Can the Inflation Reduction Act withstand election year politics?

A Republican win could threaten the clean energy-supporting Inflation Reduction Act. But fully undoing it would be complex and some Republicans even see the benefit of the Act on jobs, says Rahul Bhushan of ARK Invest Europe.

The Inflation Reduction Act (IRA) has significantly impacted the United States’ approach to clean technology and energy transition, catalysing over $100 billion in investments for domestic battery supply chain development under President Biden’s administration. This legislation, however, faces scrutiny and potential threats, especially with the political climate heating up during an election year.

Critics argue that the IRA’s incentives for electric vehicle (EV) production and clean technology advancement may disproportionately favour US interests while neglecting or penalising foreign entities, particularly in a geopolitically sensitive context with countries like China. The act’s specific guidelines, such as the 30D New Clean Vehicle Credit, aim to foster domestic production while imposing restrictions on the sourcing of critical minerals and battery components from abroad, thus shaping a more self-reliant and geopolitically secure technology landscape in the US.

The political contention surrounding the IRA, highlighted by figures from both Republican and centrist Democratic circles, underscores a broader debate on the balance between accelerating clean energy initiatives and maintaining economic and geopolitical equilibriums. Critics within the US political spectrum, including Republican Senator Lisa Murkowski, express concerns that the IRA might inadvertently support foreign industries over domestic ones, particularly in sectors like mining and extraction.

Possibility of repeal?
The possibility of altering or even repealing the IRA, as suggested by figures like former President Donald Trump and affiliated conservative groups, introduces significant uncertainty into the US clean energy and technology sectors. However, the complexity of the legislative and executive processes in the US makes a full-scale rollback of such a comprehensive act challenging.

Repealing the IRA would require a concerted legislative effort, demanding majority support in both the House and the Senate, a scenario whose likelihood is uncertain given the current political dynamics and upcoming elections. Alternatively, executive actions could reshape the IRA’s implementation, focusing on aspects such as federal loans, grants, and interpretive rules by executive agencies, which could redefine the act’s impact without needing to navigate the full legislative process.

Fate of ESG on “Trump” track

The economic and political stakes of significantly modifying the IRA are high. Republican-led states have benefited from the act’s clean energy investments, adding jobs and resources to their economies. The prospect of dismantling these benefits poses a dilemma for Republican lawmakers, balancing between party lines and economic interests in their constituencies.

The future of the IRA, particularly its clean energy provisions, hangs in a delicate balance, subject to the outcomes of the upcoming elections and subsequent administrative actions. While the act has undeniably propelled the US toward a more sustainable and autonomous energy future, its endurance and evolution will be a pivotal aspect of the nation’s economic and environmental strategy moving forward.

While the political and legislative landscape poses challenges to the IRA, its foundational impact on the US energy sector and its integration into various state economies make it a resilient piece of legislation.

The upcoming elections will indeed be a critical juncture for the IRA’s future, yet the complexity of fully undoing such legislation, coupled with its tangible benefits may safeguard its core components, ensuring continued investment and development in the US clean energy sector.



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