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4 ways the Inflation Reduction Act could impact supply chains

IRA includes focus on EVs, renewable energy, domestic supply chains

As its name suggests, the Inflation Reduction Act of 2022 (IRA) signed into law by President Joe Biden earlier this month is designed to reduce inflation, but it also includes $300 billion worth of grants and incentives for clean energy and initiatives to combat climate change. 

The goal of the incentives is to accelerate electric vehicle adoption, green ports, increase renewable energy capacity and support products made in the U.S. There are also tax reforms and provisions for health care.

The climate legislation is supposed to help the U.S. lower greenhouse gas emissions by 40% by 2030 compared to 2005 levels.

1. Incentives for electric trucks

The tax credit for purchasing an EV covers the price difference between a diesel truck and an electric truck, or 30% of the truck’s purchase price, whichever is lower. But it’s capped at $40,000 per vehicle purchase.

New heavy-duty electric trucks can cost over $300,000, so it’s unclear how much this tax credit would incentivize fleet owners to invest in EVs.

The tax credit may be “geared more toward incentivizing the purchase of smaller vehicles, such as cargo vans or box trucks used for short-haul package delivery in urban areas,” Beia Spiller, director of the transportation program at the nonprofit research group Resources for the Future, which studies the implications of vehicle electrification, told FreightWaves in a previous interview.

The IRA also includes a credit for building EV charging infrastructure of up to $100,000 per charger.

Read more about the implications of the EV tax credit here.

2. Renewable energy incentives 

The IRA includes production and investment tax credits for battery storage and renewable wind and solar energy. This should make it greener and cheaper for supply chain companies to power their warehouses, distribution centers and stores.

Independent environmental and energy research nonprofit Resources for the Future projects the act will reduce electricity costs for the retail industry by 5.2% to 6.7% over the next decade, saving electricity consumers $209 billion to $278 billion. 

These estimations were based on expected natural gas prices. One of the benefits of more clean energy is it insulates electricity consumers from volatile natural gas prices.

The nonprofit predicted the GHG emissions from the electricity sector would drop between 70% and 75% by 2030 below 2005 levels. Without the IRA, those emissions were estimated to decrease by about 49% in the same time frame.

“As the nation looks to increase production of renewable energy and the sustainability of the supply chain, these new public investments will help support more solar, more electric trucks and new clean-energy technologies and infrastructure,” Susan Uthayakumar, chief energy and sustainability officer at Prologis, said in a statement.

3. Supporting domestic supply chains

The IRA is expected to drastically increase the demand for components needed in solar panels, wind turbines and EVs. This could create more jobs in the clean energy and manufacturing sectors. 

But there’s a catch. Some of the incentives hinge on a certain amount of raw materials being sourced in the U.S., the final product being constructed in the U.S. or meeting worker training and competitive wage standards.

While these conditions support domestic supply chains and labor rights, some experts think it may slow the adoption rate of EVs and renewable energy. Domestic supply chains for EV and solar panel production are not mature right now. 

It’s unclear whether these incentives will spur the expansion of these domestic supply chains or how fast that may occur.

The National Association of Manufacturers “remains staunchly opposed to the IRA. It increases taxes on manufacturers in America, undermining our competitiveness while we are facing harsh economic headwinds such as supply chain disruptions and the highest rate of inflation in decades.”

4. Greening ports 

The IRA includes $3 billion in grants and rebates for port authorities and marine terminals to purchase zero-emission cargo-handling equipment until September 2027. The goal is to address air pollution in and around ports.

But it defines zero-emission port equipment and technology as being “human-operated equipment or human-maintained technology” and therefore excludes automated technology from being grant eligible.

Zero-emission cargo handling equipment or technology must emit no air pollutants or GHGs, or it must capture 100% of those emissions produced by vessels at berth to qualify for the grants.

“This would go a long way to help seaports meet their emission reduction goals,” said Elaine Nessle, executive director of the Coalition for America’s Gateway and Trade Corridors. “Freight projects often have economic benefits for the entire country, but they can also negatively impact local communities, so it’s good to have resources at the federal level to offset those negative impacts.”

Read more about how the IRA could impact ports here.

Related stories:

Installing LEDs gives warehouses cheaper, cleaner lighting, experts say

The ‘scope’ of emissions in transportation — Net-Zero Carbon

Q&A: The path to a circular economy in logistics and manufacturing

Trucking industry concerned about SEC’s proposed climate rules

2 Comments

  1. So when will American Shipper stop pretending and just come out and start the Biden in 24 Campaign? This story was a copy of the DNC talking points.

  2. Has anyone, other than the “thinking tax payer who will end up paying for these idiotic ideas” that if electric vehicles have to recharge every 2-300 miles when pulling a load, how this is going to work? I read an article the other day that a man pulling a 2000 lb load had to recharge many more time than normal when not towing a load.

    This policy will result in a tragic slow down of our transportation system very calculated by the demoncraps and some repubicruds to destroy our economy. We still have many ships waiting on the left coast trying to get unloaded. Florida and others have had ships coming to the east coast so they can be unloaded. Our country has become too dependent on overseas imports. We need to produce our own basic products that this country needs.

    Our political intellectuals that think this country can exist without fossil fuels are IDIOTS! When electric vehicles are invented that can replace fossil fuel vehicles they WILL! These policies were instituted to weaken this country and expose it to attacks by our world wide enemies.

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Alyssa Sporrer

Alyssa is a staff writer at FreightWaves, covering sustainability news in the freight and supply chain industry, from low-carbon fuels to social sustainability, emissions & more. She graduated from Iowa State University with a double major in Marketing and Environmental Studies. She is passionate about all things environmental and enjoys outdoor activities such as skiing, ultimate frisbee, hiking, and soccer.