This year will be the first the US federal government has a policy to meaningfully address climate change, thanks to the passage of the Inflation Reduction Act (IRA) in August 2022. The the law puts towards climate and energy-related programmes will accelerate the race to reduce carbon emissions in the US and will influence climate action across the world.
By 2030, researchers forecast that the law鈥檚 climate-related provisions 鈥� part of a larger economic package that includes spending on healthcare 鈥� will help bring US greenhouse gas emissions to between below 2005 levels. That doesn鈥檛 reach the target of a 50 per cent reduction by 2030 that the administration of US president Joe Biden has set, but it gets the US much of the way there, and changes should start to become apparent in 2023.
Immediately visible will be the tax credits that the IRA provides for existing technologies, such as electric vehicles, heat pumps and home energy retrofits. This will give consumers and manufacturers a decade of financial support from 1 January.
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In 2022, electric vehicles made up of new cars sold in the US and the tax credits are expected to boost their uptake further. 鈥淎mericans all across the country will be electrifying their lives with cheaper, more efficient machines,鈥� says Rob O鈥橠onnell at , a non-profit organisation focused on decarbonisation.
To supply the necessary electricity for this change from renewable sources, the IRA provides tax credits for clean energy projects. at Rhodium Group, a research firm in New York, expects a record 40 gigawatts of renewable energy capacity to be added in 2023. 鈥淭his represents the beginning of a streak of year-on-year record-breaking growth in renewable energy,鈥� says Larsen.
By 2030, could be coming from clean sources, says at Energy Innovation, a think tank in California. 鈥淔rom this point on, clean energy electricity, particularly with renewables, is the lowest-cost new generation out there,鈥� he says.
The IRA isn鈥檛 without controversy, though. European Union leaders claim the law鈥檚 subsidies are unfair and violate international trade rules. They are eyeing sweeping climate spending of their own through REPowerEU and other policies. 鈥淲e have to step up,鈥� Ursula von der Leyen, president of the European Commission, told EU leaders 聽on energy in December.
How fast the US system can now be built up depends less on technology or economics than it does on politics, says Gopal. Thousands of mostly renewable energy projects representing are caught in backlogs awaiting permission from federal and other regulators.
The IRA should also speed up the development of new technologies, which other countries could then use to decarbonise. The law includes tax credits for carbon capture and storage, with a particular financial boost for projects capturing carbon directly from the atmosphere. Additionally, it provides credits for technologies such as hydrogen produced using renewable energy, advanced nuclear reactors and geothermal energy. It even puts a few hundred million dollars towards the development of nuclear fusion.
All this will spur private investment in the low-carbon economy, says at the University of Victoria in Canada. A report from bank Credit Suisse finds that the IRA and the private investment it drives could lead to over the next decade.
This should make the US more competitive in climate-related industries and lend the US more credibility in international climate negotiations, says Gopal. 鈥淚 think it completely has changed the dynamic,鈥� he says.
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