Two years after the implementation of the Inflation Reduction Act (IRA), states have only captured an average of 7% of the potential funding opportunities provided by the Biden administration’s signature climate legislation. This low percentage is primarily due to the fact that the utilization of tax credits, which serve as the main source of federal support, is still in its early stages. According to a report from clean energy think tank RMI, there has been a total of $78 billion in federal investments since the passage of the IRA in August 2022. The majority of these investments have come in the form of tax credits.
California and Texas, which are leading the clean energy economy, have been the top states in capturing federal tax credits. California has claimed $13 billion, representing 11% of its total potential, while Texas has secured $9 billion, equivalent to 6% of its full funding potential. In contrast, Nevada has already captured 54% of its full potential tax credits. The IRA has allocated billions in the form of tax credits, grants, and loans over a 10-year period to support clean energy projects. However, some cities and states have been slow to take advantage of these tax credits due to complex regulations and a general wariness of federal government involvement.
Federal investment in clean energy is likely to become a contentious campaign issue between former President Donald Trump and Vice President Kamala Harris. While no Republicans voted for the IRA, Harris cast the tie-breaking vote in the Senate. Trump has expressed intentions to dismantle key provisions of the legislation, arguing that they favor China. Despite initial skepticism from Republicans, the IRA has gained some support from those who have witnessed significant clean energy projects in their districts. The IRA has been touted to have “staying power” by John Podesta, Biden’s senior adviser for clean energy innovation and implementation, highlighting the creation of new clean energy jobs across Congressional districts, including those represented by Republicans.
According to the Rhodium/MIT report, clean investment has been distributed across all 50 states post-IRA implementation. California, Texas, Florida, Georgia, and Arizona have received the most significant investments in absolute terms. RMI estimates that by 2030, the federal government’s investments in clean energy will surpass $1 trillion. However, as of June, the government has only allocated $66 billion. States are still far from reaching their full potential in clean energy investments, but by focusing on sectors with the most opportunities, they can enhance their chances of competing effectively. The utilization of tax credits is still in the early stages, hence the current low percentages across the states.
The Inflation Reduction Act has had a notable impact on federal clean energy investments, with states at varying levels of progress in capturing the available funding opportunities. While there are political challenges surrounding the legislation, it has shown promise in generating clean energy jobs and driving private investments. The future outlook for federal clean energy investments is optimistic, with the potential for significant growth and development in the coming years.