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How the Inflation Reduction Act Impacts Your Organization’s ESG Goals
Energy transition continues to gain momentum with the signing of the Inflation Reduction Act. While the legislation is certainly complex, it will serve as a catalyst for the public and private sectors and allow the United States to align itself with the goals and interests of the largest global economies. Or, as Bill Gates puts it, “(the Inflation Reduction Act) represents our best chance to build an energy future that is cleaner, cheaper and more secure.” To date, the Inflation Reduction Act has been met with varying opinions (both positive and negative). However, there is no question that it will provide ample opportunities and incentives for existing businesses to capture new value. Below, MGO’s Environmental, Social, and Governance (ESG) team breaks down a subset of the most important objectives you need to be aware of.
Objective #1: Supporting emerging climate technologyOn its surface, carbon capture (or the process of removing carbon dioxide from the atmosphere and locking it away) offers opportunities to slow, limit, or even reverse climate change — especially if done at scale. Carbon removal startups continue to research and innovate new technologies which will eventually remove many tons of CO2 from the atmosphere each year. These technologies are still relatively young and require additional financial investment in order to reduce costs and enhance impact. With the passing of the act comes a new wave of funding, which carbon removal experts and startups are eager to take advantage of. Specifically, the bill will:
- Increase tax credits for permanent carbon removal from $50 to $180 per ton (using direct air capture)
- Significantly lower the amount of carbon companies must remove to qualify (100,000 tons to 1,000 tons)