The Inflation Reduction Act (IRA) was passed in August 2022 and offers to support decarbonisation for corporations of all sizes. Josh Griffin, co-founder and chief policy officer at nZero discussions its implications.
The Inflation Reduction Act funds investment in clean energy, driving change in many sectors.
It matters not simply because of the funding provided, but because of the certainty it provides both investors and local policy makers in terms of the direction of travel.
The provisions of the IRA should take the US nearly all the way to its previously stated target of 45% reductions in emissions by 2040.
From a climate standpoint, the most important element of the bill is the sizable investment in clean energy. While the exact emissions reduction numbers are still to be determined, the IRA Bill represents a giant step forward for our country towards meeting our emissions targets and keeping ourselves accountable to our progress in meeting those targets.
Further, it invigorates the capacity to mobilise and energise industries and policy makers to create innovative solutions. The totality of the bill and its approach of including a variety of industries beyond the energy sector will have serious impacts in engaging a wide range of players who are invested in the outcomes of the bill’s measures.
Most Impactful Reductions
The majority of the emissions reductions will be caused by the shift to more renewable energy and away from fossil fuels. The bill calls for more energy sourced from solar, storage, and wind, and takes this a step further by expanding demand and infrastructure for the widespread adoption of electric vehicles (EV).
Electric Vehicles (EVs)
The IRA will increase that customer demand for EVs with its Sec. 13401. Clean Vehicle Credits, while simultaneously fueling the manufacturing process with the Refueling Infrastructure Tax Credit (30c) and Commercial Electric Vehicle Tax Credit (45W),
plus specific requirements attached to tax credits to ensure increases in domestic
manufacturing.
Private sector investment
In addition to the renewable energy support, the bill also offers major funding to boost private sector investment, allowing essential technologies like nZero to continue growing to serve as key resources for organizations who are seeking out accurate data to inform their operational decisions on the path to sustainability.
Of these, the Greenhouse Gas Reduction Fund, Energy Infrastructure Reinvestment Financing Program, and Department of Energy Loan Programs are set to translate $38.7 billion of direct federal spending into $385 billion of private sector investment.
Biofuels and sustainable aviation
The bill also addresses emissions with its focus on biofuels, sustainable aviation fuels (SAF), and methane reduction. In nZero’s work with an aviation client, we have noticed measurable results as our client made the shift to SAF and see major potential in this reduction measure.
It is a very wide-reaching and comprehensive bill, and because of this, we expect it will have very large and lasting results in reducing emissions. The work being done within nZero’s dedicated agribusiness unit involves deep research into biofuels, as we recognize it is a critical component of both the agricultural supply chain and the industry’s efforts to reduce carbon emissions.
Climate-smart agriculture
Given our dedicated work within the agriculture industry, we have a firsthand look at the many climate smart practices and innovative tools being deployed by producers and agribusinesses, and the bill’s attention to these resources will help champion renewable fuels to ultimately support American farmers and farm communities.
Perhaps the most important part of the bill is that it is done in the context of a partnership; at the end of the day, these measures to reduce emissions are all the things the majority of this country wants to see happen. We are all aligned in striving for these goals, and now the bill has given us strong and steady direction forward in taking action.
Spurring Local Government Action
Momentum drives the climate technology space. It fuels us to work against a seemingly
insurmountable crisis, to continue problem-solving and innovating in order to build the solutions of the future. Momentum in response to demand and excitement for our technologies is increased and supported by the IRA Bill’s passing.
Across both public government policy and private technological advances, we expect the momentum and excitement caused by the IRA’s passing to energize local climate policy work and catalsze innovation in the private sector that will make these things possible.
This local government work is well under way, and many local municipalities can serve as a blueprint for those taking action as a result of the IRA’s movement. For example, California is phasing out internal combustion engines in order to encourage a shift to hybrid, and ultimately fully electric models.
nZero has been working with The City of Reno and Washoe County to develop their own carbon reduction roadmaps, taking their progress to date into account and
weighing the impacts of next steps, informed by nZero’s 24/7 data.
While it outlines large federal policy, the IRA is the kind of bill that will help local governments meet their individual goals as well, providing necessary momentum to inspire their own policies.
With this federal bill, plus the ongoing work of role model states, we expect many more states to follow suit and take a more active role in developing their own carbon and climate policies.
Spurring Private Industry Tech Innovation
On the private industry side, there is no doubt that the IRA bill will stimulate many new
technologies and industries that we can’t even yet imagine. While this bill doesn’t directly dictate the market, it certainly engages it, so private capital will flow and deliver these projects efficiently and timely.
The availability of capital to respond to the bill’s demand for renewable energy and emissions reductions is robust. This bill will push us to develop optimal manufacturing processes for EVs and build more renewable resources for those charging structures, for example, and will dictate that we refine our processes in order to meet this new
demand in the most efficient manner.
In this way, the IRA stands as not just policy, but also the impetus within the markets, driving many private companies to reach for more and to continue developing exciting and impactful new sciences and products. From our standpoint as a climate technology platform, one of the most exciting outcomes of this bill will be the incredibly inventive and creative technological advancements that it spurs.
Our industry is evolving and growing constantly, with a new technology emerging daily to meet our adjusted climate needs, and the bill incentivises and encourages this creativity in the climate technology space.
Measurement
Of course, if you’re going to create and fund these sustainable changes, you’ll need to quantify them, which is where technology like nZero’s plays such an essential role in verifying results step by step.
Before the bill existed, we have been helping our customers see their reductions in real time so that they can understand which measures are the most meaningful, and the
need for this monitoring and data will only increase as a result of the bill. While the estimated emissions reductions are promising, we all need to remain accountable to those numbers and can only do so with accurate, granular emissions data, because you can’t change what you can’t measure.
The bill’s effects won’t happen overnight, nor will they be guaranteed; instead, they must be constantly and closely measured to ensure their impact and expected timeline.
With stakes as high as saving our planet, we can’t rely on industry averages or blunt measurement tools to keep us on track – granular, 24/7, highly accurate data is a necessity and will be an added tool in helping us reach our goals and hold ourselves accountable.
Implications for the Offset Market
The outlook on carbon offsets remains the same, which is this: the best offset is the one you never have to use. When and if you approach offset purchases, you must do so with an accurate understanding of your own data and needs.
If you are not measuring the impact of your own actual activities, you have no way of knowing whether your offset purchases are in any way approaching the true impact of your carbon activities.
The first priority is to obtain accurate measurements, in order to inform these subsequent actions, and this remains the same in the wake of the IRA’s passing and into its implementation.
