The Clean-Energy Race Is On
While no legislation is perfect, the US Inflation Reduction Act of 2022 will be a game changer for the transition to clean-energy sources, both in America and around the world. By doubling down on forward-looking industrial policy, the US is suddenly poised to give Europe, China, and others a run for their money.
NEW YORK – The United States has entered the clean-energy race in a big way with the Inflation Reduction Act (IRA) of 2022. Not only will the law subsidize US renewable-energy producers and consumers to the tune of $369 billion over ten years; it also authorizes the Department of Energy (DOE) to lend up to $250 billion to US companies that are investing in the clean-energy transition. Between the IRA and the recent $52 billion package to boost US semiconductor production, it is clear that industrial policy is back in vogue in Washington, DC.
To be sure, these figures might sound modest. According to Bloomberg, global investments in the energy transition topped $750 billion last year, with China alone spending $266 billion, compared to $47 billion in Germany and $114 billion in the US. And McKinsey & Company offers an even more generous accounting, putting total current investments in clean energy and its supporting infrastructure at $2 trillion.
But these figures refer to total new investments worldwide. They are coming primarily from the private sector, which is still a long way from where we need it to be. Although global deployment of renewables, electric vehicles, and other low-carbon infrastructure is accelerating fast, there is still a widening gap between what is being done and what needs to be done to manage the climate crisis.