Inflation Reduction Act Throwback by Brianna Welsh

In a throwback to this summer, the landmark IRA bill that was passed is receiving renewed attention. A recent study from Credit Suisse estimates that the potential for tax credits are actually more than double the originally cited $396 billion - closer to $800 billion!

The Treasury is now seeking general public input on #climate and #cleanenergy tax incentives as they map out their next steps, focusing on the following (due by November 4th):

? Energy Generation Incentives

?? Incentives for Homes/Buildings

?? Consumer Vehicle Credits

?? Manufacturing Credits

?? Credit Enhancements

?? Credit Monetization?

Why does this matter to you? Well, many of the IRA’s most important provisions, such as its incentives for electric vehicles and zero-carbon electricity, are “uncapped” tax credits. That means that if you meet their terms, the government will honour them. There’s no official limit written into the law that restricts how much the government can reward. Hence the 2x model CS predicts.

As a nation-first, the IRA “definitively changes the narrative from risk mitigation to opportunity capture,” finally appropriately incentivizing the clean #energytransition we need. And because federal spending tends to catalyze private investment, that could send total climate spending across the economy to roughly $1.7 trillion over the next 10 years, according to CS. Fears will shift from fear of carbon tax penalties to fear of missing out (FOMO) from the economic growth that the energy transition (and the IRA) will afford.

This bill will make America a leading clean energy provider. The IRA could enhance its “competitive advantage in low-cost clean electricity and hydrogen production, infrastructure, geologic storage, and human capital,” the report states. By 2029, U.S. solar and wind could be the cheapest in the world at less than $5 per megawatt-hour, the bank projects.

While the bill passed with not even a single Republican vote, they are not likely to repeal the law, even if they take the White House in 2024 because it would hurt their own voters most: “Red-leaning states are likely to see the most investment, job, and economic benefits from the IRA.” This makes it a properly partisan win.?

Does this all sound too good to be true? There is a realistic obstacle for the IRA which stems around energy infrastructure. Permitting for power lines and energy buildouts is historically a messy business and takes time. Especially now that Senator Joe Manchin’s permitting-reform bill has failed. The money is now there, but the process takes time.?

Not to worry though, the IRA’s programs and incentives are architected such that they will keep flowing no matter the macro environment (ie, in the case of a downturn or economic contraction)? which makes betting on clean energy one of the most certain economic trends of the next few years. Clean energy is officially the government-backed bet for conservative investors.