What the Inflation Reduction Act means for climate tech
When the Inflation Reduction Act (IRA) passed I was at lunch with my daughter, who was scolding me for checking my phone trying to find updates. I was both elated and emotional, trying to convey to a 10-year old how important this bill was for her future. This $370B package is a historic step forward for the planet and the well-being of all of us who inhabit it.
I believe the biggest news is not what the bill contains and where dollars will flow, but how it will significantly change American attitudes towards climate. These investments will drive second-order effects which dramatically transform the U.S. economy and our relationship with climate-focused solutions. Millions of people will have their first experience with an EV (electric vehicle), a climate job, a resilient home, lower energy costs, and cleaner air. We will also see a cascade of multiplier effects – tax credits, grants, and loan guarantees attracting greater private investment, communities becoming growth engines for building climate technologies, and millions of new jobs.
Beyond its impact on CO2 reduction, I believe the IRA will trigger a tipping point that positively unifies Americans around climate over the next decade. It may be hard to imagine a zero-carbon economy today, but as we deploy climate innovation it will suddenly seem inevitable. As benefits become more obvious, the transition to a low carbon economy will only accelerate. Consumers will be drawn to cheaper cars, more energy-efficient homes, and products with cooler technology. At the same time, as CO2-intensive industries experience slowing growth, they’ll see the opposite effect in terms of career and consumer choice. Together these positive feedback loops can powerfully shift the climate narrative in this country.
Fortunately, the IRA is a strong tailwind behind momentum that’s already been building for years. We have a thriving climate tech startup ecosystem, a business community committing to proactive climate action, and consumers who increasingly choose climate-friendly products & services. As I spoke with a few of the founders across our portfolio, it became clear that this bill can be a game-changer for their businesses. I want to share some of their feedback just to highlight a sample of the very real-world implications of the IRA for seed-stage climate tech startups:
Recurrent is a platform for buying and selling used EVs by assessing and scoring each EV’s battery health. Recurrent CEO, Scott Case thinks the IRA will accelerate the EV transition and expand accessibility. He expects “Recurrent will help both dealers and buyers navigate the [$4,000 used-EV] tax credit eligibility which will immediately become a second relevant question for used buyers alongside battery health and range.”
Synop is an operating system for commercial EV fleets. Synop CEO Gagan Dhillon says “upfront cost is one of the most common challenges we hear from fleets as they contemplate a switch to EVs. [The IRA] should further accelerate commercial fleet electrification.”
The IRA contains $20B for climate-smart agriculture to help farmers, ranchers and landowners adopt practices which sequester carbon.Climate Robotics’ CEO, Jason Aramburu, thinks that “provides a huge tailwind for our industry as it creates strong incentives for farmers to incorporate biochar into their agricultural practices.”
SPAN re-imagined the outdated electrical panel for homes and brings modern upgrades to home battery, solar, and EV charging equipment. SPAN CEO, Arch Rao believes “the IRA brings electrification to the forefront in abating climate change. SPAN is well-positioned to help homeowners make this transition through incentives ranging from 30% of installed costs (~$600-2,500) in SPAN products with expanded eligibility to up to $6,500 for low-to-moderate income households.”
The IRA allocates $2.8B to climate risks including wildfire events, andGridware’s CEO Tim Barat sees an opportunity to enable “utilities to both adapt and mitigate against the negative impacts of climate change on their critical infrastructure, especially as it relates to wildfire ignition.”
Solo AVT is building the world’s first long-range, electric, and fully-autonomous heavy truck platform. Solo’s CEO, Graham Doorley believes the IRA “will be helpful as we explore battery development and set up manufacturing sites in the years to come. We are excited by the way the bill approaches new manufacturing opportunities as well as motivates the retooling of existing manufacturing facilities.”
LevelTen Energy CEO, Bryce Smith says that “it’s hard to overstate the impact the IRA will have on deployment of wind, solar, storage, air capture, clean hydrogen, and more. The extension of renewable tax credits, and their new applicability to standalone energy storage, will provide much-needed financial certainty for developers and investors looking to create a cleaner, more resilient grid. When we look back in a decade I think we'll recognize the IRA as a turning point—our last, best chance to avoid the most calamitous climate impacts; a chance that, despite almost insurmountable headwinds, we finally took.”
We can see significant potential impact from the IRA across just this small set of Wireframe portfolio companies. This bill is an incredible milestone in a very long journey, and one we should all pause to celebrate. It promises to move the needle on climate, cutting greenhouse gas emissions 40% below 2005 levels by 2030, but I think we can go further and faster.
If you’re ready to pivot your career into building for climate, there’s a wide range of open positions across our portfolio. And if you’re a founder just starting to build in climate tech, we’d love to hear your thoughts on the IRA and how it might impact your thinking. Reach out and let us know what you’re working on, or tell us more about your company here. There’s never been a better time than now to build a better future, so LFG!