The Inflation Reduction Act’s tax credits could make a significant impact in jumpstarting clean energy—depending on how it is implemented.
Key Details
- President Joe Biden signed the Inflation Reduction Act on August 16, 2022, authorizing more than $369 billion in tax credits and investments for clean energy into law.
- The law has created a boom in anticipatory clean-energy investment, with thousands of startups and corporations seeking to take advantage of tax credits and opportunities by helping to jumpstart the green revolution.
- Details about the implementation of credits are still being worked out by the Treasury Department, with specific restrictions on U.S. production and labor being a part of the deal likely to be revealed in early 2023, The Wall Street Journal reports.
- The law’s vagueness has created some doubt about its implementation and the success it will have in helping these industries get off the ground.
Why it’s Important
There is alot of vaguery surrounding the Inflation Reduction Act. The bill was signed to help calm runaway inflation during the summer while adding $433 billion to the Congressional budget. The spending recipients haven’t been named, and no cap exists to limit the spending to the prescribed number. A Credit Suisse estimate put the final cost over $800 billion, The Journal reports.
As we previously reported, it is unlikely that the Inflation Reduction Act will succeed in its titular mission of reducing inflation. However, its effect on clean energy remains to be seen.
The bill’s effect could be helpful for clean-energy industries—specifically related to wind, solar, green hydrogen, nuclear, and carbon capture—who stand to raise billions of dollars in potential revenue. Much of the anticipation and trading is based on hopefuls at the moment, though—with the industry making “optimistic assumptions” about how the legislation will play out, according to Standard Solar president Scott Wiater.
“The ultimate financial impact of the Inflation Reduction Act depends in part on that provision creating a new market for tax credits and making it easier for renewable developers to raise money,” says The Journal.