Uncertain Climate Policy in an Election Year

Decision making in the face of uncertain governmental policy is incredibly difficult, and never is policy in the U.S. more uncertain than in a Presidential election year. With the executive branch and both houses of Congress up for grabs and more than two months to go before the election, it’s anyone’s guess as to how things will turn out.

In terms of climate and energy policy, what is at risk is the Inflation Reduction Act (IRA), a collection of measures signed by Joe Biden in 2022 intended to counter high inflation and promote climate protection in the U.S. The IRA includes a mixture of direct investment, tax credits, and funding for climate tech. The act’s impact is not limited to the United States. BDI – Bundesverband der Deutschen Industrie e.V., “The Voice of German Industry,” pointed out in an article from August 2023 that the IRA has triggered concerns about the future of Europe as an investment location as a result of “Buy American” provisions and tax credits that put European companies at a disadvantage.

In a highly simplified nutshell, if the Republicans find themselves on the winning end of a sweep of the Presidency and both houses of Congress, the IRA is at risk. If the Democrats take victories across all three, the IRA is safe and may be expanded. Sightline Climate (CTVC) provides a far more complete analysis of the implications and risk level for the IRA in its newsletter under all of the different scenarios. It’s worth a read.

What the CTVC analysis and the BDI article illustrate is the extent of uncertainty that exists, how many different scenarios are at play, and how broadly policy changes in one region have ripple effects around the world.

Public policy is but one of the factors that makes decision making difficult for leadership teams and investors attempting to navigate the energy transition. At Tilt Global, our PRISM framework for context analysis is a powerful tool for defining the box you are in, the first step to discovering out-of-the box solutions to challenging problems your team is facing.