Inflation Reduction Act Includes $370b in Clean Energy Spending

­The Inflation Reduction Act of 2022 includes a significant investment in clean energy, with the potential to cut U.S. greenhouse gas emissions up to 43% below 2005 levels by 2030, and I’d like to take a non-partisan, apolitical look at its contents.

In fact, the U.S. Department of Energy is even more optimistic, claiming the Inflation Reduction Act (IRA) could help us reach 50-52% GHG emission reductions below 2005 levels in 2030, but I’ll get to that.

The IRA features approximately $370b in clean energy spending, with a heavy focus on electric vehicles (including vehicles and infrastructure) and renewable power.

Alastair Bishop, portfolio manager on the BlackRock Future Climate and Sustainable Economy ETF (BECO), summed up the IRA rather succinctly: “The passage of the Inflation Reduction Act has been positive news for clean energy and other themes; it is likely to further power investment in solar, wind, and hydrogen while supercharging electric vehicles.”

On the production side, the IRA introduces tax credits for clean electricity generation and investment tax credits for new clean energy projects across wind, solar, geothermal, bioenergy, hydropower, energy storage, and clean hydrogen, along with $30 billion in modernization grants and loans for electric infrastructure.

For consumers, they’ll be eligible for $4,000 - $7,500 in EV tax credits, while manufacturers can get credits for the production of EVs, EV batteries, and new EV manufacturing facilities.

New and existing EV facilities can get $20 billion in loans and $2 billion in grants, while $3 billion is available for acquiring public transit and federal zero-emission vehicles, and that’s just scratching the clean energy surface.

All of this squares nicely with President Biden’s directive that the federal government acquire only zero-emission vehicles by 2035. The goal is a 65% emissions reduction by 2030 and complete net-zero emissions from overall federal operations by 2050.

As mentioned, the DOE has a somewhat rosy, optimistic view of the IRA’s implications. In their summary, the DOE notes that “the clean energy provisions of the Inflation Reduction Act of 2022 and the Bipartisan Infrastructure Law of 2021 together could reduce emissions by approximately 1,000 million metric tons (MMT CO2 e) in 2030, or about a gigaton.”

Here's hoping the DOE’s and other proponents’ wildest predictions come true.