On August 16, 2022—one year ago today—President Biden signed the Inflation Reduction Act (“IRA”), the most significant clean energy and climate law in U.S. history.  As we described in a series last summer, the IRA created durable tax credits and other fiscal programs to revitalize domestic manufacturing and incentivize clean energy solutions in nearly every sector of the economy. The IRA’s one year anniversary is a key opportunity to take stock of what the law has propelled and what is expected around the corner.

The IRA has already spurred significant investment in key sectors of the economy. The pace of this investment has led some forecasters to believe the IRA will now spur over $1 trillion in fiscal spending—far more than the $369 billion initially contemplated upon the IRA’s enactment. The American Clean Power Association reports that, over the last year, the private sector has announced investments of over $270 billion in domestic utility-scale clean energy—surpassing the total investment in U.S. clean power projects for the prior eight years.  The Solar Energy Industries Association counts over $100 billion in solar investments, and notes that solar manufacturing facilities announced in the last year will employ more than 20,000 workers. The White House has tracked private investments of more than $70 billion in U.S. manufacturing facilities to support the electric vehicle supply chain.  In spurring this investment, the law is structured to reward strong labor and environmental justice commitments.

Not only are the IRA’s benefits flowing to many sectors, but they are also distributed all across the country.  Politico reports that, of the 200 project locations announced through July, more than 60 percent are in Republican-held districts, even though no Republicans in Congress voted for the law.

The IRA’s climate benefits are equally notable. The Department of Energy estimates that IRA and the Bipartisan Infrastructure Law will cut U.S. greenhouse gas emissions by up to 41 percent below 2005 levels by 2030—reductions that are critical to meeting the Paris Agreement’s target of a 50 to 52 percent reduction.

The Administration has been hard at work implementing the law.  Last October, the Department of Treasury and the Internal Revenue Service (IRS) issued initial requests for comments regarding the IRA’s tax credits for clean vehicles, energy security, energy investment and production, elective payment and transfer of credits, and prevailing wage, domestic content, and energy communities requirements.  Since then, Treasury and IRS have provided some key implementation details, including:

  • Proposed regulations on the requirements for critical mineral and battery components for the Section 30D tax credit for clean vehicles (released in April)
  • Initial guidance for the domestic content requirements for owners of wind, solar, and energy storage projects (released in May), with a proposed rule to follow
  • Guidance on IRA Sections 6417 and 6418, concerning elective payment and transfer of credits (released in June)
  • Final regulations providing guidance on solar and wind facilities in low-income communities (released last week)

Treasury and IRS will provide further implementation details in coming months. Guidance or a rulemaking on Section 45V, the clean hydrogen production credit, was expected by August 16, though it now appears delayed.  Guidance on Section 45Z, the clean fuel production credit, is also forthcoming. And agencies will continue to implement grant programs across a range of sectors, from carbon capture to building materials.

EPA is also involved in implementation, as it oversees the $27 billion Greenhouse Gas Reduction Fund.  In June, EPA first announced a $7 billion Solar for All grant competition to expand solar investment in disadvantaged communities, and in July, it followed up by announcing a $14 billion National Clean Investment Fund program and a $6 billion Clean Communities Investment Accelerator program.  EPA must disburse the entire fund by September 30, 2024.

While both policy and market challenges remain—particularly to accelerate improving the power grid with additional transmission and interconnection nodes and to develop markets for transferable tax credits—the trajectory of the IRA remains transformational. Thus far, Congressional efforts to repeal IRA’s provisions have failed, and the law’s footprint in both red and blue states could make a full-scale repeal unlikely even in a future Administration.

Recognizing the IRA as a game-changer and lure for foreign green investment, the EU responded to the IRA by launching its own Green Deal Industrial Plan for the Net Zero Age. This unified U.S. and EU commitment to decarbonization will undergird calls for China and others to increase and accelerate their decarbonization commitments at COP 28.

We are tracking key developments as the Administration continues to implement this landmark law that has already inspired transformational changes in the global economy.

Print:
Email this postTweet this postLike this postShare this post on LinkedIn
Photo of Jayni Hein Jayni Hein

Jayni F. Hein co-chairs the firm’s Carbon Management and Climate Mitigation industry group.

Jayni joins the firm after serving as Senior Director for Clean Energy, Infrastructure & the National Environmental Policy Act (NEPA) at the White House Council on Environmental Quality (CEQ).

During…

Jayni F. Hein co-chairs the firm’s Carbon Management and Climate Mitigation industry group.

Jayni joins the firm after serving as Senior Director for Clean Energy, Infrastructure & the National Environmental Policy Act (NEPA) at the White House Council on Environmental Quality (CEQ).

During her tenure at CEQ, she oversaw the Biden Administration’s ambitious environmental and clean energy agenda, leading work on low carbon projects and climate disclosure, and advancing the successful implementation of the Infrastructure Investment and Jobs Act (2021) and Inflation Reduction Act (2022).

Jayni has extensive experience advising clients on climate and environmental laws and regulations, including the Clean Air Act, NEPA, and Endangered Species Act, as well as corporate decarbonization goals and reporting. Leveraging her senior government experience, Jayni advises companies and investors on compliance and strategy in light of increased scrutiny of corporate climate and net-zero commitments. She advises clients on the legal and policy issues relating to ESG and climate-related regulatory requirements, investor demands, global reporting frameworks, and strategic business opportunities.

In addition, as the former senior political appointee spearheading work to revise permitting regulations and issue guidance on climate change and greenhouse gas emissions, Jayni offers clients first-hand experience with infrastructure projects that require federal and state permits and authorization. She helps clients identify new funding opportunities and successfully advance clean energy and other infrastructure projects, including onshore and offshore wind, solar, hydrogen, transmission, semiconductor, and carbon, capture, and sequestration (CCS) projects.

Clients benefit from her ability to creatively troubleshoot issues, establish relationships across government, and engage policymakers, industry, non-profit organizations, and other key stakeholders in constructive conversations around climate change, environmental justice, and corporate decarbonization goals.

Photo of W. Andrew Jack W. Andrew Jack

Andy Jack is a broad gauge corporate and securities lawyer who leads multidisciplinary teams to help clients achieve complex business objectives and solve complex business problems.

Andy often serves in outside general counsel or senior strategist roles working closely on strategic matters with…

Andy Jack is a broad gauge corporate and securities lawyer who leads multidisciplinary teams to help clients achieve complex business objectives and solve complex business problems.

Andy often serves in outside general counsel or senior strategist roles working closely on strategic matters with C-suites and boards. His practice spans mergers and acquisitions, strategic alliances and joint ventures, venture capital, capital markets, securities compliance, corporate governance counseling, crisis management and dispute settlements.

With deep experience in the energy, diversified industrials, transportation, technology, sports and hospitality industries, much of Andy’s recent transactional and advisory work focuses on issues arising from global sustainability trends and ESG considerations, including the energy transition, vehicle electrification and advanced mobility.

Some examples of this trending work include:

  • Energy
    • Structuring and negotiating joint ventures to produce sustainable aviation fuels and to develop and deploy shared resources to respond to offshore well blowouts.
    • Advising on a carbon capture project funded by the U.S. Department of Energy.
    • M&A, finance, capital raising and commercial projects for solar PV panel suppliers.
    • Representing corporate offtakers in virtual power purchase agreements to procure renewable energy in support of wind and solar power projects.
    • Advising on U.S. public policy matters affecting the energy transition.
  • Vehicle Electrification and Advanced Mobility
    • A capital markets transaction for an industry leader in advanced mobility.
    • Multiple venture capital financing rounds for an electric truck manufacturer.
    • Joint venture restructuring and M&A transactions for EV battery manufacturers.
    • Collaboration agreements among vehicle electrification technology providers and OEMs.
    • M&A of advanced vehicle components suppliers and engineering service providers.
  • Other industries
    • Advising on board governance structures to address ESG and Sustainability oversight.
    • Assisting clients in developing voluntary sustainability reports and improving SEC reports and proxy statements to address these topics.
    • Responding to shareholder proposals on various ESG issues.

Andy co-chairs the firm’s multidisciplinary global Energy Industry Group and multidisciplinary Sustainability Solutions Initiative. He also serves as pro bono outside general counsel to the American Council on Renewable Energy and as a member of the World Resources Institute Global Leadership Council. With this background and experience, Andy frequently speaks at industry conferences and publishes on these topics. He also serves as an editor of the firm’s Inside Energy & Environment blog

He is Chambers-ranked in Corporate M&A & Private Equity, where clients report that Andy “gives practical advice with commercially reasonable solutions to problems.” He also has been ranked in Legal 500, both for Energy – Renewable/Alternative and Mergers & Acquisitions.

Photo of Tim Duncheon Tim Duncheon
Tim Duncheon is an associate in the firm’s San Francisco office and a member of the Environmental and Energy Practice Group. He represents clients in litigation, policy, and transactional matters involving greenhouse gas regulation, carbon markets, environmental review, ESG commitments, and other related
Tim Duncheon is an associate in the firm’s San Francisco office and a member of the Environmental and Energy Practice Group. He represents clients in litigation, policy, and transactional matters involving greenhouse gas regulation, carbon markets, environmental review, ESG commitments, and other related issues. Prior to joining Covington, Tim clerked for the Honorable William A. Fletcher of the United States Court of Appeals for the Ninth Circuit and the Honorable Charles R. Breyer of the United States District Court for the Northern District of California.