The US Inflation Reduction Act and the European Green Deal

The US Inflation Reduction Act (IRA) and the European Green Deal.

The US Inflation Reduction Act and the European Green Deal

The IRA and the European Green Deal

Last year, in the summer of 2022, the United States made international headlines with passage of the Inflation Reduction Act (IRA), a federal law that seeks to curb inflation through, among other initiatives, investing in renewable, domestic energy.

 Praised as both a boon to the economy and a win for environmental action, the IRA has also been criticized by other countries for what they considered protectionist tendencies, which could potentially harm EU exports to the US. This post will go over the details of the Act, and discuss the most common criticisms, from both within the United States and around the world. 

In Europe, the Green Deal offers a plan to reach Net Zero by 2050. Introduced in 2019, it provides a roadmap for different tenets of sustainability, and outlines when certain targets should be met. Different acts and proposals, including the Green Deal Industrial Plan, aim to enhance and support the actions and targets of the Green Deal, and several are still in discussion. 

What does the IRA cover?

The burning of fossil fuels for energy production is one of the leading contributors to greenhouse gas emissions, exacerbating global warming and its associated consequences.The IRA allocates funds and implements tax credits for companies investing in and developing renewable energy. These tax credits not only reduce the tax burden for investors but also promote the expansion of sustainable energy developments.

Recognizing the importance of technological advancements in renewable energy, the IRA also incorporates significant funding for research and development. This funding is specifically allocated to institutions, universities, and private research organizations dedicated to advancing renewable energy technologies. By supporting innovative research, the act aims to accelerate technological breakthroughs and make renewable energy more efficient

Renewable energy in all communities 

A key component of the IRA is a clean energy investment tax credit of up to 30%. In low-income communities, an additional 10% bonus credit is provided. Credit is also available for projects that take place in areas where coal mines have closed. 

The Energy Efficient Commercial Buildings Deduction has also been expanded, which means that a building owner’s deduction will increase as cost savings resulting from energy efficiency investments increase. 

Critique of the Inflation Reduction Act (2022)

A major criticism of the IRA is the impact on the economy. A lack of workers with the skills necessary to construct and maintain renewable projects, coupled with an unforgiving labor market, will likely add to development costs. 

On a global scale, representatives from the EU and other countries expressed concern that the IRA is too isolationist, and will decrease US investment in international renewable projects. 

What does the European Green Deal cover?

The European Green Deal, which was launched in 2019, refers to a package of policies all with the same goal: achieving a green transition and a net-zero target by 2050. 

Critique of the European Green Deal

Despite widespread support for the Green Deal, it is not without criticism. Some entities, like Greenpeace, argue that the European Green Deal does not go far enough, allowing the rate of climate change to proceed at an unmitigated rate. Others, such as some far-right political parties, believe that the Deal is too far-reaching, and will lead to societal unrest. The latter opinion neglects to understand that without concerted efforts to address climate change, more and more communities will become increasingly vulnerable to natural hazards and shrinking opportunities, opening the door for hardship and discontent. 


Critics warn US Inflation Reduction Act could keep prices high

EU’s response to the US Inflation Reduction Act (IRA)

European Green Deal

Inflation Reduction Act Guidebook | Clean Energy | The White House

Inflation Reduction Act of 2022 | Internal Revenue Service

The Green Deal Industrial Plan

The Inflation Reduction Act and U.S. Business Investment

FACT SHEET: How the Inflation Reduction Act’s Tax Incentives Are Ensuring All Americans Benefit from the Growth of the Clean Energy Economy | U.S. Department of the Treasury.

The European Green Deal sets out how to make Europe the first climate-neutral continent by 2050, boosting the economy, improving people's health and quality of life, caring for nature, and leaving no one behind