Introduction

The US Inflation Reduction Act (IRA) was signed into law by President Joe Biden in August 2022 thereby unboxing a suite of fiscal measures and incentives that continue to impact clean energy development and investments in the US and indirectly in the international energy and decarbonization policy circles. Among other things, the IRA aimed at fostering a clean energy economy, providing funds (through grants, loans, rebates, etc.) for various clean energy-related projects; alongside tax credits that increase in value when project developers engage American workers, local American manufacturing, and low-income communities. An example of the indirect international implication of the IRA was when the EU's adoption of the Net-Zero Industry Act (NZIA). The objective of the NZIA is to provide incentives and a framework for scaling up investments and manufacturing of clean energy technologies within the EU, seemingly in response to the US approach.

As of the time of publication in December 2024, voters in the US have elected Donald J. Trump to a second (non-consecutive) term as President, although his term begins in 2025. For now, it cannot be predicted with much certainty how many of the IRA's funding and policy frameworks will be targeted by the incoming administration. However, despite Mr. Trump's open hostility towards EVs and renewable energy and his climate change skepticism, the reality is that the majority of IRA funds will be spent in jurisdictions that voted for Trump and whose citizens he has vowed to support and protect. Also, several IRA incentives promote US self-sufficiency in the development of critical minerals and essential energy technologies. As a result, the Trump team is likely to take a surgical approach to revising the IRA, rather than trying to dismantle the entire framework.

Considering the implications of these regulatory developments on energy investments and projects, this OGEL special includes the following articles:

Investing in Carbon Capture Technologies and Net-Zero Pathways in the US and EU: Recent Legal and Policy Considerations by Kim Talus[1] & Tade Oyewunmi.[2] This paper examines the relevant provisions of the IRA and the emerging policy responses in the EU regarding carbon capture, utilisation, and storage (CCUS). It highlights the US government's support for the scaling up of CCUS technology through policy measures such as the transferability of credits, new eligibility requirements, and reduced carbon capture threshold for different classes of emitting facilities. In comparison with the US IRA approach, the paper discusses the EU policy measures and approach to enabling investments, including the framework for state aid for CCUS technology and projects, and the new industrial framework for critical technologies such as CCUS.

An Examination of Section 45V Clean Hydrogen Production Tax Credit by John Clay Taylor and four others.[3] This article considered the US Treasury and the Internal Revenue Service's definition of 'hydrogen' in December 2023 following the proposed regulations interpreting the clean hydrogen production tax credit under Section 45V of the Internal Revenue Code of 1986. The paper provides an overview of the clean hydrogen production credit, summarizes the key elements of the Section 45V proposed regulations, and discusses their implications for the development and operation of hydrogen projects in the United States.

The Making of a Hydrogen Economy: A Comparative Look at the US and EU by Jaqueline Santos Ruas Baessa Pinto.[4] This article critically analyses and compares the regulatory and policy measures for the development of hydrogen for energy purposes in the US and EU. It examines how the policy approaches converge and differ, as well as areas where there is a lack of clarity, setting out the issues that the US and EU will need to grapple with moving forward. The paper points out the convergence between the two approaches regarding the types of 'hydrogen' that should be supported to grow the clean hydrogen economy.

Managing Risks and Transactional Issues in CO2 Offtake and Transportation Agreements and CCUS Projects in the US by Tade Oyewunmi[5] and Ryan Haddad.[6] This article underscores the role of CO2 offtake and transportation arrangements in the application of relevant fiscal incentives provided under the IRA and in securing firm commitments from parties to Carbon Capture Utilization and Storage (CCUS) projects. Project risks can be identified and addressed during negotiations and the processes of obtaining permits. Likewise, barriers to firm commitments from potential developers, financiers, and investors in carbon capture technology applications are also expected to be addressed. The paper concludes that the emerging policy measures relating to carbon capture will expectedly enhance the potential to commercialize and scale up CCUS applications. Ideally, sponsors and developers are more inclined to make an investment decision if the main project output (i.e., the captured CO2) gets a sufficient value that supports necessary investments in carbon utilization pathways or permanent sequestration.

Balancing Trade and Climate Goals: The Role of a United States Carbon Border Adjustment Mechanism - Trade and Climate Goals by Champion Olatunji[7] and Temiloluwa Olanrewaju.[8] This paper discusses the intricacies of adopting a Carbon Border Adjustment Mechanism (CBAM) in the United States, its domestic competitiveness, implications regarding trade with international partners, and the leakages that may arise because of adopting such a measure. This tool is deployed in the need to curb emissions arising from global trade, while at the same time understanding the implications of stringent environmental policies to prevent protectionism on trade partners, particularly those from emerging and developing economies; and bolster domestic production and supply systems for delivering clean and low carbon] and affordable goods. The paper highlights the emergence of CBAM as a climate change mitigation tool in economies such as the EU and the increasing potential adoption in the United States, considering regulatory developments aiming at decarbonizing the economy such as the IRA, federal legislative bills, and existing laws that require the advancement of climate objectives. It also points to industry best practices and guiding principles that may help curb emissions, prevent green protectionism, and ensure more coordinated sustainable trade practices.

U.S. Inflation Reduction Act Sparks Interest from Developing Economies on Energy Transition Pathways by Priya Prasad,[9] Erica Pencak,[10] and Charlotte Hopkinson.[11] The paper points out that interest regarding the implications of the IRA internationally has grown since its enactment. It reflects on how developing economies are considering the direct implications of the IRA to their domestic climate targets, whether or how domestic industry can avail itself of the financial benefits under the IRA, and how ministries can replicate the incentives in their laws to spur deployment of renewables and decarbonization efforts within the country. The paper examines specific financial incentives and charges relevant to carbon capture utilization and storage, methane abatement, critical minerals, and hydrogen.

The Implications of the US Inflation Reduction Act on the Energy Policy Landscape and African Investment, by Sally Mtambo.[12] This article considers how the IRA's US-centered domestic content requirements potentially impact the sourcing of critical minerals in resource-rich Sub-Saharan African (SSA) Countries such as DRC, Zambia, and South Africa. It further discusses energy justice and transition issues concerning energy sector sustainability challenges for both SSA resource-rich countries and the USA.

The Inflation Reduction Act and Impact on the Mining Industry by Meaghan Connors, Paul de Bernier, Grant Anderson, Warren Payne, Brian Cohen.[13] This paper discusses the impact of the IRA in driving investments in the mining and energy transition context, while reflecting on the potential implications of a new Trump-led US government starting in January 2025. The paper provides an overview of the IRA, including reactions to its implementation and application to critical mineral producers and the mining industry, highlighting areas of significant activity. The discussion includes IRA's mining finance options, alternative financing opportunities presented by the IRA, and the influence of the IRA on mergers and acquisitions within the critical minerals sector.