How will the Inflation Reduction Act impact the clean energy sector? – The Average Joe
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    How will the Inflation Reduction Act impact the clean energy sector?

    victorlei

    August 9, 2022

    The Inflation Reduction Act is on its way to the House for voting (likely to pass) — before making its way to Biden for signing. The bill has major implications for the clean energy sector…

    $370B over 10 years will be available for climate and clean energy investments — estimated to reduce U.S. carbon emissions by 42% by 2030 — nearing Biden’s goal of 50%.

    Two-thirds will come from tax credits for generating electricity from clean energy sources, investing in renewable tech and clean energy manufacturing.

    The end result:

    • Speed up and lower the cost of clean energy project developments.
    • Lower electricity bills and prices on solar panels and electric vehicles.
    • Increase investments into the sector and create more jobs.

    The American Clean Power Association (ACP) thinks clean energy production in the U.S. could triple by 2030.

    Tax credits: ACP CEO Heather Zichal expects the bill to “supercharge” investments into the clean energy sector (FT) thanks to the long-term tax credits.

    • Past tax credits were short-term, making it difficult to get the loans needed for expensive projects.
    • Clean energy companies had no idea when tax credits would expire, and banks were reluctant to give loans given the uncertainty.

    The iShares Global Clean Energy ETF (NASDAQ:ICLN) has been up 16% since the end of July — when Senator Joe Manchin supported the legislation. But the sector still has a long way to go before reaching last year’s peak.

    The Joe’s Take: We wouldn’t be surprised if this became a “buy the rumor, sell the news” type of event. Rising interest rates and a slowing economy are still driving the markets. While we got a nice recovery in recent weeks, investors shouldn’t get too complacent in the current market.

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