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Biden’s climate law is reshaping private investment in the United States

President Biden spoke at the Arcosa Wind Towers, in Belen, N.M., last month.KENNY HOLSTON/NYT

WASHINGTON — Private investment in clean energy projects such as solar panels, hydrogen power, and electric vehicles surged after President Biden signed an expansive climate bill into law last year, a development that shows how tax incentives and federal subsidies have helped reshape some consumer and corporate spending in the United States.

New data released Wednesday suggest the climate law and other parts of Biden’s economic agenda have helped speed the development of automotive supply chains in the American Southwest, buttressing traditional auto manufacturing centers in the industrial Midwest and the Southeast. The 2022 law, which passed with only Democratic support, aided factory investment in conservative bastions such as Tennessee and the swing states of Michigan and Nevada. The law also helped underwrite a spending spree on electric cars and home solar panels in California, Arizona, and Florida.


The data show that in the year since the climate law passed, spending on clean-energy technologies accounted for 4 percent of the nation’s total investment in structures, equipment, and durable consumer goods — more than double the share from four years ago.

The law, however, has failed to supercharge a key industry in the transition from fossil fuels that Biden is trying to accelerate: wind power. Domestic investment in wind production declined over the past year, despite the climate law’s hefty incentives for producers. And the law has not changed the trajectory of consumer spending on some energy-saving technologies like highly efficient heat pumps.

But the report, which drills down to the state level, provides the first detailed look at how Biden’s industrial policies are affecting clean energy investment decisions in the private sector.

The data come from the Clean Investment Monitor, an initiative from the Rhodium Group, a consulting firm; and the Massachusetts Institute of Technology’s Center for Energy and Environmental Policy Research. Its findings go beyond simpler estimates, from the White House and elsewhere, providing the most comprehensive look yet at the effects of Biden’s economic agenda on America’s emerging clean-energy economy.


The researchers spearheading the first cut of the data include Trevor Houser, a former Obama administration official, who is a partner at Rhodium; and Brian Deese, a former director of Biden’s National Economic Council, who is an innovation fellow at MIT.

The Inflation Reduction Act, which Biden signed into law in August 2022, includes a wide range of lucrative incentives to encourage domestic manufacturing and speed the nation’s transition away from fossil fuels. That includes expanded tax breaks for advanced battery production, solar-panel installation, electric vehicle purchases, and other initiatives. Many of those tax breaks are effectively unlimited, meaning they could eventually cost taxpayers hundreds of billions of dollars — or even top $1 trillion — if they succeed at driving enough new investment.

Biden administration officials have tried to quantify the effects of that law, along with bipartisan legislation on infrastructure and semiconductors signed by the president earlier in his term, by tallying up corporate announcements of new spending linked to the legislation. A White House website estimates that companies have so far announced $511 billion in commitments for new spending linked to those laws, including $240 billion for electric vehicles and clean energy technology.

The Rhodium and MIT analysis draws on data from federal agencies, trade groups, corporate announcements and securities filings, news reports, and other sources to try to construct a real-time estimate of how much investment has already been made in the emissions-reducing technologies targeted by Biden’s agenda. For comparison purposes, its data stretch to 2018, under President Trump.


The numbers show that actual — not announced — business and consumer investment in clean-energy technologies hit $213 billion in the second half of 2022 and first half of 2023, after Biden signed the climate law. That was up from $155 billion the previous year and $81 billion in the first year of the data, under Trump.

Trends in the data suggest that the impact of Biden’s agenda on clean-energy investment has varied depending on the existing economics of each targeted technology.

Biden’s biggest successes have come in spurring increased investment in US manufacturing, and in catalyzing investment in technologies that remain relatively new in the marketplace.

Fueled partly by foreign investment, including in battery plants in Georgia, actual investment in clean-energy manufacturing more than doubled over the past year from the previous year, the data show, totaling $39 billion. Such investment was almost nonexistent in 2018.

The bulk of that spending was focused on the electric-vehicle supply chain, including in the new Southwest cluster of activity across California, Nevada, and Arizona. The Inflation Reduction Act includes multiple tax breaks for such investment, with domestic-content requirements meant to encourage production of critical minerals, batteries, and automotive assembly in the United States.

The big winners in manufacturing investment, though, as a share of states’ economies, remain traditional auto states: Tennessee, Kentucky, Michigan, and South Carolina.


The climate law also appears to have supercharged investment in so-called green hydrogen, which splits water atoms to create an industrial fuel. The same is true of carbon management — which seeks to capture and store greenhouse gas emissions from existing energy plants or pull carbon out of the atmosphere. All those technologies struggled to gain traction in the United States before the law showered them with tax breaks.

Hydrogen and much of the carbon-capture investment is concentrated along the coast of the Gulf of Mexico, a region filled with incumbent fossil fuel companies that have begun to branch into those technologies.

The incentives for those technologies in the Inflation Reduction Act, along with other support in the bipartisan infrastructure law, “fundamentally change the economics of those two technologies, making them broadly cost-competitive for the first time,” Houser said in an interview.