ExecutivePerspectivesUSInflationReductionAct:Climate&EnergyFeaturesandPotentialImplicationsAugust2022ExecutivePerspectivesIntroductiontothisdocumentUSCongressrecentlyenactedlegislation,theInflationReductionAct(IRA),thatincludes$369Boffundingforclimateandenergyoverthenextdecade.Thisfundingbuildsonmorethan$110BofclimateandenergyfundingintheInfrastructureInvestmentandJobsAct(IIJA)adoptedinlate2021.TheprimaryvehiclesforfiscalspendingfortheIRAwillbethroughtaxcreditsandincentivefunding,intendedtocreateinvestmentmultipliereffectsLegislationofthismagnitudeanddurationlastingthroughthe2030sandbeyondislikelytohaveprofoundandlastingimpactsacrossUSandglobalclimateandenergysystems,supplychains,industries,andtradeUSlegislationonclimateandenergyalsohasthepotentialtotriggerpolicyactionsfromothernations,bothlargeenergyproducersthatcompeteacrossthesevaluechains,andlargeenergyconsumersThisdocumentprovidesanoverviewofthekeyclimateandenergyfeaturesofthelegislation,sharesthepotentialshiftineconomicsofcleanenergyinvestmentsandtechnologiesitcandeliver,anddescribesinitialimplicationsandopportunitiesforfirmsThesecondandthirdorderimplicationsofthislegislationwillemergeovertime.Forexample,thesepoliciesimpacttheabilityofeveryindustryacrosstheeconomytodecarbonizetheirsupplychains.WewillexploretheseinfutureBCGExecutivePerspectivesacrossselectareasoffocus2InfrastructureInvestmentandJobsAct(IIJA)SignedintolawFall2021InflationReductionAct(IRA)PassedSummer2022BidenSignsBipartisanInfrastructureBill,VowingChange'FortheBetter'SenatepassesDemocrats'LandmarkTax,Climate,DrugsBillTheInflationReductionActIsaHugeDealfortheClimateBidenSignsInfrastructureBill,PromotingBenefitsforAmericansHowthe$1TrillionInfrastructureBillAimstoAffectAmericans'LivesInflationReductionActCouldSuperchargeGridEnergyStorageInfrastructureBillProvidesMoneyforBridges,Broadband,andmoreWhattheInflationReductionActincentivesmeanforyourwalletUSCongressrecentlypassedlegislationtosupportclimateprioritiesandtheenergytransition3RecentUSClimatepoliciesenableacaseforactionacrossindustriesKeyelementsofthelegislationRecentlypassedUSclimatepoliciesarepoisedtodramaticallyshifteconomicviabilityofcarbonfreeenergy,cleantech,andelectricvehicles•Incentiveswillmateriallyreducerenewableandothercarbonfreeenergycosts,withpotentialtodriveincreasesincarbonfreeenergydeploymentto65-80%ofelectricityby2030•EVadoptionwillacceleratebyseveralyears,loweringentrypriceforpassengerandheavy-dutyvehicles.However,inthenear-termthiscouldbeconstrainedbyabilitytorampupsupplychains•Significantfundingforemergingcleantechnologieswillpromoterapiddemonstrationanddeployment,catalyzingdecarbonizationofhard-to-abatesectors•ManufacturingtaxcreditswillboostdomesticproductionofkeyenergyandEVcomponentsDirectimplicationsThesepolicieswillmakedecarbonizationcheaperacrossindustries,butexecutivesmuststartnowtocapturetheirfullvalue•Reducecosts:Takeadvantageofsizablecreditsthatreduceenergyandtransportationcosts,regardlessofindustry•Re-evaluatedecarbonizationplans:Leveragemassiveshiftsincarbonabatementcurvesandcleantechnologyimprovementstoreducegreenhousegasemissions•Captureearlymoveradvantage:Actnowtomitigatebottlenecksexpectedtoemergeinlowcarboninfrastructuredevelopmentandrelatedsupplychains•Pursuenewvaluepools:Planaheadforhowyoucanshapeandcapturevaluefromnewmarketsinenergy,transportation,ormanufacturing124Overview:InfrastructureInvestmentandJobsAct(IIJA)andInflationReductionAct(IRA)include$479Binnewclimateandenergyspending11.Includescorporatetax,prescriptiondrugpricingreform,andIRStaxenforcementSource:'FACTSHEET:HistoricBipartisanInfrastructureDeal',TheWhiteHouse$650B$440BOngoinginfra.funding~$1.2T$110BOthernewinfra.investmentsNewenergyandclimateinfrastructurefundingTotalinfrastructurespendingoverthenext10+years$739B$64B$369B$306BDeficitReductionTotalfundingforInflationReductionAct1AffordableCareActExtensionCleanEnergyandClimateInvestmentInfrastructureInvestmentandJobsAct(IIJA)SignedintolawFall2021InflationReductionAct(IRA)PassedSummer20225369110196713441$B1718Totalclimate&energyinvest.Carbon-freeenergyCleantech0Manufacturing61Other9523Trans-portation47923735714118FundingfromIIJAFundingfromIRAKeyincentives:•Taxcreditsforinvestmentsinsolarandstorage•Taxcreditsforproducingwindandnuclearenergy•Taxcreditsfortransmissioninterconnectsrelatedtothesecleanenergyprojects•FundingforenergyefficiencyCarbon-freeenergy•Carboncapturetaxcreditforpointsourcecapture•Carboncapturetaxcreditfordirectaircapture(DAC)•Taxcreditforproductionofcleanhydrogen•FundingforhydrogenandDAChubs•Fundingforsustainableaviationfuels(SAF)Cleantech•Taxincentiveforpurchaseofelectricvehicles•FundingforEVcharginginfrastructureTransportation•Agricultureinitiatives•Methaneemissionscharge(revenuegenerating)•Resilienceinvestments(e.g.,ruralareadev.)•GreenhousegasreductionfundOtherNote:additionaldetailsontheIIJAandIRAinappendix;Source:EPA,CBO,BCGanalysisManufacturing•Fundingforadvancedmanufacturingproduction•InvestmentforadvancedindustrialfacilitiesDetail:InfrastructureInvestmentandJobsAct(IIJA)andInflationReductionAct(IRA)include$479Binnewclimateandenergyspending161Thisfundingwilldrivematerialchangestotheenergy,transportation,andmanufacturingsectorsandwillspurinnovationincleantech$237BCarbon-freeenergyRampupadoptionofrenewableandnuclearelectricityintheUS,andincreaseenergyefficiencyDrivenbytaxcreditsthatreducecosts$41BTransportationAccelerateEVadoptionDrivenbyincentivizingEVpurchasesandfundingEVcharginginfrastructure$35BCleantechCatalyzeinnovationtoaddresshardtoabateemissionsDrivenbyfacilityfundingandtechnology-specificincentives$71BManufacturingSparkdomesticmanufacturingoflowcarboninfrastructurecomponentsDrivenbyfacilityfundingNote:additionaldetailsontheIIJAandIRAinappendix;Source:EPA,CBO,BCGanalysis7Copyright©2022byBostonConsultingGroup.Allrightsreserved.1Carbon-freeenergyBase,multipliers,andbonustaxcreditstructureintendedtoshapeandtargetcleanenergyinvestments6%60%24%10%10%10%6%baseTotalEnergycommunitybonus5xbonusof6%base(total30%)DomesticcontentbonusLow-incomebonusRenewableinvestmenttaxcrediteligibleforbonusesupto60%ofupfrontinvestmentcostWithapotentialtoincreasebaseincentiveby10xwhilealsosupportingajusttransitionPrevailingwagesandapprenticeshipqualifyprojectsfora5xbonusmultiplieroverbaseformostnon-manufacturingcreditsSignificantapprenticeshipopportunitiestohelpupskilltheUSworkforceinlow-carbontechnologiesInvestmentintheenergycommunityandlow-incomecommunityqualifiesrenewableenergyprojectsforuptoa10pptbonuscreditincreaseeachSupportfortheenergyandlow-incomecommunitiestoenableeconomicdevelopmentandjobs314132Domesticcontentbonusprovidesuptoa10pptbonusonrenewableenergyproductionorinvestmenttaxcreditDomesticcontentbonustoincentivizeshifttoUSmanufacturing,requiring≥55%ofallpartstobeproducedintheUSby2027and100%ofsteelandironforturbinesandsolarpanels24Note:Notallcleanenergytechnologiesareeligibleforallbonuses;ppt(percentagepoint);productiontaxcrediteligibleforsimilarbonuses,butdomesticcontent,energycommunity,andlow-incomecommunitybonusesare10%increases(not10ppt)Source:'FACTSHEET:HistoricBipartisanInfrastructureDeal',TheWhiteHouse8Copyright©2022byBostonConsultingGroup.Allrightsreserved.Carbon-freeenergyFulltaxcreditscansignificantlyreducecostsofgeneratingrenewableenergy11.Newsmall-modularreactor;2.Assumes$15/MWhincentive,inflationadjustedandwithbonuses;Note:alltechnologiesassumebase+prevailingwagebonus+domesticproductionbonus+energycommunitybonus,andwindandsolaralsoincludelow-incomebonusSource:Lazard,BCGanalysis$40$35$77$136$100$20$13$44$112$79Nuclear1LevelizedCostofEnergy$/MWhSolarStorageOffshorewindOnshorewind-49%-63%-42%-18%-21%CostwithouttaxcreditCostwithtaxcreditPost-IRAincentiveapplied60%InvestmentTaxCredit$35/MWh[2]ProductionTaxCredit60%InvestmentTaxCredit50%InvestmentTaxCredit$31/MWh[2]ProductionTaxCredit9Carbon-freeenergyPotentialforstepchangeincreaseinrenewableenergybuildoutby2030andbeyond1InstalledCapacity(GW)6812523072212881408252359904-6x~2x>500x40-50x2030capacity,basecase(conservativeadoptionrates)2020capacity2030capacity,'deepgreen'(wideradoptionrates)Improvedeconomicsofrenewablesandstoragewillacceleratetransitionfromfossilfuelgeneration•Expectupwardsof65-80%generationfromrenewablecapacityin2030vs.~40%in2020•Projectsthatstartconstructioninorbefore2032eligiblefortaxcredits;expectcontinuedgrowthpast2030•Needforfirm(low-carbon)generationtoensuregridreliabilityandresiliencyremainsUtility-scaleSolarOnshoreWindOffshoreWindNon-residentialStorage10TransportationElectricvehiclepurchasepriceparityaccelerates>5years1202020201520252030-102035010PurchasepricedifferencebetweeninternalcombustionengineandbatteryelectricvehiclesSegment:CompactSUV(SUV–M)USDollars('000)No-incentive1.Purchasepriceparityandtotalcostofownershipparitydifferbyvehiclesegment(e.g.,SUVvssedan)andstatewherevehicleispurchased(somestateshaveadditionalpurchaseincentives)Source:BCGpowertrainmodelPassengervehicles:•Incentive:Upto$7500fornewpurchases,upto$4000forused•Purchasepriceparityjumpsforward5years1forqualifyingpassengervehiclescomparedtointernalcombustionenginevehicles(ICE)•5-yeartotalcostofownershipfavorsbatteryelectricvehiclesimmediately1Commercialvehicles:•Incentive:$40,000fornewpurchases•Includesoff-highwayvehiclesPurchasepriceparityWithfullincentive11Copyright©2022byBostonConsultingGroup.Allrightsreserved.TransportationClosetohalfofvehiclesaleslikelytobeelectricby203090%38%15%47%3%20216%2030basewithincentivesNon-electric3vehiclesHybridandplug-inhybridvehiclesBatteryelectricandfuelcellvehicles98%80%12%1%1%8%1.Forecastincludesalllightvehicles,exceptheavyvans;2.Assumesdecreaseinscrappagerateovertime(EVs+AVs);Includingsuchchangesinconsumermobilitybehaviorascarandridesharing;3.Includesinternalcombustion(diesel+gasoline)andmildhybridelectricvehiclesSource:BCGPowertrainModel'basecaseincl.incentives';BCGvehiclesinoperation(VIO)model>10%oflight-,medium,andheavy-vehiclesinoperationexpectedtobeelectricby2030inUS%ofUSNewLightVehicleSales1%ofUSLightVehiclesinOperation('parc')296%70%25%20212%<2%5%2030basewithincentives%ofUSNewMedium-andHeavy-DutyVehicleSales198%84%4%12%2%<1%Stack-ableincentivesintheformof:•Pointofsalerebate•30%rebateonEVcharging/alternativefuelhardware+installation•Higherresidualvaluesduetousedvehiclecredit•…andcontinuedstate-levelincentivessuchasLCFS(California)Severalnon-financialfactorsintheInflationReductionActarealsolikelytodriveadoption:•Eliminatesvolumecapforindividualvehiclemanufacturers•Provides10-yearincentivecertainty•Simplifiesincentivepayout%ofUSMedium-andHeavy-DutyVehiclesinOperation('parc')2112Copyright©2022byBostonConsultingGroup.Allrightsreserved.Note:Alldatesrefertowhenconstructionmuststartbyorsafeharborachievedby1.Forminerals:Upto80%by2027;forcomponents:upto100%by2029,butno10ppts/yincreasein2025(vs2024)Source:H.R.5376-InflationReductionActfromcongress.govToday'sEVbatteriesrelyheavilyonrawmaterialsfromChinaSourcingrequirements:InflationReductionActmandatestwosourcingrequirementstoreceivethecleanvehiclecredit,startingin2023:•40%ofbatterymineralssourcedfromUSorcountrywithfreetradeagreement•50%ofbatterycomponentsmanufacturedinUS,Mexico,orCanadaThesepercentagesincrease10ppts/y1'Excludedentities':Disqualifiesvehiclesthatareimportedorbuiltwithbatterymaterialssourcedfrom'foreigncountriesofconcern'(namely,China+Russia)9%4%68%60%72%16%42%65%65%43%79%10%6%6%Lithium1%1%1%CobaltSeparatorGraphite2%Nickel3%LithiumCobaltClass1NickelAnodeCathode2%ElectrolyteCellShareofglobalproduction,2021(%)RawmaterialsProcessingCell&Component1TransportationUSdomesticandtradealliedbatterysupplychainswillneedtorampupquicklytoqualifyfortheincentivesChinaOtherExclusionsUSQualifyingUSFreeTradeCountriesOther13Hydrogen(H2)Carboncapture,utilization,andstorage(CCUS)DirectAirCapture(DAC)Expansionofexisting45Qcredittoincludeadditionalincentiveforcarboncaptureddirectlyfromtheatmosphere,with$180/tonforsequestrationofCO2($130/tonforutilization);$3.5BforDAChubsExpansionofexisting45Qcreditto$85/tonforpermanentgeologicalsequestrationofCO2,or$60/tonforutilizationofCO2(incl.enhancedoilrecovery)Hydrogencanreceivesignificantincentives,withexactvaluedependingontheassociatedemissions;additional$8BtobuildregionalH2hubs35602585NewValuePreviousvalue5015SequestrationUtilization3513050PreviousvalueNewValue1550180SequestrationUtilization$/tonCO2$/tonCO21.Assumesfacilityreceives5xbonusfrommeetingprevailingwageandapprenticeshiprequirements;Note:$/tCO2($/tonofcarbondioxide)0.600.751.003.002.5-4<0.451.5-2.50.45-1.5Emissions(kgCO2emitted/kgH2produced)Productiontaxcredit($/kgH2produced)1CleantechSignificantincentivestohelpscalecleanhydrogen,CCUS,andDAC114UnitedStatesLevelizedCostofHydrogen($/kghydrogen,productioncost)1,21.Excludesinfrastructurecostsassociatedwithstorageanddeliverytoendconsumer2.Lightershadereflectspricinguncertaintyregardingnaturalgas(lowerlimit$2/MMBTU,upperlimit$5/MMBTU)andelectricity3.Startsat$0.4/kgH2for60-75%greenhousegasreductionvsfossil-derivedhydrogen,goesupto$0.75/kgH2for75-85%greenhousegasreduction.Source:BCGNorthAmericaH2SupplyModelProductiontaxcreditGreenHydrogenBlueHydrogen2Fossil-derived2203020223.00.80.8-1.33.00.80.8-1.3Lightershadesreflectsrangeofcostuncertainty2-0.4--0.60.9-1.20.2-0.80.2-0.83.00.80.8-1.320250-0.30.2-0.8BluehydrogencostcompetitivenowGreenhydrogencostcompetitivesoon1CleantechIncentivesimprovecostcompetitivenessofcleanhydrogenagainsttraditionallyproducedhydrogenTwoformsofcleanhydrogen(H2):Green:Renewableenergy+waterelectrolysisBlue:Fossil-derivedhydrogen+carboncapture15Copyright©2022byBostonConsultingGroup.Allrightsreserved.40070131511130125544352110210001229330171641692314125161Control29181211CleantechHigher45QtaxcreditwilltriplethescaleofemissionsaddressablewithCCUS1.HighCO2sectorsinclude:Ammonia,Chemicals(ferm.),Conv.Oil(incl.NGP),H2,Petrochem.;LowCO2sectorsinclude:Aluminum,Cement&Lime,Iron&Steel,andPetroleumRefining;Powersectorsinclude:FossilpowerGeneration;Othersinclude:Wastemanagement,Wood,PulpandPaperandOtherManufacturing2.AbatementcostsbasedonemittersassignedtohubswithinBCGCCUStool,coveringselectedregions,usinghubT&Scosts,peremitterdatadirectional3.Excludes~690Mtpafromisolatedemitterswhicharenotconnectedtohubsand~120Mptaover$120/ton;Source:EPAflightdatabase2019;BCGCCUStoolVolumeofemissionswithinsectorbycost(milliontonsperyear)123<$50/tonHigh-ConcentrationEmissions$50-$85/tonIndustrialEmissions+HighlyUtilizedFossilPowerGen$85-$120/tonPowerGenerationEmissionsTotalsGulfCoastMidwestCaliforniaOhioRiverNortheast/Mid-AtlanticNorthwestRockiesHighCO₂Conc.SectorsLowCO₂Conc.SectorsPowerOther83milliontonsperyear(6%)316milliontonsperyear(23%)956milliontonsperyear(71%)45Qnow$85/ton45Qwas$50/ton16Copyright©2022byBostonConsultingGroup.Allrightsreserved.1CleantechDirectaircapture(DAC)incentivemakesDACfacilitiessignificantlymoreattractiveSource:CARB;StillwaterAssociates;BCGResearchDACisinvestablenowwiththesesignificantincentivesLowertechnologycostsplus45QtaxcreditswillreduceDACcostsandprovideaceilingforNetZerocostsSequestration$180/tonCO2Utilization$130/tonCO2$400$220$180$600$420$200$20$180$70$250Totalcostpre-incentive(range)45QTaxCreditNetabatementcost(range)ProjectedcostofDAC($/ton)inclusiveofnewtaxcredits,2022vs.203020222030$400$270$130$600$470$200$70$130$120$25017CleantechHigherincentiveslikelytoacceleratedeploymentofcleantechnologies184170205160692971<1ThousandtonsH2peryearMilliontonsCO2peryear1MilliontonsCO2peryearBlueH21,0002,248<1GreenH2Hydrogen(H2)Carboncapture,utilization,andstorage(CCUS)DirectAirCapture(DAC)Withexpectationsofcostdeclines,supportforDACprovides"backstop"carbonremovaltechnologyIncreasedcostcompetitivenessofcarboncapturebringcarbonabatementforseveralsectorsin-the-money,e.g.,refining,cement,andsteelCleanhydrogen'scostreductionswilldriveuseasalow-carbonfuelforenergyortransport,andasafeedstocktodecarbonizeproductionofsteelandothermaterials1.Doesnotincludedirectaircapture(DAC)2030volume,basecase(conservativeadoptionrates)2020volume2030volume,'deepgreen'(wideradoptionrates)18TheInflationReductionActalsosimplifiestheabilitytocaptureincentivesTransferabilityTransferabilityremovesneedforequityinvestmenttoreceivetaxcredits,simplifyingfinancingDirectpayDirectpayallowsimmediatepaymentratherthantaxcreditforEVs,butisallowedinonlylimitedsettingsforotherincentives(e.g.,onlytax-exemptandgovernmentalentitiesforrenewables,onlyallowedfor5yearsforcarboncapture)InvestmentclarityQualificationtiming:Billsprovidesfundingforprojectsthatstartconstructionbytheendof2032Fundingduration:Severalincentivesprovidetaxcreditsfor10+years(e.g.,10-yearcleanenergyproductiontaxcredit,12-yearcarbonsequestrationtaxcredit)19RecentUSClimatepoliciesenableacaseforactionacrossindustriesKeyelementsofthelegislationRecentlypassedUSclimatepoliciesarepoisedtodramaticallyshifteconomicviabilityofcarbonfreeenergy,cleantech,andelectricvehicles•Incentiveswillmateriallyreducerenewableandothercarbonfreeenergycosts,withpotentialtodriveincreasesincarbonfreeenergydeploymentto65-80%ofelectricityby2030•EVadoptionwillacceleratebyseveralyears,loweringentrypriceforpassengerandheavy-dutyvehicles.However,inthenear-termthiscouldbeconstrainedbyabilitytorampupsupplychains•Significantfundingforemergingcleantechnologieswillpromoterapiddemonstrationanddeployment,catalyzingdecarbonizationofhard-to-abatesectors•ManufacturingtaxcreditswillboostdomesticproductionofkeyenergyandEVcomponentsDirectimplicationsThesepolicieswillmakedecarbonizationcheaperacrossindustries,butexecutivesmuststartnowtocapturetheirfullvalue•Reducecosts:Takeadvantageofsizablecreditsthatreduceenergyandtransportationcosts,regardlessofindustry•Re-evaluatedecarbonizationplans:Leveragemassiveshiftsincarbonabatementcurvesandcleantechnologyimprovementstoreducegreenhousegasemissions•Captureearlymoveradvantage:Actnowtomitigatebottlenecksexpectedtoemergeinlowcarboninfrastructuredevelopmentandrelatedsupplychains•Pursuenewvaluepools:Planaheadforhowyoucanshapeandcapturevaluefromnewmarketsinenergy,transportation,ormanufacturing122022008040120100360020402806080-80-401600240320Note:Assuming2500Mtofcrudesteelproductionby2040;CO2e(carbondioxideequivalent)Source:BCGDecarbonizationtool;BCGanalysisRecyclingFuelSwitchEfficiencyRenewableelectricityTech.substitutionCleanH2DACCarboncapureAbatementcostcurvefordirectoperationsofillustrativesteelplantAbatementpotential(%ofyearlyCO2eemissions)Illustrativeexample–steelindustryLowestcostdecarbonizationleversareoftenalreadycost-saving211Switchingtorenewableenergyreducesabsolutecostsbasedonnewincentives,inadditiontoabatinggreenhousegasemissions2Costreductionsfromnewpolicies3Certaincleanhydrogen(H2)andcarboncaptureleversarenowin-the-money;othersarenotyetbutarenowhigherpriority3Othertechnologiesarenowrelativelymoreexpensiveasdecarbonizationlevers,changingprioritizationandtradeoffconsiderations54Directaircapture(DAC)providesanabatementcostceiling4CategorizationofdecarbleverAbatementcostforeachdecarbonizationlever($/tonCO2e)5ReevaluatedecarbonizationplansMassivechangestodecarbonizationactions:Steelexample21Copyright©2022byBostonConsultingGroup.Allrightsreserved.2Captureearlymoveradvantage'Sustainabilityscarcity'islikely,givenexpectedrapidscale-up…butsupplyisexpectedtofallshortofdemandforseveralkeytechnologies100xupto200xSupplyofgreenhydrogenwillneedtogrow100–200xtomeetprojectedglobaldemandby2050Supplyofkeymetalsforbatteryproductionislessthan1/3ofwhatisrequiredtomeet2030demand11/34xForecastedsupplyofUSsolarwillneedtogrowby~4xtomeetdemandby2030Source:NetZeroTracker;Science-Based-Targetsinitiative(SBTi);CairnEnergyResearchAdvisors;RenewableEnergyBuyersAlliance(REBA)CorporateRenewableEnergyDealTracker,2019,WoodMackenzieGlobalSolarPVMarketoutlookQ42021,Netadditions,SolarPV-IEARenewables2021,CairnEnergyResearchAdvisors,TheGlobalCommitment2020ProgressReportCorporatedecarbonizationcommitmentshavecontinuedtogrow…Companieswithpledgedscience-basedtargets222PursuenewvaluepoolsNewvaluepoolswillemergeinenergy,transportation,andmanufacturingAsmarthomeandhomesecurityplayerexpandsofferingtosupportresidentialcustomerswithrooftopsolaranddistributedbatteryinstallationAtechnology/softwarecompanyexpandsitsassetmanagementandanalyticsproducttomanagetheoperationsofthegrowingbaseofutility-scalerenewablesCarbon-freeenergyAmedium-dutyOEMofICEvehiclesstartsmanufacturingelectricdeliverytrucksandalsoexpandsintoservicesassociatedwithEVcharginginfrastructureAheavy-dutyvehicleservicecompanywithsitesacrosstheUSexpandsit’sofferingtocoverelectricandfuelcellvehiclesforfleetoperatorsandlong-haultruckingplayersTransportationAchemicalscompanyscalesupproductionofCO2adsorbenttotakeadvantageofagrowingcarboncapturemarketAnenergyplayerbuildslargescalegreenhydrogenparksinadvantagedUShubstoproducegreenAmmoniaforexportCleantechApulpandpapermanufacturerbuildsacostadvantagedzerocarbonfacilityintheUStosellnetzeropackagingsolutionstotheglobalmarketAmetalsprocessingcompanybuildsnewcapacitytosupplyprocessedoretoEVbatterycellandpackmanufacturersManufacturing12435687DeepdiveprovidedonnextpageMiddleEast21.Mediandeliveredcostshownwhereapplicable;Note:Includeshigh-potentialsupplysourcesintoN.Asia,notexhaustive;MiddleEast,S.AmericaandAsiaarerepresentativeofindividualcountriesinregion;IRAincludes$3/kgProductionTaxCredit(PTC)forGreenHydrogenand$0.75/kgPTCforBlueHydrogen;Source:BCGHydrogenSupplyModelDeliveredLevelizedCostofLow-CarbonAmmonia(LCOH)inN.AsiaIllustrativeexample–Low-CarbonHydrogeninN.AsiaPre-IRA:US-producedblueH2competitivewithbutnotcheapestsourceofcleanhydrogenforN.AsiaconsumptionPost-IRA:USH2becomesthemostcompetitiveoptionforN.AsiaTheincentivesshiftcompetitivenessofgreenvs.blueH2,andhavelong-reachingglobalimpactsthatre-ordersupplycompetitivenessoftheUSvs.others2030DeliveredLCOH($/kgH2eq.)inN.Asia1PursuenewvaluepoolsUSexportcompetitivenesswillimproveinastepchange:N.AsiaHydrogenExample0.71.201234S.AmericaAsiaUSApost-IRAUSApost-IRAAsiaUSApre-IRAMiddleEastUSApre-IRA2.0-2.11.8-1.92.4-2.52.6–3.12.9-3.33.7-3.92.7-3.10.6x0.2xGreenH2BlueH2BlueH2(w/IRAPTC)GreenH2(w/IRAPTC)Green:Renewableenergy+waterelectrolysisBlue:Carboncaptureonfossil-derivedhydrogen24Closingthoughts:Far-reachingclimate&energylegislation,implementationisahugeeffortThislegislationreducesthecostoflow-carbontechnologies,atscale,makingmanyofthemmorecompetitivethanfossil-fuelbasedtechnologiesby2030inmanyapplicationsandsectors,withfar-reachingimpactsacrosstheeconomy,includingthosesharedhereTheincentivesbecomemorestraightforwardtoaccessinmanycases,butthereareadditionalchallengestobeovercomeforimplementation:•Detailedrulemakingandregulatoryclarityonspecificstoaccessfullbonusamounts•Regulatorysupport,e.g.,simplifiedpermitting,pendingpotentialcompanionlegislativeaction•Supplychainbottlenecks,toensureadequatesupplyregardlessoforiginofcomponents•Developmentconsiderationsandconstraints,e.g.,wateravailabilityandlanduseconcernsTherewillbemeaningfulknock-oneffects,bothgloballyandatthestate&locallevel,includingsimilarlawsinothercountries,complementingstatelegislation(e.g.,therecentclimatebillinMassachusetts),etc.Beyonditsbroad,industrialpolicy-likeapproach,thebillmayalsoshapeconsumerperceptions,shiftingthe‘newnormal’forrenewableenergy,electricvehicles,H2,andotherkeycomponentsofalow-carboneconomy25ElectricvehiclesDecarbonizingsupplychainsElectricCarsAreFindingTheirNextGearUSInflationReductionActImplicationsforAutoIndustryValueCreationinaDecarbonizingEconomyClimateDisruptionandthePathtoProfitsforMachineryMakersTheClimateActionsCompaniesShouldTakeTodayEnergytransitionAnInflectionPointfortheEnergyTransitionHydrogenTheGreenTechOpportunityinHydrogenHowtoMeettheComingDemandforHydrogenCarboncaptureTheBusinessCaseforCarbonCaptureThinkSmalltoUnlockCarbonCapture'sBigPotentialNovember2,2021June09,2022November2,2021August13,2022November2,2021November16,2021November2,2021October27,2020November2,2021May23,2022November2,2021July04,2022November2,2021April12,2021November2,2021June21,2022November2,2021September24,2019November2,2021September21,2020Furtherreading26BCGcontactsTomBakerMD&PartnerRenewables&DecarbonizationSanFranciscobaker.thomas@bcg.comCorneliusPieper,PhDMD&SeniorPartner,SustainabilityinIndustrialGoodsBostonpieper.cornelius@bcg.comAlexDewarPartnerDecarbonizationWashingtonDCdewar.alex@bcg.comNathanNiesePartner&AssociateDirector,Electrification&TransportationChicagoniese.nathan@bcg.comPattabiSeshadriMD&SeniorPartner,BCGGlobalLeader-EnergyDallasseshadri.pattabi@bcg.comHubiMeineckeMD&SeniorPartner,BCGGlobalLeader–Climate&SustainabilityHamburgMeinecke.Hubertus@bcg.comThomasDaunerMD&SeniorPartner,BCGGlobalLeader-IndustrialGoodsStuttgartdauner.thomas@bcg.com27TheservicesandmaterialsprovidedbyBostonConsultingGroup(BCG)aresubjecttoBCG'sStandardTerms(acopyofwhichisavailableuponrequest)orsuchotheragreementasmayhavebeenpreviouslyexecutedbyBCG.BCGdoesnotprovidelegal,accounting,ortaxadvice.TheClientisresponsibleforobtainingindependentadviceconcerningthesematters.ThisadvicemayaffecttheguidancegivenbyBCG.Further,BCGhasmadenoundertakingtoupdatethesematerialsafterthedatehereof,notwithstandingthatsuchinformationmaybecomeoutdatedorinaccurate.Thematerialscontainedinthispresentationaredesignedforthesoleusebytheboardofdirectorsorseniorma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