The Inflation Reduction Act promised an unprecedented wave of clean energy growth. Two years later, the law’s impact exceeds even optimistic initial estimates, but climate damage is mounting. Here we summarize RMI’s diverse contributions to the law’s broad priorities.
In 2022, the United States passed the world’s largest climate bill. On August 16, the Inflation Reduction Act (IRA) turns two years old, and the nation faces a divided climate reality. On one hand, the impacts of climate change are rapidly worsening and stoking fears. On the other hand, clean energy has grown faster than ever, showing real progress toward the goal of decarbonizing the world’s energy and industrial systems. Below, we summarize RMI’s work related to the landmark bill.
Think about the second-to-last Sunday in July. It was the hottest day ever recorded on Earth. But Monday was even hotter, and July closed as the hottest month yet. Disasters costing billions are piling up both in the United States and around the world. In 2023, economic losses totaled $380 billion, the fourth consecutive year that insured losses from natural disasters exceeded the $100 billion mark.
Against this disturbing backdrop, the energy transition is happening faster than ever, thanks in large part to the IRA. While renewable energy prices continue to fall, the United States is accelerating the deployment of clean energy, spurring new industrial investment, and creating related jobs faster than ever before.
Initial estimates suggest the bill will include a total of $370 billion in government stimulus. Combined with elements of the earlier bipartisan infrastructure bill (see America’s Triple Climate Play, below), the United States is aiming to reduce climate pollution by 40 percent by 2030 compared to 2005 levels.
Two years later, the IRA is on track to attract far more investment than originally estimated. Because it is structured to use public money to spur greater private investment, investment is expected to be more than three times higher than original estimates.
Table in Datawrapper: https://www.datawrapper.de/_/FKJ3n/.
Given the multi-year timelines typically required to finance, plan and build everything from factories to grid infrastructure, investments are likely to continue for years to come. By 2030, RMI predicts that total potential public funding associated with IRAs will exceed $1 trillion.
Estimates of public and private funds already spent are consistent with this forecast. MIT and the Rhodium Group recently added together private and public spending to date on energy generation, clean manufacturing, and industrial emissions reduction projects, as well as consumer and business purchases of durable goods such as electric vehicles and heat pumps. Since the end of 2022, through the first half of this year, actual investments by businesses and consumers in related technologies and infrastructure have increased by 73 percent compared to the two years before the law, totaling $493 billion.
Thanks in part to regulations requiring minimum levels of domestic production, the IRA has set in motion a race to invest in clean energy not only at home but also among the world’s three largest economies. As quickly as China has moved ahead, the United States has also quickly entered the race with huge increases in investment.
Just a few years ago, this was considered an elusive goal, but today more and more economies are well on their way to fully decarbonizing their electricity sector. Today, three U.S. states generate more than half of their electricity from renewables; California, the second-largest U.S. state by electricity consumption, routinely runs on 100 percent renewable energy for hours at a time. At least 14 countries worldwide get almost all of their electricity from renewables.
Chart from the bottom of this page. https://rmi.org/the-race-to-the-top-in-six-charts-and-not-too-many-numbers/.
At the same time, new jobs are being created. According to Climate Power, since the IRA was passed, more than 334,000 jobs have been created through announced clean energy projects in nearly every state in the country, ranging from battery manufacturing and electric vehicle assembly to solar installation and building renovations. “A clean energy job can equate to an 8 to 19 percent increase in income,” Climate Power reports. With most of the IRA funds still unspent, additional new jobs are in the pipeline. In solar, for example—the fastest-growing form of energy in the U.S.—the country will need nearly half a million workers by 2033, including those building storage, more than double the number it needs today. But today, with unemployment at persistently low levels, solar companies report finding it “very difficult” to find skilled workers.
That’s why training new workers is so important. The Energy Coordinating Agency (ECA) in Philadelphia, which received more money from the IRA, offers a model for mobilizing new workers from historically marginalized communities. The ECA offers training in building insulation, solar panels and similar programs that are “virtually free” and targeted at low-income communities, says Jackie Robinson, the ECA’s lead trainer. “You’re gaining a good set of skills that can change your life and bring intergenerational prosperity to your family.”
