The Inflation Reduction Act supports US competitiveness and financial prosperity

The US has approved several pieces of real economy legislation that can help communities compete for capital in the global marketplace and create long-term, stable financial prosperity. The Inflation Reduction Act (IRA) is one such policy and has catalyzed investments in energy infrastructure across the country. However, federal policy makers are considering repealing or sunsetting key components of the IRA, such as energy tax credits.

This blog examines the current and potential future benefits of the IRA for investors seeking opportunities in the energy sector and for American energy independence, security, and competitiveness in global markets. It also considers the importance of a stable policy environment in supporting capital formation and innovation, and encourages policy makers to take a long-term view.

Energy investments support stable job creation

The most recent data from the International Energy Agency (IEA) forecasts record global investment of $3.3 trillion in the energy sector in 2025, $2.2trn of which will be in renewable and nuclear energy, energy efficiency, and energy grids and storage. In the US, new data shows solar energy alone accounted for 84% of new electricity generation capacity added to the US power grid in 2024, with Texas producing the most wind and solar energy of any US state by a wide margin.

Data shows significant market response to policy aimed at supporting affordable, reliable, and secure energy. Investments in renewable energy technology and energy infrastructure reached $493 billion in the two years following passage of the IRA – a 71% rise from the two years prior.¹ Since Q3 2022, $321bn has been invested into manufacturing, utility-scale installments, and industrial facilities (including 2,369 new facilities), with another $522bn of planned investments and 2,217 planned facilities.² Three quarters of planned spending is located in districts represented by Republicans in Congress.

This capital supports American jobs. Estimates show that over the next decade, the IRA will create an average of 1.2 million jobs per year, adding a total of 13.7m jobs and almost $2trn to US GDP.³ In 2023, jobs in renewable energy grew at twice the overall job growth rate in the US, adding 142,000 jobs that year. And new renewable energy projects announced between August 2022 and December 2024 will create over 400,000 new jobs (although some projects have been cancelled or postponed given ongoing uncertainty in US markets).

These are jobs in places that need them. Of the investments announced since the IRA’s passage:⁴

• 81% were in counties with below-average weekly wages
• 70% were in counties with a below-average employment-population ratio
• 78% were in counties with below-average household incomes
• 86% were in counties with below-average college graduation rates

Moreover, research shows that wages and benefits in relevant industries – renewable energy, energy efficiency, and grid modernization and storage – are 25% higher than the average national wage, and more likely to include benefits such as healthcare and retirement contributions.⁵

State and local leaders have responded, putting their communities and economies in the race to attract private investment. States in the ‘battery belt’ have seen billions of dollars in long-term investments in manufacturing, such as multi-billion-dollar plants in North Carolina and Kentucky. Georgia Governor Brian Kemp has highlighted the benefits of electric vehicle manufacturing for the state economy, and recent research shows Georgia has almost $25bn in planned investments that will support 27,700 new jobs. Oklahoma Governor Kevin Stitt has also discussed the importance of industries such as critical minerals and renewable energy to Oklahoma’s economy.

Successfully competing in a global market

America’s allies and competitors alike are trying to outcompete American communities for investment dollars. While total US investment into renewable energy, grids, and storage in 2024 was estimated at over $300bn, the European Union invested $370bn, and China’s investments hit $680bn.⁶ China’s investment in renewable power alone ($359bn) was almost four times that of the US ($85bn).⁷

Like institutional investors, US policy makers should look beyond the current political context to help American communities compete to win the trillions of dollars moving through global capital markets. Abandoning incentives established by the IRA designed to lure manufacturing in critical industries back to the US will cede economic and geopolitical advantages to other countries.

For example, removing tax incentives could destroy a potential $50bn export market for solar modules and batteries by 2030, and allow intellectual property and technical expertise to be drawn away to other countries. Under the most likely scenario for policy repeals, US demand for energy technologies, such as solar panels, would remain flat but the panels would no longer be made in America, shifting expected export of 416 GWh of battery cells to an import of 84 GWh by 2030.

Policy stability supports capital flow and innovation

Existing uncertainty around federal support for energy technologies – particularly the ongoing ‘megabill’ negotiations in the US House and Senate – is undermining investments that would otherwise create jobs in American communities. Billions of dollars in planned energy projects have already been cancelled in the first quarter of 2025, with uncertainty over federal policy cited in the cancellation of plants in Minnesota, Georgia, and Arizona, among others. Removing existing energy tax credits will harm investment in key technologies such as battery storage, and wind and solar energy. Almost 800 planned energy and battery projects could be in jeopardy under the current draft of the House’s IRA repeals, and 75% of those projects are in districts represented by Republicans in Congress. These technologies will be critical to addressing America’s growing demand for electricity, which is projected to increase 2% annually nationwide (50% by 2050) due in part to growing data centers and electrification of sectors like transportation.

These repeals have real impacts on Americans communities. One study found that a full repeal of energy tax credits would result in higher average electric bills for Americans, a loss of almost four million job-years, and decreased GDP of up to $500 billion over 10 years. More recent analysis of repeals passed by the House of Representatives in May 2025 estimates a loss of two million jobs, including 300,000 direct manufacturing jobs. Scenario analysis of IRA repeal shows “rural areas and communities would experience the largest negative effects,” as they have received significant investments since the IRA passage.

Conversely, policy stability can make a market or investment less risky, encourage innovation and technological development, help to revitalize regions, as well as better match labor needs with worker skills and increase long-term national competitiveness in a global financial system. Stable policy can help underpin investments for decades, well beyond the immediate political context in which they were created – evidence suggests that over 60% of projects announced after the IRA’s passage would come online between 2025 and 2029.

Importance of long-term perspectives in policy

For institutional investors, taking a longer-term view and considering a broader set of trends and emerging risks and opportunities is regular practice. For example, a new teacher entering the workforce in 2025 may not retire until 2070 or later. Investors managing such retirement savings must consider emerging risks and opportunities over the entire course of their clients’ and beneficiaries’ lives.

The US financial system faces many systemic challenges, including climate change, historic inequality, and global competition. Institutional investors, those seeking to help American families save for school, a home, or to retire with dignity, are inherently impacted by these challenges. This longer, wider perspective is as relevant for policy makers as it is for investors. Elected officials want long-term prosperity for their community – air free from harmful pollutants, clean drinking water, affordable energy, and stable employment that will support families for years to come.

Long-term policy perspectives contribute to economic development and financial security by supporting a financial system that helps American communities compete for capital, create well-paying and long-lasting jobs, protect retirement savings, and improve economic resilience. Policy makers should keep these principles front and center as they consider changes to the IRA and similar policies.

The PRI blog aims to contribute to the debate around topical responsible investment issues. It should not be construed as advice, nor relied upon. The blog is written by PRI staff members and occasionally guest contributors. Blog authors write in their individual capacity – posts do not necessarily represent a PRI view. The inclusion of examples or case studies does not constitute an endorsement by PRI Association or PRI signatories.