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Inflation Reduction Act - weapon against climate change or protectionism?
3/14/2023 ~ 4:53:51 PM

๐—ง๏ปฟ๐—ต๐—ถ๐˜€ ๐—ฎ๐—ฟ๐˜๐—ถ๐—ฐ๐—น๐—ฒ ๐˜„๐—ฎ๐˜€ ๐˜„๐—ฟ๐—ถ๐˜๐˜๐—ฒ๐—ป ๐—ฏ๐˜† ๐—œ๐—ป๐˜๐—ฒ๐—ด๐—ฟ๐˜‚๐—บ ๐—˜๐—ฆ๐—š ๐—ฎ๐—ป๐—ฎ๐—น๐˜†๐˜€๐˜ ๐—ž๐—ถ๐˜ ๐— ๐—ฎ๐—ฟ๐—ธ๐˜€.

Signed into law in August 2022, the Inflation Reduction Act (IRA) has been hailed as โ€œthe most significant climate legislation in U.S. historyโ€ according to the US Environmental Protection Agency (

The main intention of the IRA is to catalyse investment in clean energy: the act itself includes $370b of energy-related spending; two of the main beneficiaries of this will be clean energy and electric vehicle (EV) companies.ย ย 

The funds are to be delivered through tax incentives, grants, and loan guarantees. According to McKinsey, US solar, wind, heat pumps and EV industry all stand to gain from production and investment tax credits of $30 billion for manufacturing (ย 

W๏ปฟe looked into 4 companies that are starting to benefit from the IRA:

๐—ง๐—ฒ๐˜€๐—น๐—ฎ - On 22nd February, Tesla announced a shift inย cell production from Germany to the US after considering incentives available through the IRA, making it one of the first firms to declare a strategy shift prompted by the law. [1]

๐— ๐—ฒ๐—ฟ๐—ฐ๐—ฒ๐—ฑ๐—ฒ๐˜€-๐—•๐—ฒ๐—ป๐˜‡ ๐—š๐—ฟ๐—ผ๐˜‚๐—ฝ - Mercedes are now in the process of building 10,000 fast-charging points in North America from 2023, targeting 2,500 charging points at 400 locations across most U.S. states and Canada by 2027. [2]

๐—Ÿ๐—ถ๐—ป๐—ฑ๐—ฒ - According to a recent Reuters report, Linde has estimated the total investment opportunity for the company in the United States alone could exceed $30 billion over the next decade. [3]

๐—™๐—ถ๐—ฟ๐˜€๐˜ ๐—ฆ๐—ผ๐—น๐—ฎ๐—ฟ - The company has recently announced a big expansion, planning to invest up to $1.2 billion in scaling production of American-made photovoltaic (PV) solar modules. The investment is forecast to expand the companyโ€™s ability to produce American-made solar modules for the US solar market to over 10 gigawatts (GW) by 2025. [4]

๐—ง๐—ต๐—ฒ ๐—ฟ๐—ฒ๐—ฎ๐—ฐ๐˜๐—ถ๐—ผ๐—ป ๐—ณ๐—ฟ๐—ผ๐—บ ๐˜๐—ต๐—ฒ ๐—˜๐—จ ๐—ฎ๐—ฐ๐—ฟ๐—ผ๐˜€๐˜€ ๐˜๐—ต๐—ฒ ๐—ฝ๐—ผ๐—ป๐—ฑ ๐—ต๐—ฎ๐˜€ ๐—ฏ๐—ฒ๐—ฒ๐—ป ๐—น๐—ฒ๐˜€๐˜€ ๐—ฒ๐—ป๐˜๐—ต๐˜‚๐˜€๐—ถ๐—ฎ๐˜€๐˜๐—ถ๐—ฐ.

European officials have complained that the IRA; which โ€“ amongst other things - limits tax credits to EVs assembled in the United States, and violates U.S. commitments not to subsidise domestic industries or discriminate against foreign ones.ย ย 

There are genuine fears that it could lure businesses away from the bloc with generous tax breaks - and there is no smoke without fire.ย ย 

The CEO of Enel in December publicly claimed the IRA is more efficient than EU aid to support domestic production of energy sector components.ย ย 

The response by the European Commission has been to unveil its Green Deal Industrial plan, signifying a potential relaxation of state aid towards clean tech, although this is struggling to get ubiquitous support among all member states.ย  The EU has warned against a subsidy race but has welcomed the commissionโ€™s response to the IRA.

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