The Inflation Reduction Act and Europe’s response
The US Inflation Reduction Act (IRA) will unleash billions of dollars of funding for climate and clean energy over the next decade. It is expected to significantly reduce the costs of producing clean energy, accelerate the development of emerging technologies and provide new investment opportunities. Europe has been under pressure to come up with a similar package - but how will it respond?
The IRA is expected to dramatically improve the economics of carbon-free energy, clean tech and electric vehicles in the US, and to provide a powerful catalyst to accelerate investment in emerging technologies.
We believe the magnitude and duration of the funding within the IRA will have a profound impact across US and global energy systems, industries and supply chains for years to come. Europe has historically been ahead in the clean energy race and will seek to maintain its position through the EU’s NZIA (Net Zero Industry Act). We expect the impact of the IRA to be manifested faster than the NZIA, given the straightforward nature of the tax credit provisions. Nevertheless, both will accelerate the deployment of clean energy and clean tech, which in turn will increase demand for private capital and provide more investable opportunities across Europe and the US, in our view.