The hundreds of billions of dollars in climate spending the US enacted over the last two years is likely to have "spillover" effects that make clean energy cheaper worldwide, BP's chief economist said today.
The US is starting to spend more than $430bn in climate and clean energy funds from last year's Inflation Reduction Act and the 2021 bipartisan infrastructure law. Those laws offer federal tax credits, subsidies and direct spending on wind, solar, biofuels, batteries, hydrogen, carbon capture technology and other clean energy technologies.
The infusion of spending should have predominantly positive "spillover effects" for deploying clean energy, BP chief economist Spencer Dale said. A new tax credit of up to $3/kg for clean hydrogen should support US investments in new electrolyzers, he said, bringing down their manufacturing costs and expanding supplies of a low-carbon hydrogen.
"Those falling costs for electrolyzers can be enjoyed by the world," Dale said at an event held by think tank the Center for Strategic and International Studies. "Some of that green hydrogen may well end up being exported in the form of green ammonia, allowing increased supplies of green hydrogen around the world. "
BP has yet to factor those types of spillover effects into the latest global energy outlook, which it released on 30 January, but Dale said he believes they may be "very significant." In addition to direct effects on clean energy technology costs and energy supplies, US spending on clean energy is likely to cause other countries to enact their own investments to stay competitive.
"It's changed the nature of the competitive landscape," Dale said. "For some countries or regions, they will directly want to compete to make sure that the investment funds go to their countries rather than America."
The EU is already considering a package of clean energy spending in response to the Inflation Reduction Act. Countries around the world are putting more of an emphasis on energy security, including those that come from domestic clean energy, Dale said, in the wake of disruptions tied to Russia's invasion of Ukraine last year.
