Keep in mind that the scales of the existing U.S. tax regime are tilted dramatically in favor of fossil fuel companies, which collect roughly $20 billion a year in state and federal subsidies. “In-kind” support for the industry—through diplomatic pressures abroad, for instance—has only accelerated since Russia invaded Ukraine and the State Department redoubled its role as a global salesman for U.S. fossil fuels. And companies don’t need much support at the moment. ExxonMobil and Chevron reported record profits last quarter. Just five privately-held U.S. and European oil majors are expected to have raked in $60 billion during that time. Those earnings are being made in large part off surging prices that are driving cost of living crises around the world, and helping stoke fears of a global recession. Central banks are looking at aggressive interest rate hikes to curb inflation as policymakers balk at the possibility of going directly after high energy prices with price stabilization policies.
Fossil fuels and renewables alike have benefitted from the “everything economy” of the last decades, where bottom-barrel interest rates and cheap credit have left investors searching for shiny new places to park excess cash. But whereas fossil fuel companies reap the rewards of reliable subsidies while they continue selling the lifeblood of global capitalism, renewables companies in the U.S. are often unable to even collect what intermittent subsidies have been ostensibly available to them. That’s thanks to the Rube Goldberg-esque structure of existing clean energy incentives, which siphon billions of dollars off to Wall Street middlemen. Thankfully the IRA would remedy tax credits by introducing a direct pay option. Some of the biggest clean energy developers in the U.S. remain foreign owned, like the state-backed Danish firm Ørsted.
All this leaves U.S. based solar and wind companies in a slightly precarious position as rates rise and warnings circulate about a possible recession, with precious little time to regain lost ground. Fossil fuels stand on a stronger footing entering the uncertainty ahead, with plenty of cash on hand and bipartisan support to boost production. Those already talking a big game about their commitment to a vaguely timed energy transition—like European supermajors Shell and BP—could be major beneficiaries of the IRA’s fossil fuel and clean energy incentives alike.
