US Inflation Reduction Act after One Year
One year ago, Congress passed, and the President signed, the Inflation Reduction Act into law. This marked the single most significant legislation to combat climate change in American history and one of the largest investments into the American economy in a generation.
Already, the investments and our implementation have borne fruit: over the past year, the law has unleashed an investment and manufacturing boom in the United States unlike anything seen in decades.
Treasury analysis released this week points out these announced investments in clean energy, electric vehicles, and batteries are concentrated in communities with lower wages, lower college graduation rates, and lower employment rates.
According to one estimate, China has historically spent over $400 billion per year on industrial policy, largely through direct subsidies to firms and below-market credit to state-owned enterprises. Our strategy, by contrast, uses modest incentives to promote private investment.
By doing so, the Inflation Reduction Act will unlock $3 trillion of investment in America for renewable energy technology. While more productivity gains and long-term economic growth will come in years to follow, we already see progress in three key metrics:
- Creating good-paying jobs across the United States, especially in disadvantaged communities;
- Strengthening our energy security to build resilience to geopolitical risks and other potential economic shocks; and,
- Tackling climate change by accelerating the development, adoption, and deployment of clean energy technologies.
Creating Good-Paying Jobs
A central tenet of the Inflation Reduction Act is spurring job creation across the United States.
These investments in clean energy are a prime example of Secretary Yellen’s modern supply-side economics framework—harnessing government action to promote growth while addressing climate change and inequality.
Not only do these investments generate long-term economic growth for the whole country, but they also create jobs in disadvantaged communities.
Over the past twelve months, we’ve seen these investments start to translate to American jobs:
- The following 70-page list of investment announcements details the tens of thousands of jobs being created in communities across the country, from Colorado Springs to Minneapolis, Albuquerque to Toledo.
- The annual economic opportunity for workers in the wind and solar industries will grow by $220 billion per year in wages by 2035
- Moving forward, clean energy investments could support over 1.5 million clean energy jobs in the United States by 2030.
Strengthening Our Energy Security
Events of the past year – from climate emergencies and supply chain snarls to Russia’s weaponization of exports – have further demonstrated the acute need to invest in our energy security and transition.
The Inflation Reduction Act equips us to do so by accelerating the development and deployment of clean energy, including key supply chains.
Getting clean technologies to market faster, supported by reliable supply chains for essential components, is key to building a resilient energy sector, while also ensuring that lower energy costs for Americans are not dependent on unreliable geopolitical actors.
- Estimates suggest the Inflation Reduction Act can also help bring down the costs of certain emerging technologies by as much as 25 percent, and position America as the global leader in these areas.
- Analysts now expect twice as much wind, solar, and battery storage deployment over the next seven years compared to the base case without the law.
- One analysis found that the typical American household could save around $200 per year just on their electric bills.
- Households that take advantage of the electric vehicle incentives can save thousands per year on energy and fuel costs, as electric vehicle drivers will see their fuel costs go down by about 60 percent.
Tackling Climate Change
Curbing carbon emissions necessitates the development and adoption of clean energy. For too long, the United States has lagged in making the adequate investments needed to accelerate a clean energy transition.
The incentives in the Inflation Reduction Act have positioned the United States to lead on clean energy and meet our goals.
- With the Inflation Reduction Act, the President’s 2030 emissions reduction goal is within reach. A slew of independent studies suggest the Inflation Reduction Act will drive significant emissions reductions.
- As the Inflation Reduction Act drives lower costs of emerging climate technologies, these technologies will be deployed globally, and eventually can reduce hundreds of millions of tons of emissions around the world each year.
- Increased deployment of clean energy and reduced particle pollution improve people’s day-to-day lives. For example, due to our investments, we can avoid thousands of premature deaths and asthma attacks.
These incentives and investments are, of course, part of our broader, whole-of-government approach to climate change.
For instance, other policies like the Bipartisan Infrastructure Law and further steps to upgrade our electric grid infrastructure will all contribute to major climate progress in the years to come. These federal policies run in tandem and in partnership with state, local, and private-sector action and market forces.
In our first year of implementation, the Treasury Department has focused on achieving three goals: creating good-paying jobs, strengthening our energy security, and tackling the climate crisis.
Our efforts have stretched across the Department, including the Office of Tax Policy, Climate Hub, Inflation Reduction Act Program Office, and the Office of the Deputy Assistant Secretary for Management and Budget.
At the same time, the Treasury Department is working closely with the IRS to modernize the agency’s customer service and technology and ensure the Inflation Reduction Act’s clean energy tax incentives are delivered accurately and seamlessly.
The Treasury Department has prioritized the pieces of guidance that will provide maximum economic, energy security, and climate benefits. Treasury will complete the first phase of implementation in the coming weeks, having provided information or proposed guidance for the Investment and Production Tax Credits’ cross-cutting bonus provisions, as well as new credit monetization provisions that are a force multiplier for job creation and clean energy deployment. Treasury will announce plans for phase two of implementation in September.
At Treasury, we are focused on implementing the clean energy tax provisions as quickly as possible. On the day of the law’s enactment, Treasury issued guidance on the electric vehicle tax credit and worked to ensure consumers could easily find a list of eligible vehicles online.
Since then, Treasury and the Internal Revenue Service have issued 38 pieces of guidance on the clean energy provisions, while engaging with hundreds of stakeholders and reviewing nearly 5,000 comments. #US Inflation Reduction Act after One Year Naira Steadies as Banks Issue Update on FX Purchase