The US Inflation Reduction Act (IRA) was signed into law over two years ago, in August 2022. Since then, USD 500 billion in domestic, utility-scale clean energy investments has been announced, including 334 new clean energy and clean vehicle projects and more than 300 gigawatts of new clean power. For investors, any changes to the IRA will be important to track given the potential impact to corporate earnings of those companies with exposure to sectors influenced by the IRA.

Regardless of the election outcome, it appears unlikely that the IRA will be fully unwound under the next US administration. If Vice President Kamala Harris wins the White House, we expect little to no change to the IRA. A Harris presidency would likely continue to focus on effective implementation of the law, via measures such as clean energy “tech-neutral” tax credits that streamline the existing range of technology-specific tax credits.

While the IRA was unanimously opposed by Republicans in Congress, a future Republican administration would need to balance any desire to repeal the law against the investment flow and job creation to Republican districts. As of August 2024, 60% of the announced projects and 71% of the estimated job growth were in Republican congressional districts, according to analysis from JPMAM’s Sustainable Investing team. Technically, the full repeal of the act would require an act of Congress, which implies this would only be possible if the president’s party also controlled the House and the Senate. It is also important to note that not all of the IRA relates to clean energy, with other provisions focusing on areas such as corporate tax provisions and Medicare drug reimbursements.

A full unwind of the IRA is not our base case, but there are elements of the legislation that could be subject to change in the event of a Republican victory. In his speech at the Republican National Convention in July, former President Donald Trump vowed to “end the electric vehicle mandate on day one”, referring to new regulations on vehicle pollution that will likely encourage automakers to sell more electric vehicles over time. We infer that electric vehicle tax credits in the IRA could therefore also be at risk, which would be particularly impactful for producers of more expensive electric vehicles. Offshore wind power is another area of focus. The IRA extended and increased tax credits for wind power, although Trump has committed to halting offshore wind energy projects by executive order at the start of a second term. Conversely, the onshoring of battery manufacturing is one associated area that receives bipartisan support, although eligibility rules related to the foreign content of critical mineral and battery components may also be subject to change. The IRA’s impact on battery manufacturing cost is significant, with tax credits decreasing costs by an estimated 34% – a figure which makes US-based manufacturing highly competitive with manufacturing in China.

In sum, even if a full repeal of the IRA appears unlikely, a Republican victory would likely increase policy uncertainty around clean energy provisions and move investors and project developers to take on more conservative project timelines. Electric vehicles and wind power are two policy areas that could potentially see the most change. Regardless of political leadership, investors must also keep in mind that the energy transition is a global, secular influence on business strategies, with global investment in the energy transition hitting an all-time high of USD 1.8 trillion in 2023.