Inflation Reduction Act (IRA, US)

The Inflation Reduction Act (IRA) was signed into law by President Joe Biden on 16 August 2022 after passing the US Senate on a party-line vote with Vice President Kamala Harris breaking the tie. Despite its name, the law is widely regarded as the largest single climate investment in US history, with the Congressional Budget Office initially scoring its energy and climate provisions at roughly $369 billion over ten years; later estimates from outside analysts (including Goldman Sachs and the Brookings Institution) projected significantly higher uptake because most incentives are uncapped tax credits.

Key climate and energy provisions include:

• Extended and expanded production and investment tax credits (sections 45 and 48 of the Internal Revenue Code) for wind, solar, geothermal, and other zero-carbon generation.
• A new clean vehicle credit (Section 30D) of up to $7,500 for qualifying electric vehicles, conditioned on domestic content and critical mineral sourcing rules that exclude "foreign entities of concern."
• Credits for clean hydrogen (Section 45V), advanced manufacturing (Section 45X), carbon capture (Section 45Q), and sustainable aviation fuel.
• Funding for the Greenhouse Gas Reduction Fund, methane fee on oil and gas operators, and Department of Energy loan programs.

The IRA also includes non-climate measures, notably allowing Medicare to negotiate certain prescription drug prices and imposing a 15% corporate alternative minimum tax.

Internationally, the law triggered friction with the European Union, South Korea, and Japan, which argued its domestic-content requirements amounted to discriminatory subsidies inconsistent with WTO principles. The EU responded in part with the Green Deal Industrial Plan and the Net-Zero Industry Act (2024). The IRA's longevity is politically contested: the second Trump administration and Republican-led Congress have moved to repeal or narrow several credits, making the law's long-term emissions impact uncertain.