The Inflation Reduction Act (IRA) will allow the U.S. to take a major step towards its long term climate goals, but more action is needed to stimulate the trillions of dollars in investment needed to deliver a net zero emission economy by 2050.
That is the conclusion of the latest New Energy Outlook: US report from BloombergNEF (BNEF), which details how the U.S. government has allocated $369 billion of support to clean energy projects during the first year of the IRA, primarily through tax credits and direct subsidies for wind, solar, battery, electric vehicle (EV), carbon capture and hydrogen projects.
However, BNEF warned that clearer and stricter policies will be necessary to deliver net zero emissions by 2050, with modeling suggesting current incentives would result in a 40 percent drop in energy-related emissions by 2035 and a 55 percent cut by 2050 against a 2021 baseline. Such emissions reductions would represent a major transformation of the U.S. energy system, but would fall short of the climate targets set by the Biden White House.
"The IRA has dangled some very attractive carrots that will get the economy moving, but to make it move fast enough, the U.S. will need a few more sticks," said Tom Rowlands-Rees, head of North America Research for BNEF.
Derrick Flakoll, policy associate for North America at BloombergNEF, hailed the IRA as a "multibillion-dollar down payment on decarbonization," but he stressed that further policies would be needed to stimulate the levels of investment needed to reach net zero emissions.
The report details three pathways for the U.S. to hit net-zero emissions by 2050 and rapidly scale up investment over the next decade from the $141 billion invested in energy transition technologies in 2022 to nearly $10 trillion cumulatively by 2032.
The IRA's impact on bridging this financing gap depends on the extent to which the incentives delivered through the legislation can trigger additional private sector investment in clean tech projects.
BNEF's modeling suggests the cheapest way for the U.S. to reduce emissions in line with its goals would focus on the scaling up of investment in wind and solar power, along with low-carbon dispatchable electricity technologies.
Under such a net-zero scenario, the U.S. would need to invest $30
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