The Inflation Reduction Act is just a start

Billions of dollars earmarked for clean energy and climate tech investment in the Inflation Reduction Act will hardly nudge U.S. emissions.

Why it matters: The sobering conclusion from Bloomberg New Energy Finance is one of the first comprehensive reviews we've seen of how the IRA will affect the energy transition.

Catch up fast: Biden in 2021 pledged to cut U.S. emissions by 50% from 2005 levels by as soon as 2030.

The latest: U.S. emissions are on track to remain 22% above Biden's goal, per Bloomberg New Energy Finance's annual outlook this morning.

• That's just 2 points from where the country would have been without the IRA.

What's happening: The law's generous support for carbon capture projects is expected to drive investment in cheap natural gas — leading to more emissions from producing, storing, moving and burning the fossil fuel.

Meanwhile, natural gas's cleaner alternative, hydrogen, will see slow deployment due to its higher upfront cost.

Reality check: This, of course, is all projection.

• Swaths of the IRA remain unclear as federal agencies hammer out exactly which dollars will go where and how.

Zoom in: Some $49 billion — about 14% of the IRA — is earmarked for manufacturing. That's not modeled in this BNEF outlook.

Plus: 2030 may be the wrong milestone — or one that doesn't provide much clarity.

• Hydrogen and other hardware-heavy sectors spanning EV charging to advanced nuclear energy will take years to achieve scale.

Be smart: Simply halting an increase in emissions was once reason enough to celebrate. A 2-point decline, in an economy as large as the U.S., isn't trivial.

💭 Our thought bubble: We don't often hear about unit economics in our conversations with climate investors — certainly less than you'd think.

• BNEF's projection, especially the disparity it exposes between expected natural gas and hydrogen deployment, is another reminder why those economic fundamentals are inextricable from decarbonization.