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This week: Cheap green steel; mining crackdown; dealing with at-home document risk.
Welcome back. The Inflation Reduction Act is landmark clean-energy legislation that has propelled the U.S. from the back of the green pack. More than $40 billion worth of clean-energy investment in the U.S. was announced in the three months after the bill passed.
Its 274 pages contain a lavish menu of tax credits, grants and other incentives but also a lot of terms and conditions. Exactly what it all means is still being worked out by the likes of the Internal Revenue Service and the Treasury.
Which trading partners are considered to have a “free-trade” agreement under the act? What exactly qualifies under the Act’s numerous made-in-America provisions: is assembling a battery locally enough, or must its components be made locally, or must its minerals be mined in the U.S.? A huge number of details need to be finalized before businesses can be certain they will be able to collect the generous incentives.
As seen with the European Union’s green deal, project announcements don’t become actual investments until the fine print is known. EU officials are still ironing out important details, and meanwhile companies that were planning new projects in the EU are now eyeing the U.S. instead.
That shift of investment has created another challenge to implementing the IRA. Friendly nations like Britain, Japan and those in Europe want their local manufacturers to be eligible for at least some IRA incentives and if not, they are threatening to offer competing incentives to keep their companies at home.
Those trading partners saw a glimmer of hope in a recent IRS ruling that some foreign-assembled fleet vehicles would qualify for IRA commercial EV incentives. However, Treasury Secretary Janet Yellen then said the EU and Japan might need new trade deals with the U.S. to qualify for some tax subsidies, while Sen. Joe Manchin is working hard to keep locally-made rules more strict. So, still quite a bit to be worked out then.
Another wrinkle is the little matter of implementing the act with a newly-installed Republican-led Congress. Although admittedly it has limited ways to intervene, not a single Republican voted for the act. However, opposition could be muted, given most of the big, clean-energy investments announced so far are set to be in red states, The Wall Street Journal's Phred Dvorak reports.
The recent flood of clean-energy project announcements offer a promising boost to the U.S. energy transition. However, Europe’s green deal demonstrates how important it is to work quickly to get the implementation right. It is very unlikely that any shovel will hit the ground until the CFO checks the fine print.
✍️ Let me know what you think.
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