Review of the US Inflation Reduction Act

Jhe US government last month passed a major energy market bill that is expected to have a significant impact on the market. In its latest weekly report, ship broker Gibson said that “After several months of intense political negotiations, President Biden signed into law the Inflation Reduction Act (IRA) on August 16, 2022. This bill is considered the most significant climate change bill in US history. Although the lengthy legislation covers various aspects of the US economy, the environmental provisions are unprecedented in scope and scope. The colossal $369 billion in funding is designed to encourage multiple sources of clean energy, including electric cars, hydrogen, carbon capture and storage, nuclear, solar and wind both that they are carbon neutral. Businesses will also benefit by getting payments for their credits directly from the government instead of entering into complex financing arrangements.”

Source: Gibson Shipbrokers

According to Gibson, “Here are some of the key takeaways. Solar and wind tax incentives, which previously had to be renewed every year or two, are extended for a decade, allowing long-term planning of new projects. The bill also offers support for electric vehicles (EVs), extending a federal tax credit of $7,500 for the purchase of EVs, with a credit capped at the retail price of $55,000 or less for cars. new and $80,000 for new pickups. A new credit incentive of $4,000 is also introduced for the purchase of a used EV. These credits only apply to electric vehicles assembled in the United States, while in the coming years there will be new restrictions on the origin of electric batteries and minerals. Yet even with these looming limitations, electric car sales in the United States are expected to rise sharply in the coming years. The IRA also offers a significant boost to green hydrogen, arguably putting the United States ahead of the European Union in terms of investment incentive for clean hydrogen development. The bill provides a base credit of $0.6/kg of clean hydrogen, which could increase to $3/kg if certain working conditions are met. Experts say these clear tax incentives have the potential to make the United States one of the most competitive countries in the world for producing clean hydrogen.”

The shipbroker added that “although many initiatives aim to develop alternative energy sources, the interests of oil companies have not been ignored. The bill revives new oil and gas leases in the Gulf of Mexico and on federal lands. A new principle is also being introduced that would require the government to provide opportunities for fossil fuel development on federal lands wherever renewable energy development is promoted. Carbon capture and storage projects receive additional incentives, with a tax credit for new carbon capture and storage projects reaching a maximum of $85 per tonne of CO₂ (compared to $50/tonne previously) . These incentives will be welcomed by ExxonMobil, which is pioneering a $100 billion CCS center on the US Gulf Coast, which aims to capture CO2 emissions from refineries and other industrial facilities the along the Houston Ship Channel. Likewise, it will benefit Occidental Petroleum, which is building the largest plant in the world to take CO2 directly from the atmosphere and store it underground in the Permian Basin.”

“Still, the IRA is not free. This includes a 15% tax on companies with profits over $1 billion. The bill also marks the first US national greenhouse gas award. From 2024, a levy of $900 per tonne will be imposed on methane emitted by oil and gas companies from wells, pipelines, liquefied natural gas terminals and other facilities. to reach $1,500 per tonne by 2026. However, there are caveats Small producers, who account for a significant portion of all methane emissions, will be exempt from the levy. comply with minimum regulations on methane emissions would also be exempt.Nevertheless, overall, with all the above measures in place, the Curbing Inflation Act undoubtedly has the potential to reduce cons ideably American emissions in the years to come. However, at the same time, it is also recognized that the oil and gas industry is an important part of the energy transition and will remain so for a long time,” Gibson concluded.
Nikos Roussanoglou, Hellenic Shipping News Worldwide

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