The US Inflation Reduction Act 2022 (IRA) is a comprehensive piece of legislation that aims to tackle the issue of inflation in the United States. The act encompasses a range of measures designed to reduce inflation, including tax cuts, spending reductions, and regulatory reform.

In addition to its focus on inflation, the act also includes provisions related to carbon reduction as well as subsidies and tax breaks across of a range of industries including pharma, transport and manufacturing. These provisions aim to support the United States' efforts to reduce its carbon footprint and address the threat of climate change.

The scope of the act is wide-ranging, reflecting the fact that inflation is a complex issue that affects many areas of the economy. The act includes measures such as increasing funding for renewable energy and green technology research and development, providing tax incentives for individuals and businesses that invest in renewable energy and energy efficiency improvements, and implementing regulations that encourage the use of green technologies and discourage the use of fossil fuels.

Early Impact on US Carbon Reduction Journey

Whilst even the most enthusiastic American Democrat will argue that it is perhaps too early to tell if IRA is indeed tackling inflation, the early signs are promising. Of course IRA will never be responsible in isolation for driving inflation down, but no doubt economists on both sides of the political divide will be watching and analysing these numbers and other economic indicators through their own prisms in the coming months.

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In terms of the early impact of IRA on the country's carbon reduction journey we can point to some indications that it has indeed been positive. The act has provided funding for a number of carbon-cutting initiatives, including investments in renewable energy such as wind and solar power, grants for research and development of new green technologies, and funding for energy efficiency improvements in buildings and homes.

These initiatives have already begun to yield results. For example, the investment in renewable energy has led to a significant increase in the amount of wind and solar power generated in the United States. Additionally, the grants for research and development have led to the creation of new, more efficient green technologies.

The early impact of the act on the country's carbon reduction journey is a promising sign that the US is taking meaningful steps towards addressing climate change. By investing in renewable energy and green technology, and funding research and development, the country is positioning itself as a leader in the fight against climate change.

Suggestions for future climate policy in the US

While IRA has already had a positive impact on the country's carbon reduction journey, there are ways in which it could be used to even greater effect in the future. We suggest

• Increasing funding for tangential and complimentary technological R&D. As an example, we have previously pointed out the use of graphene in H2, the gains the material would make for fuel cell efficiency, and the lack of a cost effective process for the mass production of high quality graphene production. By increasing the focus on these promising areas of research, the US might be able to accelerate the commercialisation of promising new technologies that will help to reduce carbon emissions.
• Focus on it’s energy infrastructure. Can it cope with the increased sources of electricity that are emerging? We have seen in the UK how the long term lack of investment in the energy sector in the UK has led to a bottleneck in connecting new energy supply to the existing grid architecture. Ensuring that its infrastructure is able to absorb energy from new solar and wind arrays is a no-brainer.
• Providing tax incentives for individuals and businesses that invest in renewable energy and energy efficiency improvements: By providing incentives, the US can encourage more individuals and businesses to invest in renewable energy and energy efficiency improvements, which will help to further reduce carbon emissions.
• Implementing regulations that encourage the use of green technologies and discourage the use of fossil fuels: By implementing regulations, the United States can incentivize the use of green technologies and discourage the use of fossil fuels, which will help to accelerate the transition to a low-carbon economy.

It’s still early days, but we see a lot of potential that IRA will lead to increased climate-focused activity in the US economy. Indeed it has been estimated that almost 150,000 clean energy jobs have been created since IRA was enacted. These jobs are important. Not just for the economy, but also in building some semblance of unity around IRA. Even the most right-wing of the Republican Party representatives, whilst quibbling about the “green agenda” welcome the jobs in their States.

We’ll be watching, measuring, comparing and assessing the successes and failures of IRA in the following months.