The document discusses how the passage of the Inflation Reduction Act in the US has sparked a "green arms race" globally as countries seek to compete for investments in clean energy and technology. The IRA provides large subsidies that could draw investments away from other nations. In response, the UK, EU, and Canada have all recently announced new policy packages and incentives of their own aimed at remaining competitive with the US for attracting green businesses and investments. The competition is expected to significantly boost global investment in decarbonization efforts over the coming years.

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The “green arms race” appears to be going global. The “green arms race” is the idea that in order to encourage energy
transition countries have to out-incentivize other countries in order to draw investment towards their country and away from
others. For years Europe was the only player in the game, but that changed when the United States Congress passed the
Inflation Reduction Act (IRA) into law in August 2022. While U.S. allies cheered the stimulus, they also immediately voiced
concerns over the potential of IRA’s tax incentives to suck private investment away from them and toward the U.S. In
addition to policy enhancements being pursued in the European Union, we more recently observed policy announcements
and enhancements from Canada and the United Kingdom.
To back up a bit, the IRA was more than just a $430 billion decarbonization package. According to analysts at Goldman
Sachs, the IRA is a massive boost to what they term the Third American Energy Revolution, putting the U.S. in position to
dominate energy production for decades. Coming on the heels of the Shale Revolution, (Revolution #2), it adds competitive
strength in carbon capture, wind and solar production, and green hydrogen production to the already strong U.S. position in
traditional energy.
The Green Arms Race Goes Global
EGA Renewables Infrastructure Team
The IRA directs new federal spending designed to catalyze investments in domestic manufacturing capacity, encourage
procurement of critical supplies domestically or from free trade partners, and jump start R&D in leading edge technologies.
Some estimates suggest the $430 billion of government spending will leverage into $1-3 trillion per year in clean energy
investment.
It therefore comes as no surprise that non-U.S. participants in the Green Arms Race feel compelled to act in order to stay
competitive in the new energy order. On March 30th the British government released its own collection of policies to
encourage investment in green technology. Along with a goal of reaching net zero emissions by 2050, the U.K. “Green
Finance Strategy” aims to compete with the U.S. in attracting climate tech businesses and economic growth. It follows the
Green Deal Industrial Plan announced by the European Union on Feb 1, 2023 which is designed to “enhance the
competitiveness of Europe’s net zero industry and support the fast transition to climate neutrality.”(1)
(1) European Commission press release February 1, 2023
April 3, 2023

2. April
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Not to be outdone, Canada announced during its budget process last week their own package of incentives aimed at
lowering the cost of investment in clean tech to remain competitive with the U.S. The package includes a 15% credit
for non-emitting electricity generation, a goal of the electricity grid reaching net zero by 2035, and a 30% tax credit for
manufacturing equipment to produce renewable and nuclear energy projects.
The U.S., long thought of as a decarbonization laggard, has raised a ruckus with the IRA. We love good old-fashioned
competition. Let the games begin/continue!
For more information, contact:
Curt Pabst
Managing Director
cpabst@eagleglobal.com
713-952-3550
www.eagleglobal.com