Just past the two-year anniversary of the Inflation Reduction Act, states have captured a median of seven% of the Biden administration’s signature climate laws potential funding opportunities.
That is based on an Aug. 13 report from clean energy think tank RMI, which adds that the small number “is sensible” since use of the tax credits that provide the majority of the federal support is “just getting began.”
A separate report estimates a complete of $78 billion in federal investment since passage of the IRA on Aug. 16 2022. Just about all of that has been in the shape of tax credits.
Private investment over the identical period was 5-6 times larger, based on the report, from Rhodium Group and MIT’s Center for Energy and Environmental Policy Research. Private investment, which incorporates business and consumer investment, totaled $493 billion, a 71% increase from the two-year period preceding the laws. Rhodium and MIT-CEEPR have created the Clean Investment Monitor, which tracks investments in manufacturing and deployment of climate technologies within the U.S.
California and Texas, leaders within the clean energy economy, topped the states for probably the most amount of tax credits, the reports found. California has claimed $13 billion — 11% of its total potential — and Texas $9 billion, or 6% of its full funding potential, RMI said. Nevada, then again, has already captured 54% of its full potential tax credits.
The IRA allocates billions in the shape of tax credits, grants and loans over 10 years to support clean energy projects. It created or substantially modified 24 different incentives within the federal tax code, a dozen of which can be found for the primary time to non-tax paying entities like cities and states as elective- or direct-pay tax credits. Tax credits can cover anywhere from 6% to 70% of project costs.
Cities and states have been somewhat slow to choose up on the tax credits, with some within the muni market pointing to confusing and sophisticated regulations and others pointing to a general wariness of the federal government in light of political headaches which have dogged Construct America Bonds. Final rules for the tax credits weren’t released until March.
Federal investment in clean energy is prone to be a campaign issue between former President Donald Trump and Vice President Kamala Harris. No Republican voted for the IRA, and Harris forged the tie-breaking vote within the Senate. Trump has vowed to dismantle key provisions of the laws, calling it overreach by the Biden administration whose provisions profit China.
However the law has gained some traction amongst Republicans, especially people who have seen significant projects launched of their districts. That offers the IRA “endurance,” said John Podesta, Biden’s senior adviser for clean energy innovation and implementation, at an Aug. 13 speech on the IRA’s two-year anniversary.
Republicans benefiting from the Inflation Reduction Act’s investments into clean energy projects gives the climate law “endurance,” said John Podesta, Biden’s senior adviser for clean energy innovation and implementation.
Bloomberg News
“In line with Climate Power, 58% of the brand new clean energy jobs created because the IRA passed are positioned in Congressional districts represented by Republicans,” Podesta said.
He noted that in July, 18 House Republicans wrote a letter to Speaker Mike Johnson, R-La., urging him to not repeal the IRA’s energy tax credits.
“Prematurely repealing energy tax credits, particularly those which were used to justify investments that already broke ground, would undermine private investments and stop development that’s already ongoing,” the letter said. “A full repeal would create a worst-case scenario where we’d have spent billions of taxpayer dollars and received next to nothing in return.”
Clean investment has flowed to all 50 states throughout the post-IRA period, the Rhodium/MIT report found.
In absolute terms, many of the dollars were spent in California at $94 billion, Texas at $69 billion, Florida at $29 billion, Georgia at $22 billion, and Arizona at $18 billion.
By 2030, RMI estimates the federal government will top $1 trillion. Through June, the federal government has allocated $66 billion, the group said.
“States have a protracted option to go in reaching their full investment potential,” RMI said in its report. “But in the event that they deal with the sectors with probably the most opportunity, they will increase their possibilities of winning the race to the highest. Use of the tax credits is just getting began, so it is sensible that these numbers are (for just about all states) low without delay. But most states are also not on course to attain the complete potential, and more work shall be needed to appreciate it.”