector has announced approximately $240 billion in new clean energy manufacturing investments. This includes at least 210 major new clean-energy projects, 51 new or expanded plants for producing solar panels, and 10 new factories for making batteries.

The upshot for no sector has been as palpable as the electric vehicle branch. According to the legislation, seven US-made EV models are eligible for a $7,500 tax credit at least in part; another four are eligible for a $3,750 tax credit. This has the sales of EV passenger models flying. Sales in the first quarter of 2023 exceeded the same quarter last years by 79 percent. The Biden administration expects sales to surge by 50 percent in 2023. As for heavy EVs, the Rocky Mountain Institute estimates that by 2032 the share of EV sales using IRA credits will be close to 100 percent for commercial fleets, and 84 percent for medium- and heavy-duty trucks.

Batteries are another market that the IRA targeted, envisioning turning the US into the world hub of battery production. Automakers GM and Ford are accessing the act’s $45-per-kilowatt battery production tax credit to turbocharge construction of new plants across a “battery belt,” stretching from Michigan to Georgia. “Increased output of US-made batteries is, in turn, helping carmakers boost output of popular EVs, such as Ford’s F-150 Lighting electric pickup,” according to the US think tank.

And the IRA is driving record rollout of renewable energies, first and foremost solar. In 2023, commercial solar grew by 35 percent. Solar accounted for 54 percent of all new electricity-generating capacity added to the US grid in the first quarter of 2023.

The IRA is a subsidies boon for the US energy transition market – and the market is making full use of it. The major drawback is that this kind of subsidy bonanza is just one lever. Europe, in contrast, has many levers at its disposal, like, for example, the EU carbon trading system, which taxes those industries that burn fossil fuels. It is playing an enormous role in pushing these sectors to switch to low-carbon energy source – and it raises money for the transition.

The views and opinions in this article do not necessarily reflect those of the Heinrich-Böll-Stiftung European Union.


Paul Hockenos is a Berlin-based journalist and author of Berlin Calling: A Story of Anarchy, Music, the Wall and the Birth of the New Berlin.

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