Made in America: how Biden's climate package is fuelling the global drive to net zero
This article is part of a series by The Conversation, Getting to Zero, examining Australia’s energy transition.
- This article is part of a series by The Conversation, Getting to Zero, examining Australia’s energy transition.
- Just over a year since US President Joe Biden signed the Inflation Reduction Act (IRA) into law, it’s becoming clear this strangely named piece of legislation could have a powerful impact in spurring the global transition to net zero emissions by 2050.
The IRA changes the landscape
- Passage of the IRA, in August 2022, ensured a swathe of green technologies would benefit from tax credits, loans, customer rebates and other incentives.
- The IRA is all carrot, no stick.
- To free-market economists who ask why government should invest in private sector industries, the answer is that the green energy transition is not natural.
- Read more:
Too hard basket: why climate change is defeating our political system
Industrial policy to protect the climate
- More than climate policy, it is industrial policy, replete with made-in-America provisions.
- Companies are more likely to obtain tax credits if they employ unionised labour, train apprentices and set up shop in states that are transitioning out of fossil fuels.
- Similarly, wind and solar projects will earn tax credits only if half of their manufactured components are made in America.
- Yet while America’s strongest allies are also alarmed by the challenge from China, they are disturbed by aspects of the IRA.
Why the IRA challenges Australia
- In Australia, before the IRA was legislated, the Morrison government provided a A$1.25 billion loan to Iluka Resources to fund construction of an integrated rare-earths refinery in Western Australia.
- But Australia risks being left behind in the race to build clean energy industries.
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The IRA, however, brings Australia many potential benefits.
- Australia can also build new industrial processes and supply chains so that we earn more from decarbonised metallic iron, aluminium and nitrogenous fertiliser.