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Here’s how corporations can leverage the Inflation Reduction Act to address climate change

When President Biden signed the Inflation Reduction Act (IRA), he unleashed $739 billion to rebuild the economy, including a historic $369 billion over the next 10 years for climate action. While this is a lot of money, it is insufficient for what is needed to address the challenge of global climate change. Conservative estimates (such as The Stern Review’s) have called for investing 1.5 to 2 percent of GDP annually to thwart the worst effects of climate disruption.

With a $22 trillion economy, that would put the climate bill for the U.S. at more than $400 billion a year. Yet the IRA is a good opportunity for American businesses and other large organizations. The act is corporate friendly in that it supports the coal and gas pipeline industries, and does not eliminate the “carried interest” income tax shelter for wealthy companies. It offers companies and other large organizations a novel opportunity to rise to the greater challenge of finding a global climate solution.

As the chief sustainability officer of a large organization, I have learned that government investments are most effective when they are positively leveraged by other large organizations. The IRA is already being leveraged by the state of California, which announced this week its plans to ban gas powered vehicles by 2035. Its plan, if implemented by the California Air Resources Board, will ensure 35 percent of new passenger vehicles are electric battery or hydrogen powered by 2026, and 100 percent net-zero emissions by 2035. This is a good start; now we need corporations and consumers to find ways of leveraging the IRA.

The Inflation Reduction Act is strategic and fundamental to moving the U.S. into compliance with the 2015 Paris Climate Agreement. Firstly, it sends a symbolic message that the U.S. now believes in and is strongly behind the idea of building a low-carbon economy. Secondly, it makes a significant enough investment to trigger the process of change in several relevant industries such, as electric vehicles (EV), EV charging infrastructure and battery technology. Thirdly, it has a real potential for reducing 40 percent of U.S. carbon emissions by 2030. Each of these can serve as leverage points for corporations.

Our discussions of climate solutions at the Club of Rome, a platform of diverse thought leaders who identify holistic solutions to complex global issues, show that in implementing global climate solutions, corporations and consumers both can play vital roles as “impact multipliers.”


A far-sighted and far-reaching corporate strategy is to see this act as a strong signal of where the federal government is leading the U.S. economy — to a low-carbon future.

This is the opportunity for corporations to lean-in with their own considerable resources to make new strategic investments into decarbonization. They could convert all vehicles to EVs, make all their buildings energy efficient, build new buildings to be carbon neutral, implement the sustainable development goals and align with the Paris agreement targets.

Boosting these decarbonization expenditures, and doing so annually, could also create competitive advantage by spawning new sustainable technologies that the world will need in the coming decade. Corporations could target an equivalent amount of investment to match government investments, and that would surely make U.S. corporations the global leader in climate action.  

Consumers can lean-in on several of the IRA’s provisions by abandoning fossil-based automobiles and home energy systems. The bill offers them a $4,000 to $7,000 tax credit for buying electric vehicles, and a 20 percent subsidy for home solar panels. The bill changes the economic logic of home heating and autos by making renewable energy cheaper than fossil-based option. This is a huge leverage opportunity that sustainable consumption advocates should actualize now.  

If corporations, large organizations and consumers do not rise to the challenge now, the IRA by itself will surely not solve the climate problem. It will, at best, make a small dent, and leave the U.S. economy vulnerable to a 15 percent decline in GDP at a time when it is already suffering from inflation and potential recession. The time to act is now.  

Paul Shrivastava, Ph.D., is a professor of management and organizations at the Smeal College of Business at Pennsylvania State University. For five years, he served as the university’s chief sustainability officer. He is a member of The Club of Rome.