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Climate change is an escalating threat that is hanging over all our heads. Years of environmentally harming industrial practices have severely damaged our world across decades. Heavy industrialization has made several water sources no longer safe for consumption, and significant deforestation means natural carbon sinks are no longer able to match the level of carbon gases we are emitting. In places the air is no longer breathable from the fumes from cars and industry. The Earth is being stripped of its metals and minerals to match the every-growing mass consumerism wave.
To confront climate change and to reduce dependencies on superpowers not fully aligned with US values, the US Inflation Reduction Act (IRA) was passed into law in 2022. The IRA seeks to protect the environment by optimizing domestic capacity and expansion in U.S. home territory in many industry sectors. Sectors range from clean energy production in residential and commercial buildings to battery components and storage for zero-emission vehicles.
The IRA incentivizes US producers by providing a wide array of environmental and sourcing tax credits, a combination of grants, loans, rebates, and other investments. Additional credits are available to companies that are located in low-income communities or energy communities, pay prevailing wages and use registered apprentices, or meet certain domestic content requirements (The White House, 2023).
The IRA does not only have a forceful impact on the environment but also has social and economic elements. Benefitting many republican states, it funds ESG initiatives to prevent climate change while overall strengthening the American economy.
The Inflation Reduction Act 2022: A Landmark Legislation
After President Biden signed the IRA into law, his administration announced an investment of $370 billion USD to grow American-made clean energy and to become a global leader in clean energy technology, manufacturing, and innovation (The White House, 2023). This monumental investment intends to reduce energy costs for families and small businesses, boost private investment in clean energy nationwide, strengthen supply chains, and create new economic opportunities.
The Department of Energy (DOE) is at the heart of this transformation, receiving ample resources to supercharge energy improvements, bolster building efficiency, and electrify infrastructure. The act goes further by supporting the production of low-emission vehicles and ensuring contractors are well-trained to implement these energy-saving measures, with funding extending through 2031. Meanwhile, the Environmental Protection Agency (EPA) is gearing up to cut greenhouse gas emissions, particularly in communities that need it most. The act funds the transition to zero-emission vehicles, provides incentives to replace polluting trucks, and boosts air quality monitoring in low-income areas. A methane emissions reduction program is also in place, with both penalties for major emitters and rewards for those who cut their methane output.
The Ethical Sourcing Challenge in the Clean Energy Sector
The IRA includes measures to address supply chain risks, particularly in sourcing critical minerals for renewable energy technologies. Ensuring ethical practices, like avoiding forced labour and environmental harm, is crucial to maintaining the integrity of these supply chains. Indeed, unethical sourcing poses a significant threat to achieving the IRA's sustainability and climate goals. The Act mandates strict compliance and transparency to ensure that the supply chains are free from forced labour and environmental degradation, thereby ethically supporting long-term climate objectives.
The IRA allocates funds to enhance transparency and efficiency in environmental reviews and corporate climate actions. These efforts aim to mitigate the risks associated with unethical supply chains, which could undermine the Act’s sustainability achievements. The Act supports the development of standardized environmental product declarations for construction materials, ensuring that the entire supply chain, from raw materials to finished products, aligns with ethical and environmental standards. The EPA has allocated resources to enhance the transparency and standardization of corporate climate action commitments and greenhouse gas emission reductions.
The Future of Clean Energy and Ethical Supply Chains
Peer Ledger’s Digital Product Passport Platform provides a versatile, multi-industry system to meet the country's emphasis on upholding IRA compliance requirements. Peer Ledger product solutions are designed for continuous vigilance to ensure an ethical supply chain.
Core Features:
Conclusion
The Inflation Reduction Act of 2022 is more than a climate initiative—it's a blueprint for a sustainable, equitable future where every action is accountable and every community benefits. Peer Ledger's traceability and transparency solutions can be a crucial information technology component in realising this vision. By providing clear insights into supply chains and ensuring that environmental and ethical standards are met at every step, Peer Ledger empowers companies to have sustainability information on demand for their products and to comply with the act's rigorous demands. In doing so, they not only contribute to the reduction of emissions and the advancement of green technologies but also build trust and foster a culture of accountability that aligns perfectly with the act’s goals. Together, the Inflation Reduction Act and Peer Ledger's innovative tools are paving the way toward a more responsible and resilient future.
Sources:
H.R.5376 - 117th Congress (2021-2022): Inflation Reduction Act of 2022. (2022, August 16). https://www.congress.gov/bill/117th-congress/house-bill/5376/text
The White House. (2023, January). Building a clean energy economy: A guidebook to the inflation reduction act’s investments in clean energy and climate action [Guidebook]. https://www.whitehouse.gov/wp-content/uploads/2022/12/Inflation-Reduction-Act-Guidebook.pdf
