Green Energy Gold Rush: Federal Funding Fuels Boom Times in the US
In February, LanzaJet, a US company specializing in sustainable aviation fuel (SAF) production from ethanol, announced plans to construct a second, larger plant in the United States. The decision was influenced significantly by the Inflation Reduction Act (IRA), which offers substantial tax credits and support for clean energy initiatives. The IRA, along with the Bipartisan Infrastructure Law (BIL), aims to channel federal funds into clean energy development, reduce greenhouse gas emissions, and stimulate private investment, thereby fostering growth in green industries and job creation.
The IRA provides tax credits, loans, and loan guarantees over a 10-year period, with an estimated cost surpassing $1 trillion. These incentives are available for domestic production of clean energy and manufacturing equipment required for the energy transition, such as electric vehicles (EVs) and batteries. Consumers can also benefit from tax credits for purchasing EVs or installing heat pumps. Additionally, the BIL allocates government grants for research, development, and capital projects, with approximately $77 billion earmarked for clean energy technology projects.
Companies like Ascend Elements, specializing in EV battery recycling, have capitalized on BIL grants to support their expansion plans. Ascend Elements secured $480 million in grants, matched by private investment, to establish a new facility in Kentucky.
The impact of these policies is evident in increased investment in clean energy technologies. Federal investment in clean energy reached approximately $34 billion in the 2023 fiscal year, primarily through tax credits. Total clean energy investment in the US, including both public and private sources, soared to a record $239 billion in 2023, a 38% increase from the previous year.
The IRA has spurred investment in mature technologies like solar, EVs, and batteries while driving substantial growth in emerging climate technologies such as clean hydrogen and carbon dioxide capture. However, it has yet to boost investment in declining sectors like wind and heat pumps, though it may have prevented further decline.
The fate of these laws hinges on future political developments, particularly the US November elections. Repealing or amending the IRA would require Republican control of the presidency, Senate, and House. While some advocate for repeal due to fiscal concerns, others argue that the US cannot afford to backtrack on clean energy investments.
The US’s aggressive clean energy agenda is prompting competitive pressure on Europe to enhance its efforts. Some European companies are establishing facilities in the US to capitalize on tax credits, raising questions about Europe’s competitiveness in the clean energy sector.
As the US leads the clean energy transition, other countries are expected to reassess their strategies, potentially accelerating global efforts to combat climate change and promote clean energy innovation.
