A mere year ago, the global economic landscape faced a different trajectory. The Build Back Better Act, proposed by Joe Biden to bolster clean economy manufacturing, lingered in congressional stagnation. Simultaneously, Russia’s invasion of Ukraine disrupted Europe’s energy markets, global oil prices maintained levels above $100 per barrel, and China’s assertive actions hinted at the end of globalization.
Rather than succumbing to these challenges, the Biden administration seized the opportunity, skillfully navigating the political landscape to pass the Inflation Reduction Act (IRA). This landmark act is now reshaping the global economy in ways reminiscent of President Truman’s 1948 Marshall Plan for post-WWII reconstruction.
The IRA, a $370 billion wager that may eventually surpass a trillion dollars, represents the most extensive industrial strategy since World War II. It aims to reshore manufacturing and pivot the U.S. economy away from fossil fuel dependence. This multifaceted act combines elements of industrial strategy, climate planning, and social justice with a protectionist edge. Its impact is poised to fundamentally and permanently alter the U.S. manufacturing landscape, making it challenging for future administrations to reverse.
In its initial six months, the IRA generated 70,000 new jobs and unlocked over $81 billion in private capital, directed towards 180 clean energy projects. The act is steering fiscal incentives as an industrial strategy, departing from the free-market approaches of previous decades. New analyses suggest that the IRA could result in 1.3 million solar and 250,000 wind-related jobs by 2035, offering economic benefits such as lower energy costs, reduced inflation, increased productivity, and elevated economic output over time.
To prevent capital and projects from migrating to the U.S. and its enticing incentives, the EU responded with its Green Deal Industrial Plan, a $270 billion initiative aiming to create a more predictable regulatory environment, accelerate cleantech production, enhance skills, and facilitate trade for the clean energy transition.
Canada faced a similar choice, leading to the announcement of $58 billion in investments through Budget 2023, aligning with the ambitions of the IRA and Green Deal. These investments primarily involve investment tax credits and funding from the Canada Infrastructure Bank.
The economic transition is already underway in Canada, with substantial investments announced in EV battery manufacturing, renewable energy, and clean energy projects. However, swift implementation of budget announcements, including new Investment Tax Credits, is crucial for Canada to gain a competitive edge in the race to decarbonization.
Surprisingly, Alberta emerges as a potential beneficiary of Biden’s bold bet on the new economy. Despite challenges in the province’s budget projections due to fluctuating oil and natural gas prices, Alberta’s deregulated electricity grid, skilled workforce, and culture of innovation position it as a leader in renewable electricity and clean hydrogen growth. Budget 2023 is expected to further accelerate clean investments across Canada, contributing to critical minerals, renewable energy, and clean manufacturing.
As we navigate the evolving landscape of global economic transformations, the urgency lies in capitalizing on the opportunities presented by the IRA and similar initiatives. Alberta, with its unique economic strengths, stands at the forefront of potential clean energy success, provided that swift action is taken to secure investments and offer certainty to investors in this critical juncture.