The Inflation Reduction Act invigorated US clean energy plans – can it stir a stronger climate response globally?

Some notable things have happened recently in Pataskala, Ohio. The local Rotary Club selected a 9-year-old as “Junior Grand Marshal” of an annual parade. The mayor got a raise for the first time in a decade. And plans moved ahead to build the biggest solar-panel factory in US history.

The project is part of a vast reindustrialization effort, powered in large part by clean energy and a deceptively named law passed slightly more than a year ago.

The Inflation Reduction Act spurred plans for more than 100 new or expanded clean-energy manufacturing facilities in the US during its first 12 months of existence, representing about $80 billion in fresh investment. Goldman Sachs estimates that in less than a decade, it’s possible the country could be pouring $290 billion annually into the “re-invention” of its energy system thanks to the law.

Of course, those numbers are just projections. For now.

The IRA’s first major hurdle will be moving from encouraging headlines to actual domestic projects. The second will be inspiring more competitive climate plans in other countries, in ways that hasten a timely global energy transition.

For some places, this means coming to terms with legislation that initially stirred anxiety. Much of the funding the IRA makes available must go into products at least partly made in the US, giving it a protectionist slant. And the government-centered approach to building industries may seem out of sync for a country that rode free-market orthodoxy to Cold War victory, then drove decades of relentless globalization.

But in wartime, governments of all stripes tend to apply a heavier hand to economies. And the fight to preserve existence as we know it in the face of climate change might be a conflict worthy of full mobilization.

That logic appears to have eventually resonated abroad. Or at least, stirred a desire to keep pace.

About five months after the IRA was passed in the US, the European Union’s Green Deal Industrial Plan emerged. By the year 2030, it’s supposed to have at least 40% of the annual need in the EU for net-zero technologies like solar panels being met domestically.

“We can’t just sit there and watch this evolve,” Germany’s economy minister said of the IRA, while pointing to efforts in his country to ramp up battery cell production and build fuel cell components. In France, a tax credit for investing in the production of things like electric heat pumps and wind turbines was introduced in May. And in Canada, tax credits now slated for clean-energy production function in ways similar to what was enshrined in the US law.

Every effort matters. In order to stop global warming short of the meaningful guardrail of 1.5°C, the rate of new wind- and solar-energy installations needs to become about five times faster in the next seven years, according to a study published in June.

As the one-year anniversary of the IRA approached last month, US Treasury Secretary Janet Yellen described it as an example of “modern supply side economics" – designed not just to spur growth, but to do so in a way that builds a more sustainable foundation for the future.

The law may be domestically focused, but its impact wouldn’t be possible without interest from abroad. That planned solar factory in Pataskala, Ohio, for example, is a joint venture with a Chinese manufacturer. It’s expected to deliver power to a million homes.

South Korean companies account for more than a third of all manufacturing investment planned under the IRA; their projects include a $5 billion electric battery plant and a $2.5 billion solar panel factory, both in the state of Georgia.

All told, the IRA is being credited with booking nearly 70,000 new jobs, geographically spread more than evenly across the political spectrum – including in districts represented by lawmakers who voted against it.

Ultimately, the law’s designed to nudge the country towards a significant reindustrialization following decades of disappearing manufacturing jobs. In the state of Ohio, more than one in five workers were employed in manufacturing in 1990; that slipped to 12.5% by 2019.

Between 1990 and 2007, an estimated 1.5 million US manufacturing jobs were lost specifically due to trade with China.

That country has steadily built a comfortable lead in areas of clean-energy technology like solar and wind. By 2021, China accounted for 63% of global solar employment. Its 2.7 million jobs in the sector far surpassed the combined 523,000 in the US and Europe.

As the US ramps up its own related efforts, and other countries respond in kind, the widely shared hope is that each region finds a way towards healthy competition – which would be more beneficial to everyone than decoupling in order to try to gain a strategic advantage.

Soon after the IRA’s passage, officials from the US and China were frankly tweeting at each other over its implications. If that kind of energy is channeled into constructive rivalry, prospects for our collective clean energy future brighten.

But we’re not there yet.

The IRA could still run into political obstacles at home, for one thing.

And even if it succeeds, it may leave ample room for further action. According to a study published earlier this year, the law could help the US slash its emissions by as much as 48% by 2035 (from 2005 levels).

That’s still shy of the 50% cut by 2030 that the country has committed to.

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