AMERICA’S LANDMARK CLIMATE LAW

 The Inflation Reduction Act must spur virtuous competition, not vicious protectionism

 
The Inflation Reduction Act is the most significant piece of climate legislation in the history of the United States. It will deploy nearly $400 billion over the coming decade to slash carbon emissions. By lowering the cost of clean energy technologies, the law can accelerate their deployment not only at home but abroad. But to achieve its full climate potential, US diplomats and trade officials must now ensure that the large subsidies and domestic manufacturing requirements in the law spur the right mix of competition and cooperation from other countries, rather than feed the growing forces of protectionism that could stymie a clean energy transition.

The law’s successful passage after decades of congressional stalemate reflects not only growing alarm over climate change but also two notable shifts in strategy. First, carrots work better than sticks to build political support, and thus the law subsidizes clean energy rather than taxing or restricting carbon pollution—despite a large academic literature demonstrating the economic efficiency of a carbon price. Second, the law explicitly favors clean energy manufactured in the United States, part of a broader shift evident elsewhere, such as a recent law to boost the domestic semiconductor industry, toward “industrial policy”—a catchall phrase referring to government intervention to promote and protect firms in targeted and strategic sectors.

Συνέχεια εδώ

Πηγή: imf.org