INTERVIEW: US Inflation Reduction Act to unlock opportunities for overseas investors: DOE Official

The US' Inflation Reduction Act is set to unlock significant opportunities for overseas investors in a range of decarbonization technologies, Brad Crabtree, Assistant Secretary for the US Department of Energy's Office of Fossil Energy and Carbon Management, said in a recent interview.

Crabtree said the IRA was open to all companies globally that do business in the US and fulfill the IRA's requirements.

"The tax credits really span all the critical energy technologies that we need to meet our energy and climate goals," he said.

Tax credits would be offered to investments in wind and solar, sustainable aviation fuel, low-carbon manufacturing, carbon capture and storage, and hydrogen produced from renewables, nuclear power and natural gas with CCS, he said.

"The whole package of tax credits in IRA are available to projects beginning construction for the next 10 years from when the legislation was passed," he said.

This means any project starting construction by the end of 2032 would be eligible, giving companies a generous window for planning and financing.

When asked if there could be restrictions on some countries, notably China, when it comes to accessing the IRA, Crabtree said there might be for "sensitive technologies," although he added that this area is not his responsibility.

CBAM-a-like

Meanwhile there has been robust discussion in the US Congress about introducing a policy similar to the EU's Carbon Border Adjustment Mechanism, "and I would be surprised if it doesn't continue," Crabtree said.

"What's interesting is that it involves senior members of Congress from both [Republican and Democratic] political parties, and it's an area of cooperation on climate policy," he said.

Over time some sort of CBAM-style policy in the US is likely to emerge, not least because the EU is moving forward with its own policy and "it is no longer a theoretical question, it's very real," he said.

Crabtree said industries with high energy intensities like steel and cement would likely to be prioritized in a US version of CBAM.

The EU's CBAM is set to impose carbon taxes on emission-intensive commodities imported into the EU, levelling the playing field for sectors in the EU Emissions Trading System. As the US does not have a nationwide price on carbon, the policy would have to be designed differently.

Crabtree said there was plenty of work to be done in terms of measuring carbon intensities of commodities imported into the US, making a timeline for the policy difficult to estimate.

CCUS at COP28

In the run-up to the COP28 UN climate talks in Dubai later this year, Crabtree said the US has four priorities: phasing out unabated coal; decarbonizing energy and industry; halting deforestation; and reducing methane and other non-CO2 greenhouse gas emissions.

Making progress on the Carbon Management Challenge initiated by US President Joe Biden in April, focused on accelerating and scaling up carbon capture, utilization and storage, is a specific goal for energy and industry, he said.

"It [carbon management challenge] includes capturing CO2 emissions from industrial facilities and power plants, developing regional geologic storage sites and geologic hubs," Crabtree said.

Around a dozen countries had joined the challenge, including Australia, Canada, the UK, Norway, Japan, Saudi Arabia and the UAE.

"We're talking to my counterparts in Southeast Asian countries about their joining as well," he said. "This is a huge opportunity to foster leadership from the oil and gas industry."

"The reality is that the UAE and other Gulf countries have the expertise and the know-how. They have the geologic assets. They have the capital, and they have the geo-strategic interests to lead on decarbonization of energy."