It’s been nearly two years since President Biden signed the Inflation Reduction Act into law.
With a mix of tax incentives, federal subsidies and policy tweaks, the I.R.A. was designed to turbocharge America’s clean energy economy and put the country on the trajectory to a lower emissions future.
The Biden administration initially expected the law to provide some $370 billion in spending and tax credits for clean energy projects, but other groups expect the figure to be far higher as more companies and households take advantage of the law’s tax credits. The Brookings Institution estimated the I.R.A. could be worth $780 billion through 2031, while Goldman Sachs set a potential total cost of $1.2 trillion.
The law was also set up to be a political win for Biden, delivering jobs and setting the stage for future emissions reductions in the run-up to the president’s rematch with Donald Trump.
We’ll be checking in on the I.R.A. regularly in the coming months, but with Election Day drawing closer, this much is becoming clear: The law is delivering on the economic front, but it has not become a winning political issue.
While big, industry-changing investments are already happening, public perception of the I.R.A. is being shaped by the plodding pace of industrial development and permitting, the fuzzy math of tax incentives and a heavy dose of partisan politics.
The boom in clean energy projects is astounding. Since the passage of the I.R.A. in 2022, incentives provided by the law helped drive roughly $332 billion in new investments in clean energy and transportation technologies. Almost all of that was private investments, as opposed to government spending, spurred on by an estimated $48 billion in federal tax credits.
(These figures come from the Clean Investment Monitor, a joint project of Rhodium Group and the M.I.T. Center for Energy and Environmental Policy Research.)
There are new Tesla battery plants in South Texas, solar panel factories in Oklahoma, wind energy facilities in New Mexico, and hundreds of other new projects in the works around the country.
In total, investments in clean energy and transportation accounted for a whopping 44 percent of all investment growth in fixed assets like plants, property and equipment in the entire U.S. economy last year, said Trevor Houser of the Rhodium Group.
Batteries and electric vehicles are the big winners. The I.R.A. included incentives specifically designed to spur the creation of a domestic supply chain for batteries and electric vehicles.
Since the law’s passage, $114 billion in new projects in those industries have been announced, according to Jay Turner, a professor at Wellesley College who is tracking the data with his students.
That was a calculated move, part of the broader effort by the Biden administration to catch up with China, which is dominating the market for solar panels and electric vehicles.
“Batteries are the biggest winner here,” he said. “We have seen an enormous influx of battery projects over the last two years, especially to the Southeast, which is now being referred to as the ‘Battery Belt.’”
While the initial flurry of projects announced was primarily in manufacturing, Turner said a new wave of projects taking advantage of the I.R.A. was moving further up the supply chain, with companies investing in facilities to process lithium, which is a crucial component for batteries, and polysilicon, a key ingredient for solar panels.
“There’s an effort to onshore the supply of raw materials,” he said, “not just the manufacturing.”
The climate impacts are poised to be significant. Two of the most straightforward ways to reduce emissions are by electrifying the grid and replacing gas guzzling cars with electric vehicles. The coming boom in battery production will go a long way toward accomplishing those goals.
“The level of battery manufacturing is enough to make a meaningful dent in emissions,” Turner said, “for both the transportation sector and to help continue decarbonizing the electricity sector.”
According to the Environmental Protection Agency, the I.R.A. will reduce carbon dioxide emissions from 2005 levels by 35 to 43 percent by 2030.
But while the law has succeeded in spurring the sale of electric vehicles, the country is falling behind in the administration’s ambitious plans to expand energy production from wind and solar, as my colleague Brad Plumer reported in February.
The political picture is more complicated. While much of the I.R.A. is working as intended, the American public is largely unaware of the story. The president did not mention the I.R.A. by name in his State of the Union speech in March. Most registered voters have not heard much about the Inflation Reduction Act, according to a survey by the Yale Program on Climate Change Communications. And most of the voters Yale surveyed don’t think the I.R.A. will help them or the country.
Even in states like Arizona and Georgia, two battleground states that are both big beneficiaries of the I.R.A., the president is trailing Trump in the polls. Biden campaign officials told my colleague Madeleine Ngo that the president’s economic policies have “delivered where Trump failed the American people.”
But Jennifer Harris, a former Biden administration economic policy official, acknowledged to Ngo that the investments did not have “as much voter penetration as they should.”
A big part of the reason the I.R.A. has not delivered a political punch is that the law was, by design, a long-term solution to a long-term problem. Climate change is a generational challenge, and, particularly with its reliance on tax credits, the I.R.A. was designed to reshape the economy over a decade, not an election cycle.
Capturing the political benefits of a future-focused law were always going to be hard in the short term.
“Projects that are announced and planned are not the same thing as projects that are operating, where people are going to work every day,” Turner said. “Until you actually see steel being erected and people going to work, it’s not going to change the politics.”
5 more things to know
More record heat and dangerous weather. The heat index in Miami reached 112 degrees Fahrenheit over the weekend, breaking the previous daily record by 11 degrees. In Mexico, dozens of monkeys fell dead from trees amid scorching temperatures.
Warming oceans are also behind the National Oceanic and Atmospheric Administration’s prediction that this year could see between 17 to 25 named tropical cyclones, the most the agency has ever forecast in May for the Atlantic Ocean.
Kenya gets support for its climate agenda. President William Ruto will have his state dinner at the White House on Thursday. As Declan Walsh, who covers Africa for the Times, wrote, 90 percent of Kenya’s energy comes from renewable sources, an advantage Ruto hopes to leverage to convert his country into an industrial powerhouse.
Today, the United States announced policies to support that vision, including loans for businesses that want to invest in clean manufacturing in Kenya or other African countries.
Rich nations are making billions from loans to help developing nations fight climate change. A Reuters investigation found that a substantial share of the loans were made at market rates for interest, rather than disbursed as grants. In some cases, they required recipients to purchase materials from companies in lending countries. The pattern may increase the stress on highly indebted countries like Kenya.
Half the world’s pastures are degraded and half the world’s mangroves are at risk of collapse, according to two separate reports. The first, by the United Nations Convention to Combat Desertification, warned that a sixth of the world’s food supplies is at risk from the deterioration of soils. The second, by the International Union for Conservation of Nature, highlighted the key role of mangroves as carbon sinks that help shield coastal cities from extreme weather events.
Senate Democrats opened a second investigation into former President Donald Trump’s meeting with oil and gas executives last month. At issue is whether Trump offered a “policies-for-money transaction” when he asked for $1 billion for his 2024 campaign so he could retake the White House and undo climate regulations. Read the full article from Lisa Friedman, who covers climate policy in Washington.
