Why the Inflation Reduction Act is the action manufacturers need

Oct. 14, 2022
Manufacturers must adapt to changing purchasing behaviors as buyers shift their spending to greener technologies.

Itron's Tom Deitrich

In mid August, the Inflation Reduction Act (IRA) was signed into law and allocated a record $370 billion to climate and energy initiatives. As a result, by 2030, carbon emissions are expected to be 40% lower than in 2005. It’s encouraging to see that with recent legislation—both the IRA and the Infrastructure Investment and Jobs Act (IIJA)—lawmakers are demonstrating that now is the time to take decisive action to address the future of infrastructure.

The substantial increase in funding for clean energy technology is an essential step in the United States’ efforts to reduce carbon emissions. However, now that the law has been passed, we must not overlook the changes required to support critical industries—today and in the future.

Take the manufacturing industry, for example. The World Economic Forum recently pointed out that the industry accounts for a significant portion of greenhouse-gas emissions. In the United States, manufacturing accounts for nearly a quarter (24%) of all carbon emissions.  While the numbers highlight that there is still much work to be done, the IRA offers solutions and provides meaningful tax incentives to manufacturers. It’s a win for both the environment and industry.

Manufacturers must also adapt to changing purchasing behaviors as commercial and residential buyers shift their spending to greener technologies. Demand for smart energy technology—everything from smart meters to solar panels—will inevitably increase. We are already seeing this shift in the automotive space as electric-powered vehicles (EVs) continue to grow in popularity. Most major automakers have an all-electric model on the market, with Honda announcing last year that they only plan to sell only EVs in North America by 2040.  These changes dramatically alter the manufacturers, their supplies, and the underlying infrastructure enabling the entire value chain.

There has never been a greater focus on creating a more sustainable environment for future generations. In fact, Energy Innovation: Policy and Technology, a nonpartisan climate policy think tank, called the IRA “the most significant climate action legislation in US history.”

We have seen pushes from SEC, the Justice Department and other regulatory agencies in the past year on how manufacturers and other companies should report on their sustainability initiatives. Many, including Itron, release Environmental, Social Governance (ESG) Reports yearly with aggressive objectives to create a more sustainable world with a reduction in greenhouse-gas emissions and a focus on carbon-neutral operations.

Itron welcomes the passing of the IRA and IIJA, which prioritize infrastructure resiliency, security, and sustainability initiatives. However, we can’t overlook the reality that the industry will need time to adapt. The IRA, for example, contains language incentivizing domestic content and prevailing wages. Itron supports these new requirements and believes the industry will need time and flexibility to find creative solutions to overcome the current global supply crisis and worker shortage.

With the infusion of funding to support carbon-reduction efforts, manufacturers will turn to more environmentally friendly practices, and more companies will shift toward producing green technology. We’ll see these changes chronicled in governmental and company reporting. 

As with any infrastructure scale project it will require time, but the industry can adapt and come out stronger for it.

Tom Deitrich is president and CEO of Itron