Lucrative tax incentives have fueled a surge in solar panels but failed to boost wind power, data from a new project show.
Private investment in clean energy projects like solar panels, hydrogen power and electric vehicles surged after President Biden signed an expansive climate bill into law last year, a development that shows how tax incentives and federal subsidies have helped reshape some consumer and corporate spending in the United States.
New data being released on Wednesday suggest the climate law and other parts of Mr. Biden’s economic agenda have helped speed the development of automotive supply chains in the American Southwest, buttressing traditional auto manufacturing centers in the industrial Midwest and the Southeast. The 2022 law, which passed with only Democratic support, aided factory investment in conservative bastions like Tennessee and the swing states of Michigan and Nevada. The law also helped underwrite a spending spree on electric cars and home solar panels in California, Arizona and Florida.
The data show that in the year since the climate law passed, spending on clean-energy technologies accounted for 4 percent of the nation’s total investment in structures, equipment and durable consumer goods — more than double the share from four years ago.
The law so far has failed to supercharge a key industry in the transition from fossil fuels that Mr. Biden is trying to accelerate: wind power. Domestic investment in wind production declined over the past year, despite the climate law’s hefty incentives for producers. And so far the law has not changed the trajectory of consumer spending on some energy-saving technologies like highly efficient heat pumps.
But the report, which drills down to the state level, provides the first detailed look at how Mr. Biden’s industrial policies are affecting clean energy investment decisions in the private sector.
The data come from the Clean Investment Monitor, a new initiative from the Rhodium Group, a consulting firm; and the Massachusetts Institute of Technology’s Center for Energy and Environmental Policy Research. Its findings go beyond simpler estimates, from the White House and elsewhere, providing the most comprehensive look yet at the effects of Mr. Biden’s economic agenda on America’s emerging clean-energy economy.
The researchers spearheading the first cut of the data include Trevor Houser, a former Obama administration official, who is a partner at Rhodium; and Brian Deese, a former director of Mr. Biden’s National Economic Council, who is an innovation fellow at M.I.T.
The Inflation Reduction Act, which Mr. Biden signed into law in August 2022, includes a wide range of lucrative incentives to encourage domestic manufacturing and speed the nation’s transition away from fossil fuels. That includes expanded tax breaks for advanced battery production, solar-panel installation, electric vehicle purchases and other initiatives. Many of those tax breaks are effectively unlimited, meaning they could eventually cost taxpayers hundreds of billions of dollars — or even top $1 trillion — if they succeed at driving enough new investment.
Biden administration officials have tried to quantify the effects of that law, along with bipartisan legislation on infrastructure and semiconductors signed by the president earlier in his term, by tallying up corporate announcements of new spending linked to the legislation. A White House website estimates that companies have so far announced $511 billion in commitments for new spending linked to those laws, including $240 billion for electric vehicles and clean energy technology.
The Rhodium and M.I.T. analysis draws on data from federal agencies, trade groups, corporate announcements and securities filings, news reports and other sources to try to construct a real-time estimate of how much investment has already been made in the emissions-reducing technologies targeted by Mr. Biden’s agenda. For comparison purposes, its data stretch back to 2018, under President Donald J. Trump.
The numbers show that actual — not announced — business and consumer investment in clean-energy technologies hit $213 billion in the second half of 2022 and first half of 2023, after Mr. Biden signed the climate law. That was up from $155 billion the previous year and $81 billion in the first year of the data, under Mr. Trump.
Trends in the data suggest that the impact of Mr. Biden’s agenda on clean-energy investment has varied depending on the existing economics of each targeted technology.
Mr. Biden’s biggest successes have come in spurring increased investment in American manufacturing, and in catalyzing investment in technologies that remain relatively new in the marketplace.
Fueled partly by foreign investment, like in battery plants in Georgia, actual investment in clean-energy manufacturing more than doubled over the last year from the previous year, the data show, totaling $39 billion. Such investment was almost nonexistent in 2018.
The bulk of that spending was focused on the electric-vehicle supply chain, including in the new Southwest cluster of activity across California, Nevada and Arizona. The Inflation Reduction Act includes multiple tax breaks for such investment, with domestic-content requirements meant to encourage production of critical minerals, batteries and automotive assembly in the United States.
The big winners in manufacturing investment, though, as a share of states’ economies, remain traditional auto states: Tennessee, Kentucky, Michigan and South Carolina.
The climate law also appears to have supercharged investment in so-called green hydrogen, which splits water atoms to create an industrial fuel. The same is true of carbon management — which seeks to capture and store greenhouse gas emissions from existing energy plants or pull carbon out of the atmosphere. All those technologies struggled to gain traction in the United States before the law showered them with tax breaks.
Hydrogen and much of the carbon-capture investment is concentrated along the coast of the Gulf of Mexico, a region filled with incumbent fossil fuel companies that have begun to branch into those technologies. Another cluster of carbon-capture investment is concentrated in Midwestern states like Illinois and Iowa, where companies that produce corn ethanol and other biofuels are beginning to spend on efforts to sequester their emissions.
The incentives for those technologies in the Inflation Reduction Act, along with other support in the bipartisan infrastructure law, “fundamentally change the economics of those two technologies, making them broadly cost-competitive for the first time,” Mr. Houser said in an interview.
Other incentives have not yet budged the economics of critical technologies, most notably wind power, which boomed in recent years but is now facing global setbacks as projects become increasingly expensive to finance.
Wind investment was lower in the first half of this year than at any point since the database was started.
In the United States, wind projects are struggling to navigate government processes for permitting, transmission and locating projects, including opposition from some state and local lawmakers. Solar projects and related investment in storage for solar power, Mr. Houser noted, can be built closer to power consumers and have fewer hurdles to clear, and investment in them grew by 50 percent in the second quarter of 2023 from a year earlier.
Some consumer markets have yet to be swayed by the promise of tax breaks for new energy technologies. Americans have not increased their spending on heat pumps, even though the law covers up to $2,000 toward the purchase of a new one. And over the last year, the states with the highest spending as a share of their economy on heat pumps are all concentrated in the Southeast — where, Mr. Houser said, consumers are more likely to already own such pumps, and to be in need of a new one.
Tense diplomatic relations may not impact trade, investment ties between India, Canada: Experts
NEW DELHI: The tense diplomatic relations between India and Canada are unlikely to impact trade and investments between the two countries as economic ties are driven by commercial considerations, according to experts. Both India and Canada trade in complementary products and do not compete on similar products.
“Hence, the trade relationship will continue to grow and not be affected by day-to-day events,” Global Trade Research Initiative (GTRI) Co-Founder Ajay Srivastava said.
Certain political developments have led to a pause in negotiations for a free trade agreement between the two countries.
On September 10, Prime Minister Narendra Modi conveyed to his Canadian counterpart Justin Trudeau India’s strong concerns about the continuing anti-India activities of extremist elements in Canada that were promoting secessionism, inciting violence against its diplomats and threatening the Indian community there.
India on Tuesday announced the expulsion of a Canadian diplomat hours after Canada asked an Indian official to leave that country, citing a “potential” Indian link to the killing of a Khalistani separatist leader in June.
Srivastava said these recent events are unlikely to affect the deep-rooted people-to-people connections, trade, and economic ties between the two nations.
Bilateral trade between India and Canada has grown significantly in recent years, reaching USD 8.16 billion in 2022-23.
India’s exports (USD 4.1 billion) to Canada include pharmaceuticals, gems and jewellery, textiles, and machinery, while Canada’s exports to India (USD 4.06 billion) include pulses, timber, pulp and paper, and mining products.
On investments, he said that Canadian pension funds will continue investing in India on grounds of India’s large market and good return on money invested.
Canadian pension funds, by the end of 2022, had invested over USD 45 billion in India, making it the fourth-largest recipient of Canadian FDI in the world.
The top sectors for Canadian pension fund investment in India include infrastructure, renewable energy, technology, and financial services.
Mumbai-based exporter and Chairman of Technocraft Industries Sharad Kumar Saraf said the present frosty relations between India and Canada are certainly a cause for concern.
“However, the bilateral trade is entirely driven by commercial considerations. Political turmoil is of a temporary nature and should not be a reason to affect trade relations,” Saraf said.
He added that even with China, India has acrimonious relations but bilateral trade continues to remain healthy.
“In fact, bilateral trade is an effective tool to improve political relations. India must make special efforts to increase our bilateral trade with Canada,” Saraf said.
India and Canada have a strong education partnership. There are over 200 educational partnerships between Indian and Canadian institutions.
In addition, over 3,19,000 Indian students are enrolled in Canadian institutions, making them the largest international student cohort in Canada, according to GTRI.
According to the Canadian Bureau for International Education (CBIE), Indian students contributed USD 4.9 billion to the Canadian economy in 2021.
Indian students are the largest international student group in Canada, accounting for 20 per cent of all international students in 2021.
Benefits of educational partnerships are mutual and hence the current situation may have no impact on the relationship, Srivastava said.
Apple supplier Foxconn aims to double India jobs and investment
Apple supplier Foxconn aims to double its workforce and investment in India by next year, a company executive said on Sunday.
Taiwan-based Foxconn, the world’s largest contract manufacturer of electronics, has rapidly expanded its presence in India by investing in manufacturing facilities in the south of the country as the company seeks to move away from China.
V Lee, Foxconn’s representative in India, in a LinkedIn post to mark Indian Prime Minister Narendra Modi’s 73rd birthday, said the company was “aiming for another doubling of employment, FDI (foreign direct investment), and business size in India” by this time next year.
He did not give more details.
Foxconn already has an iPhone factory employing 40,000 people in the state of Tamil Nadu.
In August, the state of Karnataka said the firm will invest US$600 million for two projects to make casing components for iPhones and chip-making equipment.
The company’s Chairman Liu Young-way said in an earnings briefing last month that he sees a lot of potential in India, adding: “several billion dollars in investment is only a beginning”.
Taiwan election: Foxconn’s Terry Gou taps star-powered running mate
Last month, Foxconn’s billionaire founder Terry Gou said he would run for the Taiwanese presidency in next year’s election, as an independent candidate.
He said the ruling and independence-leaning Democratic Progressive Party (DPP) was unable to offer a bright future for the island and left Foxconn’s board following his decision to run.
The firm operates the world’s largest iPhone plant, in the city of Zhengzhou in Henan province.
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