The New Zealand Embassy in Washington DC has prepared an in-depth summary of the United States’ Inflation Reduction Act (IRA) and its potential impacts to New Zealand business.
The IRA, seen as a landmark achievement of the Biden Administration, was signed into law over a year ago, authorising around USD$391 billion in government spending to reduce emissions and promote green industrialisation. This act is seen as a key driver for economic growth and job creation while positioning the US at the forefront of the clean energy race.
Some key points raised in the report include:
Investment & Impact
- The IRA has catalysed approximately USD$360 billion in new clean energy and cleantech manufacturing projects.
- The Act aims to reduce greenhouse gas emissions by 50-52% below 2005 levels by 2030.
Funding & Administration
- Authorised spending is USD$391 billion over ten years, with potential to reach USD$1.2 trillion.
- Major funding is administered by the Department of Energy’s Loan Programs Office (USD$111.7 billion) and the Treasury Department (USD$265 billion in tax credits).
Opportunities for New Zealand
- The IRA presents significant opportunities for New Zealand’s cleantech companies and research institutions looking to expand in the US.
- New Zealand firms can benefit from tax breaks and subsidies in sectors like critical mineral recovery, hydrogen, sustainable aviation fuel, energy storage, and carbon capture.
Challenges
- Companies must navigate domestic content requirements to qualify for IRA incentives, often necessitating US registration or joint ventures with US companies.
- Political challenges and the influence of upcoming elections could impact the Act’s implementation.
Strategic Positioning & Collaboration
New Zealand companies can leverage the IRA’s focus on green industrialisation and “friendshoring” to enhance their export potential and foster innovation collaborations. Participation in initiatives arising from the Indo-Pacific Economic Framework could facilitate access to US capital and investment opportunities
You can read the full details on the MFAT site: www.mfat.govt.nz/en/trade/mfat-market-reports/united-states-of-america-inflation-reduction-act-february-2024
View the report here: www.mfat.govt.nz/assets/Trade-General/Trade-Market-reports/United-States-of-America-Inflation-Reduction-Act-February-2024.pdf