The 2022 climate law unleashed a torrent of government subsidies to help the U.S. build clean-energy industries. The biggest beneficiaries so far are foreign companies.
The Inflation Reduction Act has spurred nearly $110 billion in U.S. clean-energy projects since it passed almost a year ago, a Wall Street Journal analysis shows. Companies based overseas, largely from South Korea, Japan and China, are involved in projects accounting for more than 60% of that spending.
Fifteen of the 20 largest such investments, nearly all in battery factories, involve foreign businesses, the Journal’s analysis shows. These overseas manufacturers will be able to claim billions of dollars in tax credits, making them among the biggest winners from the climate law. The credits are often tied to production volume, rewarding the largest investors.
Japan’s Panasonic, one of the few companies to publicly estimate the impact of the law, could earn more than $2 billion in tax credits a year based on the capacity of battery plants it is operating or building in Nevada and Kansas. The company, which supplies batteries to electric-vehicle maker Tesla, is considering a third factory in the U.S. that would lift that total.
The climate law is designed to build up domestic supply chains for green-energy industries, but the reality is that the technology for building batteries and renewable-energy equipment resides overseas. The incentives are leading these companies to invest in the U.S., often alongside domestic businesses. “It’s a testament to the fact that we still live in a globalized economy," said Aniket Shah, head of environmental, social and corporate governance—or ESG—strategy at investment bank Jefferies.
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