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A new deal for the climate? Lessons from the Inflation Reduction Act

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  • Kauer, Pia

Abstract

The Inflation Reduction Act (IRA), passed under the Biden administration in August 2022, is the biggest US climate bill to date. Its focus on subsidy-driven decarbonization incentives marks a potential turning point in US industrial policy and might prevent its repeal under the upcoming Trump administration. This paper closely examines how the IRA aims to address the crisis of US capitalism with a particular emphasis on its ecological, geopolitical, and social objectives. Central to the IRA are strategies for decarbonizing the power and transport sectors, enhancing US competitiveness in the clean energy and battery industries, and linking subsidies to workers' rights. Despite its transformative potential to advance renewable energy and generate 'green' jobs, the IRA also includes concessions to the fossil fuel industry and incorporates protectionist measures that could heighten international tensions, especially with China. This analysis situates the IRA within the broader context of the crisis of post-Fordism and explores its role in a potential 'state-interventionist turn' towards a greener capitalism, while critically assessing its adequacy in addressing the urgency of climate action.

Suggested Citation

  • Kauer, Pia, 2025. "A new deal for the climate? Lessons from the Inflation Reduction Act," IPE Working Papers 248/2025, Berlin School of Economics and Law, Institute for International Political Economy (IPE).
    • Handle: RePEc:zbw:ipewps:311195
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    More about this item

    Keywords

    Inflation Reduction Act; Industrial Policy; Decarbonization; Energy Transition; Regulation Theory;
    All these keywords.

    JEL classification:

    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • J58 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Public Policy
    • O25 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - Industrial Policy
    • P18 - Political Economy and Comparative Economic Systems - - Capitalist Economies - - - Energy; Environment
    • Q42 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Alternative Energy Sources
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming

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