The U.S. Inflation Reduction Act (IRA), signed into law in August 2022, is poised to accelerate a fundamental rebuild of U.S. energy infrastructure and drive significant reductions in carbon emissions.
It aims to tackle rising prices by incentivising investment in clean energy while reducing the federal deficit via a new corporate minimum tax rate, more effective tax enforcement, and measures to cut the cost of prescription drugs.
In terms of numbers, the IRA is expected to channel more than $360bn towards energy security and climate-positive technologies.
The U.S. tax system has long included incentives for green infrastructure, providing credits based on investment value (investment tax credits, or ITCs) and on production/generation (production tax credits, or PTCs). Prior to the IRA, both types of credit were phasing down and were more limited in scope.
Law incentivises clean energy projects in low-income areas
The IRA extends existing ITCs and PTCs for eligible projects that start construction before January 1 2025, and introduces new incentives that cover a broader range of clean technologies including nuclear power, green hydrogen, carbon capture, electric vehicles and charging infrastructure, and a mix of storage systems.