With the approach of the first anniversary of the US Inflation Reduction Act (IRA) plan, we can see that the green technologies landscape in the United States has undergone a major upheaval. A historic legislative package signed by the US president Joe Biden, the IRA has inaugurated a new era of investments and innovations in the renewable energies, electric vehicles and other key sectors in the ecological and energy transition.

Transformation of the clean technologies supply chain

In only one year, the IRA has marked a revolution in the supply chain for clean technologies. From renewable energies such as wind energy and solar energy to revolutionary technologies such as hydrogen and electric vehicles, the IRA has served as a catalyst for investments, job creation and the expansion of capacities. Among the most notable effects, we would note the development of national production capacity. Increasing numbers of companies are currently announcing major investments in order to transfer their production capacities to the United States.

The figures tell a convincing story. Close to 86 billion dollars in private investments (chart 1) have flowed into clean energy projects, triggering a multiplier effect throughout industries. The solar panels sector has seen the creation of 51 new production plants or expansion projects. Battery production has seen a similar boom, with 91 plants now involved in the production of batteries. Over 100,000 jobs linked to clean energy have been created, supporting local economies and favouring a greener future. This economic push underlines the potential of the IRA to stimulate economic growth while propelling the country in the direction of a sustainable energy future.

Industry giants such as Tesla, General Motors and Ford (chart 2, in billion dollars) have announced major investments in the production of electric vehicles, returning the United States to the lead in the race for the development of these vehicles. SK and Ford have set up battery production facilities in Tennessee and Kentucky in order to meet the growing demand for electric vehicles. LG Energy Solution’s investment in a battery complex in Arizona and Panasonic’s third battery plant in the United States located in Oklahoma illustrate the large-scale transition to cleaner technologies.

A changing geopolitical landscape

The IRA is influencing the complex geopolitics surrounding the new green technologies at a time when China and the United States, the two principal players in the race for clean energies, are competing to affirm their domination of this crucial sector. The IRA has boosted the competitiveness of the United States while at the same time reducing its dependence on foreign supply chains and is putting into question China’s established position as the principal supplier of key materials. The wave of US and foreign companies transferring their production to the United States is evidence of a more general trend triggered by the IRA, underlining the central role of this plan on the worldwide level.

The emphasis on localised production has additionally encouraged other economies to act. For example, Canada and the European Union (chart 3) are elaborating their own initiatives in order to remain competitive in the evolving green economy, without however any major success for the moment. The incentives contained in the IRA have triggered a broader reassessment of subsidy policies and competitive strategies.

Bipartisan support and future of the IRA

Critics have speculated on the fate of the IRA given the changing political winds. What would happen in case of a change in the administration in the United States? Nevertheless, the resiliency of the IRA is based on its tangible impact. In a remarkable manner, this legislation put forward by the Democrats has generated over two-thirds of its jobs and three-quarters of its investments in states leaning in favour of the Republicans (chart 4). While the political landscape can change, the economic advantages of the IRA being felt deeply in local communities, reflecting a long-term impact that transcends political divisions, thereby securing its future.

One year after its signing, the transformative effects of the IRA on the clean technologies supply chain are undeniable. From the overhaul of national production to its influence on global geopolitics, the IRA is establishing a new pathway for sustainable development. Even if uncertainties remain, one thing is clear: the IRA has established itself as a driving force for change, remodelling worldwide supply chains and laying the bases of a more resilient future. In this manner, the IRA is positioning the United Sates as leader in innovation concerning clean technologies while additionally contributing to a more sustainable future on the worldwide level.

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The US IRA one year later: the reshaping of green technologies production chains

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