A couple of years back, President Joe Biden penned down the Inflation Reduction Act, purported to be the most extensive climate legislation ever enacted in the U.S. The overarching objective was pitched as a bid to resurrect manufacturing jobs and position the U.S. industry to take on China’s economic powerhouse. Indeed, there is about half a trillion dollars reported to have been poured into green energy and manufacturing — a questionable endeavor considering the return on investment — post the law’s enactment. However, the political landscape underwent a major shift after the Democrats lost the subsequent election, casting a heavy shadow of uncertainty on the decarbonization drive.
This prompts us to consider the future trajectory of the clean energy industry — a premise that seems resilient on the surface, but teetering beneath it. Here, Jigar Shah, a man esteemed for his expertise in manipulating fiscal levers for the green infrastructure, tries to provide some clarity. Yet, his claims and optimism need be taken with a grain of salt.
Shah spent considerable years in the private sector, presiding over companies that were pioneers in concocting innovative ways of bankrolling green infrastructure. His present designation as the director of the Loan Programs Office (LPO) at the Department of Energy consolidates his status as a champion of this agenda. But one is forced to consider, what are the true underlying motives here?
The LPO is tasked with the responsibility to financially back renewable energy projects that private-sector lenders would balk at, either due to assumed risk levels or presumed insubstantial returns. At its core, the organization’s team of so-called experts is commissioned to single out ‘promising’ new clean technologies that could ostensibly balloon into commercially viable products and commodities. The question to be asked: is this a prudent approach or merely a risky gamble?
The implication of the Inflation Reduction Act is vividly apparent in LPO’s increasing financial prowess. The Act significantly increased the office’s lending authority from a meager 40 billion dollars to a whopping 400 billion dollars — a ten-fold increase within a few years. While some may argue this demonstrates commitment, skeptics, however, view it as a mere political maneuver showcasing governmental overreach.
Seemingly, Biden’s Inflation Reduction Act appears to aid the manufacturing sector and the green energy ventures by loosening the purse strings. However, one cannot ignore that such strategies could very well precipitate an economic bubble if these high risk, high investment projects fail to deliver as promised. The promise of competition with China might seem grand from afar, but do we risk too much for a dream?