The Inflation Reduction Act became law on Aug. 16. As he signed the bill, President Joe Biden called it “the most aggressive action ever, ever ever ever, in confronting the climate crisis.”
And he wasn’t wrong: The IRA, which authorizes nearly $370 billion in climate spending, made history as the single largest U.S. government investment to address the climate crisis. It’s also a potential game changer for tech such as electric vehicle charging stations, sustainable batteries, solar energy, and direct air carbon removal. It’s not the first time the government has spent big on climate tech—the 2009 stimulus bill, for example, included $90 billion to promote clean energy—but many experts believe this time around is different, thanks to more advanced solutions and private investment.
On Friday’s episode of What Next: TBD, I spoke with Pranshu Verma, who covers innovation for the Washington Post, about why the Inflation Reduction Act could be transformative for climate tech—and (maybe?) our planet. Our conversation has been edited and condensed for clarity.
Lizzie O’Leary: How exactly does the Inflation Reduction Act help climate tech?
Pranshu Verma: Tax credits and raw dollars for research development are the two main mechanisms through which you’ll see climate technology companies bolster and get funding for their solutions.
Because of scientific and process innovations, [climate tech] is still expensive, but it is [getting] cheaper, and there’s a more feasible business case. I think this is where the IRA comes in, where it spurs and jolts this next level of innovation to get [climate tech] cheaper and to get it to a place where it becomes feasible in the time scale that we need, which is right now.
Climate tech takes money—lots of it—right up front for research and development. And that, theoretically, is where this bill could make a difference, right?
Climate technology is not unlike pharmaceuticals and biotechnology. When you need to make a medicine, you have no idea if it’s going to work, so you need to pour a lot of money in, and it costs billions of dollars to make that first pill and then five cents to make every pill after. Climate tech is kind of like that. Until you figure out an energy solution that actually works, it takes billions of dollars to get there. But once you perfect it, then you can make it cheaper and cheaper. We’re still in that phase where we need a lot of money for these solutions. The investors are getting more and more lured in as the government is becoming more and more a partner.
Carbon capture systems essentially suck carbon out of the air, either actively, passively, or semi-passively. How does the IRA support carbon capture?
Before this bill passed, companies would get $50 per ton of carbon they captured out of the air as a tax credit from the government. To qualify for that tax credit, they needed to capture at least 100,000 tons of carbon out of the air—that’s a lot. Instead of that $50 per ton, now companies will get $180 for every ton of carbon they capture. To qualify for this credit, they no longer have to have a big project that’s 100,000 tons of carbon. Now, they can have something as low as 1,000 tons of carbon.
What other technology is the IRA boosting?
Nuclear fusion. It’s really interesting because nuclear fusion has always been considered the holy grail—an alternative source of energy that can be unlimited and clean. It’s scientifically been … not impossible, but very science fiction-y to consider it mainstream.
But in the past five to six years, you’ve seen nuclear fusion reach milestones with a few companies. The money that’s coming from this act—hundreds and hundreds of millions of dollars in continued research—is going to be what I think is needed to solve some of the last-minute research problems that these companies are having to bring [the technology] to scale.
And what about electric vehicles?
The bill makes billions in tax credits available to make electric vehicles cheaper for the consumer. It’s not just like, let me invest in the technology. It’s like, let me invest in making it cheaper to buy these solutions.
There’s a lot of stuff in the bill that feels kind of sci-fi or borderline impossible. Walk me through some of the wierdest examples.
The most experimental thing I’ve heard is called superhot rock energy. The Earth generates a lot of heat, and it’s theoretically limitless. We’ve harnessed the Earth’s heat before to make power, but it’s never been powerful and widespread enough to really make a dent. Now, scientists are trying to go deeper than anyone has ever gone before, to a point where the Earth reaches about 750 degrees Fahrenheit. They want to drill a hole all the way down there, pour and pump water, and then turn the water into a really potent, energy-filled steam, and pump that steam back up into the Earth’s ground, put it through a turbine, and make it a source of power.
The science actually isn’t the challenge here, it’s really the engineering. You have to go deeper than anyone’s ever gone.
We won’t really know if any of the tech jump-started by the Inflation Reduction Act is successful for at least a decade—and it might take even longer for it to bloom commercially. At the same time, there’s another criticism of clean tech: It doesn’t fundamentally alter the behaviors that led to global warming in the first place.
One of the big critiques of things like direct air carbon capture is that they are Band-Aids and don’t take enough carbon out of the atmosphere to make a significant dent in climate change. How much do these things move the needle?
That’s a great question, and it’s a complicated one because when you talk to critics of carbon capture, they say, “Well, all carbon capture is really doing is it’s letting me emit as much as I want, but then letting me create solutions to just take that stuff out of the air.” I’m not changing my underlying behavior. That said, for better or for worse, the government is relying on carbon capture to achieve upwards of 10 or 20 percent of net zero emission goals by 2050. In the strategy of the government, it’s a core component—but it gets a lot of critique because it’s seen as something that’s easy for industry to adopt because it’s just kind of throwing money at the problem.
If every dollar is precious, how much of those dollars should be sent to band-aid solutions versus spurring ground-up behavior change? That’s the tension the government has, because in actuality, carbon capture systems might be a little further along than some of the more behavior-change solutions.
We are now at the point where just individual action alone is no longer considered feasible to stop the world from warming. Systematic, government-level change is what’s going to move the needle. And so this is potentially moving the needle, but is it moving it enough? Is it going to create an environment that makes it easier to pass more ambitious legislation in the future? Maybe this is as ambitious as it’ll get, and then we’ll see 30 years from now whether it really did much. Or does it spur a culture of innovation on climate technology and create more bills that help us get toward progress?