Tax Credits, Deductions and Exemptions

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    Solar Manufacturing Lured to U.S. by Tax Credits in Climate Bill

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    A combination of government policies is finally succeeding in reversing a long decline in solar manufacturing in the United States.Six years ago, an executive from Suniva, a bankrupt solar panel manufacturer, warned a packed hearing room in Washington that competition from companies in China and Southeast Asia was causing a “blood bath” in his industry. More than 30 U.S.-based solar companies had been forced to shut down in the previous five years alone, he said, and others would soon follow unless the government supported them.Suniva’s pleas helped spur the Trump administration to impose tariffs in 2018 on foreign-made solar panels, but that did not reverse the flow of jobs in the industry from going overseas. Suniva’s U.S. factories remained shuttered, with dim prospects for reopening.That is, until now. Last month, Suniva announced plans to reopen a Georgia plant, buoyed by tariffs, protective regulations and, crucially, lavish new tax breaks for Made-in-America solar manufacturing that President Biden’s signature climate law, the Inflation Reduction Act, created.Solar companies have long been the beneficiaries of government subsidies and trade protections, but in the United States, they have never been the object of so many simultaneous efforts to support the industry — and so much money from the government to back them up.The combination of billions of dollars of tax credits for new facilities and tougher restrictions on foreign products appears to be driving a wave of so-called reshoring of solar jobs. Those efforts are succeeding where more modest approaches did not, although critics argue that the gains come at a high cost to taxpayers and may not hold up in the long run.In the year since the climate law was passed, companies have announced nearly $8 billion in new investments in solar factories across the United States, according to data from the Massachusetts Institute of Technology and the Rhodium Group, a nonpartisan research firm. That is more than triple the amount of total investment announced from 2018 through the middle of 2022.Suniva plans to reopen and expand a factory to make solar cells in Norcross, Ga., by spring. REC Silicon will restart this month a polysilicon plant in Moses Lake, Wash., that it shut down in 2019. Maxeon, a Singapore-based producer of solar cells and modules, will start work next year on a $1 billion site in New Mexico.In each of those cases, executives cited the incentives in the climate law as a driving factor in their investment decisions.In recent years, China overtook foreign competitors through huge government investments that allowed it to build factories 10 times as large as American ones.Gilles Sabrie for The New York Times“It was kind of exactly what we had in mind in terms of what would be needed, to pull these kinds of manufacturing initiatives forward,” said Peter Aschenbrenner, Maxeon’s chief strategy officer.China has loomed large over the industry for more than a decade. American demand for solar power has grown sharply since 2010 — by about 24 percent each year in that time, according to the Solar Energy Industries Association, a trade group. But much of that spending went to cheaper foreign solar panels, often made by Chinese companies or with Chinese parts. That raised concerns of American overreliance on China, which is restricting supplies of other key products and whose solar production has been troubled by human rights concerns.U.S. solar manufacturing employment peaked in 2016, with just over 38,000 workers. By 2020, nearly one-fifth of those jobs were gone.Factory solar jobs have begun to grow again.E2, an environmental nonprofit organization, estimated that new investments announced in the first year of the climate law would create 35,000 temporary construction jobs and 12,000 permanent jobs across the entire solar industry in the years to come. Thousands of those permanent jobs are related to manufacturing, including an expected 2,000 at Maxeon’s planned plant in New Mexico.Economists and executives said that surge was largely due to public subsidies that flipped the economics of the solar industry in favor of domestic production.Mr. Aschenbrenner said Maxeon’s cost of domestic solar manufacturing would fall roughly 10 percent, just through a new manufacturing tax credit in the climate law that targets the production of both solar cells and solar modules. That is enough to offset the higher wage and construction costs of American factories, he said.The law also includes credits for customers, like homeowners and utilities, that install solar panels and begin generating electricity from them. If the customer buys panels that are sourced from the United States, like the ones Maxeon is planning, the value of that credit grows 10 percent.Those incentives could be enough to build an American industry that, within a matter of years, could be large and efficient enough to compete with China even without subsidies, Mr. Aschenbrenner said.Others are more skeptical. Analysts at Wood Mackenzie, an energy consultancy, estimate that nearly half the solar module capacity announced by 2026 will not materialize, given that some manufacturers announce long-term plans to gauge feasibility and interest.The recent embrace of subsidies and tariffs by politicians of both parties also irks some economists, who say that while such programs can save or create jobs, they do so at an extremely high cost.A 2021 study by the Peterson Institute of International Economics of past industrial policy programs found that the Obama administration’s 2009 investment in Solyndra, a solar company that ultimately went bankrupt, cost taxpayers about $216,000 for each job created, more than four times prevailing industry wages. Other programs were even more expensive.REC Silicon, a Norwegian maker of polysilicon, entered into a deal with QCells to supply that company’s planned U.S. plants.Megan Varner/Reuters“With certain kinds of technology, you can subsidize and protect your way to having factories,” said Scott Lincicome, who studies trade policy at the Cato Institute, a libertarian think tank. “The question is always about at what cost?”In addition to the costs incurred to taxpayers, protections for the U.S. industry are making solar products more expensive in the United States than in other countries, Mr. Lincicome said. That slows the adoption of solar technology, in contrast to climate goals.Trends in the global solar industry have often been closely linked with government action. The industry started booming over a decade ago when Germany and Japan began offering subsidies for solar power.In recent years, China overtook foreign competitors through huge government investments that allowed it to build factories 10 times as large as American ones. Since 2011, China has invested more than $50 billion in the sector, ultimately capturing more than 80 percent of the global share of every stage in the manufacturing process, according to the International Energy Agency.Tariffs also shaped the industry’s evolution. The United States imposed levies on Chinese solar products in 2012. The next year, China retaliated with tariffs of up to 57 percent on U.S. polysilicon, a raw material for solar panels.That proved to be the death knell for the factory that REC Silicon, a Norwegian maker of polysilicon, was operating in Washington State, said Chuck Sutton, the company’s vice president of global sales and marketing. With few companies still standing outside China, REC Silicon “basically didn’t have any customers left,” he said.REC Silicon worked with the Trump administration to get China to commit to buying more American polysilicon as part of a 2019 trade deal. But China never followed through on those purchases.The turnaround for REC Silicon came, Mr. Sutton said, with the new tax credits this year. The manufacturer entered into a deal with QCells to supply its polysilicon to QCells’ planned U.S. plants. The deal allowed REC Silicon to reopen its Washington site, Mr. Sutton said.To compete with China, the industry needed “a whole-of-government approach,” Mr. Card of Suniva said, that included both tariffs and tax credits for domestic manufacturing.“They are not opposing forces,” he said. “They work together and make each other stronger.” More

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    A Rural Michigan Town Is the Latest Battleground in the U.S.-China Fight

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    Firestorms over Chinese investments, like a battery factory in Green Charter Township, are erupting as officials weigh the risks of taking money from an adversary.Yard signs along the quiet country roads of Green Charter Township, Mich., home to horse farms and a 19th-century fish hatchery, blare a message that an angered community hopes is heard by local leaders, the Biden administration and China: “No Gotion.”The opposition is to a plan by Gotion, a subsidiary of a Chinese company, to build a $2.4 billion electric vehicle battery factory on roughly 270 acres of largely uninhabited scrub land. An investment of that magnitude can transform a local economy, but in this case it is unwelcome by many. Residents fear that the company’s presence is a dangerous infiltration by the Chinese Communist Party and it has led to backlash, death threats and an attempt to unseat the elected officials who backed the project.The debate over the factory has turned a township of about 3,000 people located 60 miles north of Grand Rapids against each other and into an unlikely battleground in the economic contest between the United States and China. The resistance is part of a broader movement by states to erect new barriers to Chinese investment amid concerns about national security and growing anti-China sentiment.“It’s the Communist influences that I’m bothered by, because they have shown repeatedly that they don’t care about our rules, our laws or anything,” said Lori Brock, who lives on a 150-acre horse farm near where the battery factory is being built. “They shouldn’t be able to buy here.”Gotion purchased 270 acres of land in Green Charter Township with plans to build an electric vehicle battery plant.Cydni Elledge for The New York TimesThat sentiment has been reverberating in the United States and on the Republican presidential campaign trail this year. In August, the campaign of Nikki Haley called Michigan’s Democratic governor, Gretchen Whitmer, a “comrade” for backing the Gotion factory. On Wednesday, Vivek Ramaswamy, a Republican candidate who has called for banning Chinese investments, will hold a rally at Ms. Brock’s farm.Gotion has insisted that it has no ideological ties to China. John Whetstone, a company spokesman, said Gotion was “in no way affiliated with any political party,” explaining that it had pledged to the township not to partake in any activity that supports or encourages any political philosophy.Animosity toward China has been deterring Chinese investment in the United States in recent years. Annual investment by Chinese companies has fallen to $5 billion in 2022 from $46 billion in 2016, according to a recent report by Rhodium Group, as relations between the world’s two largest economies soured. Employment at Chinese firms in the United States has declined by nearly 40 percent since 2017, to 140,000 workers.But investment is starting to turn around as a result of new federal incentives — included in the 2022 Inflation Reduction Act — that were meant to spur American production of electric vehicles. Foreign companies, including those from China, are trying to capitalize on tax credits for businesses that manufacture renewable energy products inside the United States.The Coalition for a Prosperous America, which represents American manufacturers, estimates that Chinese companies could gain access to $125 billion in U.S. tax credits related to “green energy manufacturing” investments.“There are really strong commercial logics driving this, and those commercial logics aren’t going away anytime soon,” said Kyle Jaros, a professor at the University of Notre Dame, who studies Chinese investment in the United States.The possibility that American taxpayers could subsidize Chinese firms has stoked anger in local communities and in Congress, where lawmakers are scrutinizing transactions involving companies with ties to China and urging the Biden administration to block them.Experts predict that Chinese companies will continue to pursue investments in the United States but concerns at the local level and in Washington are mounting.Cydni Elledge for The New York TimesSenator Marco Rubio of Florida, a Republican, has introduced legislation that would block subsidies to Chinese battery companies. A House committee has demanded answers about a licensing agreement between Ford and the Chinese battery company Contemporary Amperex Technology Co. Limited. Ford has defended the project and described it as an effort to strengthen domestic battery production.House Republicans have also urged Treasury Secretary Janet L. Yellen to withhold any federal subsidies for the Gotion facility and questioned why the Committee on Foreign Investment in the United States did not block its investment.Gotion has said that it voluntarily submitted documents to the interagency panel, known as CFIUS, and the committee declined to block the transaction.The Inflation Reduction Act does restrict American consumers from getting tax credits if they buy electric cars that have parts that come from “foreign entities of concern,” such as China. However, the law does not allow the Treasury to block Chinese companies from securing tax credits if they build factories in the United States.“We know that the vast majority of investments made through the Inflation Reduction Act are being made by American companies,” said Wally Adeyemo, the deputy Treasury Secretary.The Treasury estimates that only 2 percent of the electric vehicle and battery investments that have been made during the Biden administration involve Chinese companies.Gotion already has operations in California and Ohio and plans to open a $2 billion lithium battery manufacturing plant in Illinois. The company chose Michigan last year after securing nearly $800 million in grants and tax exemptions from the state’s strategic fund, whose officials said the investment would bring jobs, customers and economic vitality to the region. At the time, Ms. Whitmer hailed the factory as a win for the state.Since then, a growing and vocal contingent has been working to halt the project.Much of that effort has been directed at Green Charter Township’s board of trustees, a group of local Republican officials who voted to allow Gotion to secure the state tax breaks. When residents realized that the company that was coming to town had ties to China, township meetings that usually drew a handful of people attracted hundreds of angry critics.Green Charter Township’s supervisor, Jim Chapman, sees the advantages of having a Gotion electric vehicle battery plant in the region.Cydni Elledge for The New York TimesJim Chapman, the township supervisor, has heard residents suggest that they would call in the Michigan militia or exercise their Second Amendment rights to stop Gotion from building the factory. Mr. Chapman, a lifelong Republican and former police officer, has found himself in the position of trying to convince his neighbors that allowing Gotion to bring more than 2,000 new jobs to the area will create a housing boom and bring other new businesses to the area.Yet residents have confronted Mr. Chapman with a host of conspiracy theories including that the plant is a “Trojan Horse” and that it will be used to spy on Americans. Some in town believe that the plant will employ cheap Chinese labor, instead of local workers, and erect cooling towers to conceal ballistic missiles.“No Gotion” groups active on Facebook and other social media platforms have seized on the company’s bylaws, which say the company operates in accordance with the Constitution of the Communist Party of China.Kelly Cushway, an organizer in the Gotion resistance movement, opposes the facility and is running for trustee of Green Charter Township.Cydni Elledge for The New York Times“I will go to my grave and people will curse me for this project,” Mr. Chapman said during an interview in his office inside the Green Charter Township building.After researching the company and the actions of other Chinese businesses that operate in the United States, Mr. Chapman concluded that Gotion was not a threat and that the opportunity to invigorate a relatively poor part of the state was worthwhile.“What are they going to spy on us for in Big Rapids? Are they going to steal Carlleen Rose’s fudge recipe?” Mr. Chapman asked, referring to the owner of a popular confectionery in Big Rapids.Opponents hope that a November recall election can replace the board and stop Gotion in its tracks. Residents are raising money to file lawsuits and petition against every permit that Gotion will need to construct a factory that is expected to span more than a million square feet.“I’m worried about environmental catastrophes — there’s going to be 200 to 300 truckloads of chemicals coming in every day,” said Kelly Cushway, who opposes Gotion and is running for a seat on the Green Charter Township board. “We know China has not worried too much about their environment.”Some community activists such as Ms. Brock are coordinating with counterparts in other states including North Dakota, where Fufeng USA tried and failed to construct a corn mill, to learn how to terminate a Chinese investment.Ms. Brock said she remained hopeful that the Gotion factory in her town could be halted.“We haven’t even started,” Ms. Brock said. “We haven’t even hit them with one lawsuit yet, and it’s coming.” More

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    U.S. Issues Final Rules to Keep Chip Funds Out of China

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    The rules, which aim to prevent chip makers from using new U.S. subsidies to benefit China, take into account the industry’s perspective.The Biden administration on Friday issued final rules that would prohibit chip companies vying for a new infusion of federal cash from carrying out certain business expansions, partnerships and research in China, in what it described as an effort to protect United States national security.The regulations come as the Biden administration prepares to disburse more than $52 billion in federal grants and tens of billions of dollars of tax credits to build up the U.S. chip industry. The new rules aim to prevent chip makers that benefit from U.S. grants from passing technology, business know-how or other benefits to China.The final restrictions will prohibit firms that receive federal money from using it to construct chip factories outside the United States. They also restrict companies from significantly expanding semiconductor manufacturing in “foreign countries of concern” — defined as China, Iran, Russia and North Korea — for 10 years after receiving an award, the administration said.The rules also prevent companies that receive funding from carrying out certain joint research projects in those countries, or licensing technology that would raise national security concerns to those countries.If a company violated those guardrails, the Commerce Department said, the government could claw back the firm’s entire award.“These guardrails will protect our national security and help the United States stay ahead for decades to come,” Gina M. Raimondo, the secretary of commerce, said in a statement.The restrictions have been the subject of heavy lobbying from the chip industry, which collectively earns about one-third of its revenue from China. Chip makers in comments filed this year expressed concerns that overly restrictive measures could disrupt supply chains and hamper their global competitiveness.Many of the rule’s broad principles, like the 10-year limit on new investments in China, were outlined in the bipartisan legislation that authorized funding for the sector. But Commerce Department officials were responsible for writing the detailed provisions of the rule.In its final rules issued Friday, the department appeared to take the perspective of chip makers and others into account. A comparison of the restrictions showed that the department had made several changes supported by chip makers, such as abolishing a specific dollar threshold for transactions that would expand chip companies’ manufacturing capacity in China, Russia, North Korea or Iran. Under the proposed rule in March, the Commerce Department would have reviewed any transaction that expanded a company’s semiconductor manufacturing capacity in such a “country of concern” valued at more than $100,000.But companies like Taiwan Semiconductor Manufacturing Company suggested that it would be more pragmatic for the department to monitor the physical expansion of the footprint of semiconductor factories, a standard that the commerce department adopted.It remains to be seen if any of the changes will prompt a backlash from Republicans on Capitol Hill, who have criticized the Biden administration as not being tough enough on Beijing and condemned a recent set of trips to China by top administration officials.In an interview on Friday, Commerce Department officials said that they had received various requests from the industry to relax certain guidelines, but that they had maintained or even strengthened some provisions where necessary to protect national security.One official added that the national security goal of the program was to have companies operating in the United States and doing so successfully, and that the department aimed to work with companies to ensure they were executing on U.S. grants.“My sense is that they struck a reasonable balance between trying to be restrictive but also not trying to be draconian with the impact on existing facilities in China,” said Chris Miller, the author of “Chip War” and an associate professor of international history at the Fletcher School at Tufts University. More

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    U.S. National Debt Tops $33 Trillion for First Time

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    The fiscal milestone comes as Congress is facing a new spending fight with a government shutdown looming.America’s gross national debt exceeded $33 trillion for the first time on Monday, providing a stark reminder of the country’s shaky fiscal trajectory at a moment when Washington faces the prospect of a government shutdown this month amid another fight over federal spending.The Treasury Department noted the milestone in its daily report detailing the nation’s balance sheet. It came as Congress appeared to be faltering in its efforts to fund the government ahead of a Sept. 30 deadline. Unless Congress can pass a dozen appropriations bills or agree to a short-term extension of federal funding at existing levels, the United States will face its first government shutdown since 2019.Over the weekend, House Republicans considered a short-term proposal that would slash spending for most federal agencies and resurrect tough Trump-era border initiatives to extend funding through the end of October. But the plan had little hope of breaking the impasse on Capitol Hill, with Republicans still divided on their demands and Democrats unlikely to support whatever compromise they reach among themselves.The debate over the debt has grown louder this year, punctuated by an extended standoff over raising the nation’s borrowing cap.That fight ended with a bipartisan agreement to suspend the debt limit for two years and cut federal spending by $1.5 trillion over a decade by essentially freezing some funding that had been projected to increase next year and then limiting spending to 1 percent growth in 2025. But the debt is on track to top $50 trillion by the end of the decade, even after newly passed spending cuts are taken into account, as interest on the debt mounts and the cost of the nation’s social safety net programs keeps growing.But slowing the growth of the national debt continues to be daunting.Some federal spending programs that passed during the Biden administration are expected to be more costly than previously projected. The Inflation Reduction Act of 2022 was previously estimated to cost about $400 billion over a decade, but according to estimates by the University of Pennsylvania’s Penn Wharton Budget Model it could cost more than $1 trillion thanks to strong demand for the law’s generous clean energy tax credits.Pandemic-era relief programs are still costing the federal government money. The Internal Revenue Service said last week that claims for the Employee Retention Credit, a tax benefit that was originally projected to cost about $55 billion, have so far cost the federal government $230 billion. The I.R.S. is freezing the program because of fears about fraud and abuse.At the same time, several of President Biden’s attempts to raise more revenue through tax changes have been met with resistance.In late 2022, the I.R.S. delayed by one year a new tax policy that would require users of digital wallets and e-commerce platforms to start reporting small transactions to the agency. The policy was projected to raise about $8 billion in additional tax revenue over a decade.Last month, the I.R.S. delayed by two years a new provision that will stop high earners from being able to funnel extra money into their 401(k) retirement accounts. The agency described the delay as an “administrative transition period.”Meanwhile, lobbyists are pressing for loopholes in new taxes that have been enacted. The 15 percent corporate alternative minimum tax was devised to ensure that rich companies could no longer get away with paying single-digit tax rates because of creative use of deductions. However, many of these companies have been pushing the Treasury Department, which is currently writing the rules that will govern the tax, to create exceptions to preserve their most prized deductions. That tax is different from the global minimum tax that most countries, except the United States, are working to adopt.The pushback against efforts to raise revenue and cut spending has heightened the sense of alarm among budget watchdog groups that fear that a fiscal crisis is approaching.“As we have seen with recent growth in inflation and interest rates, the cost of debt can mount suddenly and rapidly,” said Michael A. Peterson, the chief executive of the Peter G. Peterson Foundation, which promotes fiscal restraint. “With more than $10 trillion of interest costs over the next decade, this compounding fiscal cycle will only continue to do damage to our kids and grandkids.”Republicans and Democrats in the House and the Senate continue to be divided on a path forward to avoid the near-term problem of a shutdown, and lawmakers have started pressing for leaders to begin focusing on a stopgap bill to keep the government operating past Sept. 30.But the red ink continues to mount.A Treasury Department report last week showed that the deficit — the gap between what the United States spends and what it collects through taxes and other revenue — was $1.5 trillion for the first 11 months of the fiscal year, a 61 percent increase from the same period a year ago.In an interview with CNBC on Monday, Treasury Secretary Janet L. Yellen said she was comfortable with the nation’s fiscal course because interest costs as a share of the economy remained manageable. However, she suggested that it was important to be mindful of future spending.“The president has proposed a series of measures that would reduce our deficits over time while investing in the economy,” Ms. Yellen said, “and this is something we need to do going forward.” More

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    Biden’s Climate Law Is Reshaping Private Investment in the United States

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    Lucrative tax incentives have fueled a surge in solar panels but failed to boost wind power, data from a new project show.Private investment in clean energy projects like solar panels, hydrogen power and electric vehicles surged after President Biden signed an expansive climate bill into law last year, a development that shows how tax incentives and federal subsidies have helped reshape some consumer and corporate spending in the United States.New data being released on Wednesday suggest the climate law and other parts of Mr. Biden’s economic agenda have helped speed the development of automotive supply chains in the American Southwest, buttressing traditional auto manufacturing centers in the industrial Midwest and the Southeast. The 2022 law, which passed with only Democratic support, aided factory investment in conservative bastions like Tennessee and the swing states of Michigan and Nevada. The law also helped underwrite a spending spree on electric cars and home solar panels in California, Arizona and Florida.The data show that in the year since the climate law passed, spending on clean-energy technologies accounted for 4 percent of the nation’s total investment in structures, equipment and durable consumer goods — more than double the share from four years ago.The law so far has failed to supercharge a key industry in the transition from fossil fuels that Mr. Biden is trying to accelerate: wind power. Domestic investment in wind production declined over the past year, despite the climate law’s hefty incentives for producers. And so far the law has not changed the trajectory of consumer spending on some energy-saving technologies like highly efficient heat pumps.But the report, which drills down to the state level, provides the first detailed look at how Mr. Biden’s industrial policies are affecting clean energy investment decisions in the private sector.The data come from the Clean Investment Monitor, a new initiative from the Rhodium Group, a consulting firm; and the Massachusetts Institute of Technology’s Center for Energy and Environmental Policy Research. Its findings go beyond simpler estimates, from the White House and elsewhere, providing the most comprehensive look yet at the effects of Mr. Biden’s economic agenda on America’s emerging clean-energy economy.The researchers spearheading the first cut of the data include Trevor Houser, a former Obama administration official, who is a partner at Rhodium; and Brian Deese, a former director of Mr. Biden’s National Economic Council, who is an innovation fellow at M.I.T.The climate bill President Biden signed into law last year includes a wide range of lucrative incentives to encourage domestic manufacturing and speed the nation’s transition away from fossil fuels. Doug Mills/The New York TimesThe Inflation Reduction Act, which Mr. Biden signed into law in August 2022, includes a wide range of lucrative incentives to encourage domestic manufacturing and speed the nation’s transition away from fossil fuels. That includes expanded tax breaks for advanced battery production, solar-panel installation, electric vehicle purchases and other initiatives. Many of those tax breaks are effectively unlimited, meaning they could eventually cost taxpayers hundreds of billions of dollars — or even top $1 trillion — if they succeed at driving enough new investment.Biden administration officials have tried to quantify the effects of that law, along with bipartisan legislation on infrastructure and semiconductors signed by the president earlier in his term, by tallying up corporate announcements of new spending linked to the legislation. A White House website estimates that companies have so far announced $511 billion in commitments for new spending linked to those laws, including $240 billion for electric vehicles and clean energy technology.The Rhodium and M.I.T. analysis draws on data from federal agencies, trade groups, corporate announcements and securities filings, news reports and other sources to try to construct a real-time estimate of how much investment has already been made in the emissions-reducing technologies targeted by Mr. Biden’s agenda. For comparison purposes, its data stretch back to 2018, under President Donald J. Trump.The numbers show that actual — not announced — business and consumer investment in clean-energy technologies hit $213 billion in the second half of 2022 and first half of 2023, after Mr. Biden signed the climate law. That was up from $155 billion the previous year and $81 billion in the first year of the data, under Mr. Trump.Trends in the data suggest that the impact of Mr. Biden’s agenda on clean-energy investment has varied depending on the existing economics of each targeted technology.Mr. Biden’s biggest successes have come in spurring increased investment in American manufacturing, and in catalyzing investment in technologies that remain relatively new in the marketplace.Fueled partly by foreign investment, like in battery plants in Georgia, actual investment in clean-energy manufacturing more than doubled over the last year from the previous year, the data show, totaling $39 billion. Such investment was almost nonexistent in 2018.The bulk of that spending was focused on the electric-vehicle supply chain, including in the new Southwest cluster of activity across California, Nevada and Arizona. The Inflation Reduction Act includes multiple tax breaks for such investment, with domestic-content requirements meant to encourage production of critical minerals, batteries and automotive assembly in the United States.The big winners in manufacturing investment, though, as a share of states’ economies, remain traditional auto states: Tennessee, Kentucky, Michigan and South Carolina.Mr. Biden’s bipartisan infrastructure law targets the clean-energy economy, including spending to build out more charging stations for electric vehicles.Gabby Jones for The New York TimesThe climate law also appears to have supercharged investment in so-called green hydrogen, which splits water atoms to create an industrial fuel. The same is true of carbon management — which seeks to capture and store greenhouse gas emissions from existing energy plants or pull carbon out of the atmosphere. All those technologies struggled to gain traction in the United States before the law showered them with tax breaks.Hydrogen and much of the carbon-capture investment is concentrated along the coast of the Gulf of Mexico, a region filled with incumbent fossil fuel companies that have begun to branch into those technologies. Another cluster of carbon-capture investment is concentrated in Midwestern states like Illinois and Iowa, where companies that produce corn ethanol and other biofuels are beginning to spend on efforts to sequester their emissions.The incentives for those technologies in the Inflation Reduction Act, along with other support in the bipartisan infrastructure law, “fundamentally change the economics of those two technologies, making them broadly cost-competitive for the first time,” Mr. Houser said in an interview.Other incentives have not yet budged the economics of critical technologies, most notably wind power, which boomed in recent years but is now facing global setbacks as projects become increasingly expensive to finance.Wind investment was lower in the first half of this year than at any point since the database was started.In the United States, wind projects are struggling to navigate government processes for permitting, transmission and locating projects, including opposition from some state and local lawmakers. Solar projects and related investment in storage for solar power, Mr. Houser noted, can be built closer to power consumers and have fewer hurdles to clear, and investment in them grew by 50 percent in the second quarter of 2023 from a year earlier.Some consumer markets have yet to be swayed by the promise of tax breaks for new energy technologies. Americans have not increased their spending on heat pumps, even though the law covers up to $2,000 toward the purchase of a new one. And over the last year, the states with the highest spending as a share of their economy on heat pumps are all concentrated in the Southeast — where, Mr. Houser said, consumers are more likely to already own such pumps, and to be in need of a new one. More

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    Poverty Rate Soared in 2022 as Aid Ended and Prices Rose

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    The increase in poverty reversed two years of large declines. Median income, adjusted for inflation, fell 2.3 percent to $74,580.Poverty increased sharply last year in the United States, particularly among children, as living costs rose and federal programs that provided aid to families during the pandemic were allowed to expire.The poverty rate rose to 12.4 percent in 2022 from 7.8 percent in 2021, the largest one-year jump on record, the Census Bureau said Tuesday. Poverty among children more than doubled, to 12.4 percent, from a record low of 5.2 percent the year before. Those figures are according to the Supplemental Poverty Measure, which factors in the impact of government assistance and geographical differences in the cost of living.The increases followed two years of historically large declines in poverty, driven primarily by safety net programs that were created or expanded during the pandemic. Those included a series of direct payments to households in 2020 and 2021, enhanced unemployment and nutrition benefits, increased rental assistance and an expanded child tax credit, which briefly provided a guaranteed income to families with children.Nearly all of those programs had expired by last year, however, leaving many families struggling to stay ahead of rising prices despite a strong job market and improving economy. Overall poverty now looks much the way it did in 2019, with the notable difference that financial hardship has declined among Black households, reflecting higher incomes in recent years.The Share of Children in Poverty More Than DoubledThe poverty rate for those under 18 rose to 12.4 percent last year.

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    Share of each age group living in poverty
    Note: Data are the supplemental poverty rates, which adjust for geographic differences. The rates also include wage income, taxes and the fullest account of government aid.Source: Census BureauBy Karl RussellOne pandemic program that did not expire was a temporary freeze in Medicaid terminations, a move that allowed the program to cover more Americans than ever. Because of that program, the share of Americans without health insurance matched a record low last year of 7.9 percent. But states are unwinding that temporary coverage, and the uninsured rate has probably increased in recent months.The increasing cost of living added to the challenge last year. The poverty threshold, which is based on the cost of essential items like food and housing, rose sharply: A family of four living in a rental home was considered poor under the supplemental measure if the family’s income was less than $34,518 in 2022, up from $31,453 in 2021.Higher prices didn’t just hit the poor. Median household income, adjusted for inflation, fell 2.3 percent in 2022, to $74,580, as the fastest inflation since 1981 overwhelmed the impact of increased employment and rising wages.“People are working hard,” said Margaret O’Conor, who runs Common Pantry, a small food bank in Chicago. “They’re just not making ends meet, the cost of living is too much.” Rent in particular has soaked up a lot of people’s extra earnings.Common Pantry, like many food banks, had demand explode during the pandemic and then recede in 2021, when people received stimulus checks, enhanced unemployment benefits and the child tax credit, among other assistance. Then, as those programs lapsed, demand began to climb again.“2022 just threw us,” Ms. O’Conor said. “We were not expecting it. I don’t think any food pantry was really expecting it.”The White House, in a blog post previewing the report, argued that more recent data “tell a more optimistic story.” Inflation has cooled in recent months, while the job market has remained strong and wages continue to rise.The hot job market has had clear benefits for those able to take advantage of it. Many workers, especially in low-paying industries like hospitality and retail, experienced significant wage gains in 2022. Supersized unemployment benefits and other cash payments allowed workers to hold out for higher-paying jobs. Income for the poorest 20 percent of households — excluding tax credits and some other government benefits — rose 4.3 percent last year, adjusted for inflation. Income gains also outpaced inflation for the least educated workers.Those effects were more pronounced for women. The share of working women who were employed full time for the whole year reached 65.6 percent, the highest level on record — which also allowed real earnings to fall less for women than they did for men.The story was not as rosy for Americans over 65, for whom the poverty rate rose to 14.1 percent, despite an 8.7 percent cost-of-living increase in Social Security payments. Labor force participation among older people remains depressed, as many lost jobs and have had a difficult time re-entering the workplace.“People became more isolated, experienced significantly more health problems,” said Jess Maurer, the executive director of the Maine Council on Aging. “Older people had a harder time coming out of the pandemic, coming back into the community.”Inequality, as measured by the gap in pretax income between the richest and poorest 10 percent of households, narrowed, as most of the decrease in median incomes came from those at the middle and top of the wage distribution. Racial gaps also shrank, as white households lost ground to inflation, while inflation-adjusted income was little changed for other racial and ethnic groups.The “official” poverty rate — an older measure that is widely considered outdated because it excludes many of the government’s most important anti-poverty programs, among other shortcomings — was nearly flat last year, at 11.5 percent, reflecting the offsetting forces of higher prices and increased earnings of low-wage workers. By that measure, the poverty rate for Black Americans was 17.1 percent, the lowest rate on record.U.S. Poverty Increased Last YearThe supplemental poverty rate — which accounts for the impact of government programs — increased to to 12.4 percent last year, surpassing the official poverty rate, which was 11.5 percent.

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    Share of the population living in poverty
    Note: The supplemental rate adjusts for geographic differences. It also includes wage income, taxes and the fullest account of government aid.Source: Census BureauBy Karl Russell“There has really been this resurgence in terms of the labor market fortunes of Black workers, particularly Black male workers,” said Michelle Holder, an economist at John Jay College in New York. “The most important element for people in my community is can we get a job, and if we can get a job, can we keep a job? And right now, both things look pretty darn good.”But those unable to work, or unable to work full-time, faced a one-two punch of higher costs and lost benefits in 2022 — problems that have continued this year. Increased federal nutrition benefits, one of the last vestiges of pandemic aid efforts, expired last spring. Factoring in the loss of benefits, real income fell for the poorest households in 2022, and inequality rose.“Tight labor markets are incredibly powerful, they’re really important, but they’re not sufficient,” said Elisabeth Jacobs, a senior fellow at the Urban Institute.When a high-risk pregnancy forced Amber Summers to leave her job in rural Southern Illinois in 2021, the expanded child tax credit provided a lifeline. The $250 monthly payments helped cover her mortgage and allowed her son, now 9, to play Little League Baseball for the first time.“It was financial stability and stress relief for our family,” she said.But when the payments lapsed at the end of 2021, the family’s finances quickly unraveled — especially after Ms. Summers’s husband, Tim, contracted Covid and lost his job as a cook. And while both of them have since returned to work, neither is receiving full-time hours, and they are falling further behind on their bills. Opportunities for better-paying jobs are limited in their area.“The child tax credit helped pull our family out of poverty for such a short period of time,” Ms. Summers, 32, said.Congress passed the expanded child tax credit as part of the American Rescue Plan, President Biden’s pandemic-relief package, in early 2021. But while other Covid-era relief programs were always intended to expire once the emergency passed, supporters hoped to make the expanded child credit permanent.That didn’t happen. Faced with united opposition from congressional Republicans as well as some conservative Democrats, Mr. Biden dropped his effort to extend the program at the end of 2021; a renewed push failed again last year. The rise in poverty in 2022, social policy experts said, was the inevitable result of that decision.“Today’s Census report shows the dire consequences of congressional Republicans’ refusal to extend the enhanced Child Tax Credit, even as they advance costly corporate tax cuts,” Mr. Biden said in a statement.Correspondingly, the highest increases in poverty were in the South, where research has shown the child tax credit had the greatest effect, and among Alaska Natives and American Indians, for whom the poverty rate rebounded to 23.2 percent.Critics of the child tax credit and other pandemic aid have argued that the rapid rebound in poverty after the programs’ expiration is evidence that the progress made against poverty in recent years was, in effect, artificial. Michael Strain, an economist at the conservative American Enterprise Institute, argued that programs that offer incentives to work — such as the earned-income tax credit and the standard child tax credit — have led to more sustainable gains.“Yes, this alleviated child poverty, but it didn’t really do a whole lot to encourage self-sufficiency,” he said.Progressives take a different lesson: Government programs succeeded in lifting millions of people out of poverty. An analysis by researchers at Columbia University on Tuesday found that child poverty would have been nearly 50 percent lower in 2022 if the expanded tax credit had remained in place. The programs might also have had longer-run benefits, they argue, but ended before those effects could be seen.“The last few years just illustrated in an incredible way the power of effective government intervention,” said Arloc Sherman, a vice president at the Center on Budget and Policy Priorities, a progressive research organization. “The last couple years, through a plunge in poverty and what is now a record single-year increase in poverty in 2022, have shown that poverty is very much a policy choice.”Margot Sanger-Katz More

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    Schumer Wields Political Heft in Bid for New York Chips Funds

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    The Senate majority leader helped deliver billions of dollars in federal funding for semiconductors. Now he’s pushing for his state to reap benefits.In a darkened hotel ballroom in San Jose, Calif., last November, the most powerful players in the semiconductor industry received a familiar sales pitch.Senator Chuck Schumer, the majority leader, appeared by video message to urge the industry titans at the Semiconductor Industry Association’s annual awards dinner to work together to strengthen American manufacturing of a critical technology — and to invest more in his home state of New York.“I ask that more of the industry consider investing in the Empire State, and if you do, you’ll find no greater champion in your corner than me, the Senate majority leader,” Mr. Schumer said, to cheers and laughs of recognition from a crowd accustomed to the senator’s solicitations.Amid growing fears about China’s dominance of technology and America’s loss of competitiveness, Mr. Schumer last year helped rally Congress to push through the biggest industrial policy programs the United States has seen a generation. The Biden administration is now preparing to invest tens of billions of dollars in the U.S. semiconductor industry in an effort to boost chip manufacturing across the country and lessen U.S. reliance on foreign factories.If Mr. Schumer gets his way, a substantial part of that funding will flow to New York.In his encounters with chip executives, Commerce Secretary Gina Raimondo and President Biden himself, Mr. Schumer has openly and aggressively drawn on his political capital as majority leader to try to channel investment to his home state. During the months where Congress was debating whether to approve that funding, industry executives who set foot in Mr. Schumer’s office or spoke to him on the flip phone he carries in his breast pocket were asked when, not if, they would invest in New York.Mr. Schumer, a longtime China critic, primarily views the investments as critical to reducing America’s reliance on Beijing for a technology that powers everything from cars and dishwashers to missiles and fighter jets. Most chip production has moved to Asia in recent decades, leaving the U.S. economy highly vulnerable to shortages, as became apparent during the pandemic.But he also saw the opportunity to fulfill a more personal goal: securing investment that could revive the factory towns of his home state, which had been hollowed out through decades of competition with China. The move would also augment his local political support, attract donations from chip companies to fill Democratic coffers and cement his legacy as a proponent of upstate New York.“I cared about upstate and I cared about competition with China,” Mr. Schumer said in an interview in Albany in June. “When I drafted the legislation, I did things with New York companies in mind.”Senate majority leaders and other legislators have long used their clout to drive federal funds back home. But Mr. Schumer is capitalizing on his position at an opportune moment, as the United States prepares to invest nearly $53 billion in the sector, including $11 billion for chip research and $39 billion in manufacturing grants.Still, some critics have cautioned that economic and strategic factors, not political influence, must determine the investment decisions that could shape the U.S. economy for decades to come.A silicone wafer at the GlobalFoundries facility.Cindy Schultz for The New York TimesIf the proposed investments are realized, New York could become one of the country’s busiest hubs for chip production. Chip makers like GlobalFoundries, IBM, Onsemi and Wolfspeed are applying for funds to build or expand facilities there. Micron Technology, a memory chip maker, is proposing to invest up to $100 billion near Syracuse over the next two decades to build what would be the largest high-tech chips facility proposed in the United States, employing up to 9,000 people.Mr. Schumer is also pushing for New York to play a leading role in semiconductor research, as the headquarters of a new federal chip research organization.Competition for federal funding is expected to be fierce. By late June, the Commerce Department — which will dole out the funds — had received nearly 400 statements of interest from companies that intended to apply for money.“I suspect there will be many disappointed companies who feel that they should have a certain amount of money,” Ms. Raimondo said in February.New York has already faced some setbacks. Taiwan Semiconductor Manufacturing Company, Samsung and Intel, makers of the most cutting-edge types of logic chips, passed over the state in recent years in favor of Arizona, Texas and Ohio, where they are now building large facilities that could absorb a significant portion of government funding.Chip industry executives say practical factors, like the cost of electricity, land and capital, the availability of workers and the proximity of their suppliers, weigh heaviest in their decisions about where to invest.But the pressure from Mr. Schumer — and from other influential lawmakers, university presidents and company executives who helped secure the funding — raises questions about the role powerful political figures will play in the next chapter of American industrial policy.“I think there is and ought to be a lot of skepticism about political players having a major say in decision making over where these funds are spent,” said Chris Miller, an associate professor at Tufts University and the author of “Chip War: The Fight for the World’s Most Critical Technology.”“If you want effective industrial policy, you have to keep it as far away as possible from pork barrel politics,” he said.The Commerce Department has been hiring experts in finance and semiconductors to review company applications, and it has set up a selection committee to chose the board for the new research center, called the National Semiconductor Technology Center. The department appears to be trying to avoid any undue influence or favoritism.“Our awards will be entirely dependent upon the strength of applications and which projects will advance U.S. economic and national security interests,” the Commerce Department said in a statement.Mr. Schumer insists that New York will win federal dollars on its own merits, but he is also explicit about the benefit his position brings. In June, as he walked the sunlit halls of the Albany NanoTech Complex, a long-running chip research and educational facility, Mr. Schumer said he “did not close out a single discussion” with a semiconductor company without encouraging them to invest in New York.GlobalFoundries is among the chip makers that stand to benefit from the CHIPS act.Cindy Schultz for The New York TimesNew York has five main advantages, he told executives: Skilled workers, stemming from New York’s history of manufacturing. Cheap and plentiful water. Cheap hydropower. Shovel-ready sites for companies to build on.“And fifth, they had the majority leader,” he said.In a yellow-lit clean room behind Mr. Schumer, workers in white protective suits were tending to hundreds of millions of dollars of advanced machinery. On tracks overhead, mechanized metal pails whizzed by carrying silicon wafers, each roughly the size of a record, to and from the machines, where they would be imprinted with layers of intricate circuitry.Mr. Schumer paused to peer over his reading glasses at a smooth, white box the size of a mobile home: an extreme ultraviolet lithography machine, made by the Dutch firm ASML, arguably the most advanced piece of machinery ever developed.Albany NanoTech is the only public research facility in the United States with such a machine. The facility is applying for federal funding to build a new clean room in an adjacent parking lot, and it hopes to become home to part of the government’s new research center.“This is the perfect place,” Mr. Schumer said. “When we wrote the CHIPS and Science bill to set up a National Semiconductor Technology Center, I had Albany in mind. And I’m pushing to get it.”Mr. Schumer said he had personally made that case to a parade of administration officials he brought through the state. That included Mr. Biden, who was pitched on New York’s potential as the two men rode in a motorcade to hear Micron’s investment announcement last October.By his telling, Mr. Schumer’s efforts on behalf of upstate New York are a personal mission, stemming in part from an early challenge from a political opponent who told voters they would never see Mr. Schumer, a Brooklyn native, west of the Hudson River. As Mr. Schumer watched companies like General Motors, General Electric and Carrier shutter their New York facilities, he said, he vowed to do something to stop the flow of young people out of the state.Mr. Schumer had also been one of Congress’ earliest China hawks, particularly on the issue of Chinese currency manipulation. During a workout in 2019 in the Senate gym, Mr. Schumer began forming a plan with Senator Todd Young, Republican of Indiana, to bolster the U.S. economy by dedicating over $100 billion to technology research.It took two years — and an aggressive, coordinated lobbying effort between government and industry — to amass the support and momentum to turn that bill into law. Mr. Schumer and other key Republican and Democratic lawmakers enlisted company executives, university presidents and state officials to talk publicly about the importance of the funding, and put pressure on reluctant members of Congress.Mr. Schumer also worked closely with Ms. Raimondo to push the bill forward. He called her frequently as obstacles arose, including during Sunday Mass and her daughter’s 18th birthday party, she said in an interview in July 2022.As the bill progressed, the prospect of funding for new U.S. factories touched off an elaborate game of courtship among legislators, state officials and companies.The number of chip lobbyists in Washington multiplied. Companies like GlobalFoundries and Intel, which stood to benefit enormously from the legislation, hosted or attended fund-raisers and virtual events for Mr. Schumer in the months before the CHIPS Act was passed. From the beginning of 2021 through June 2023, political action committees linked with Mr. Schumer received more than $350,000 in donations from executives at chip companies and their suppliers, including a $5,000 donation from Intel’s chief executive, Pat Gelsinger, data from the Federal Election Commission shows.Mr. Schumer, right, viewed a model of a Micron facility with President Biden in Syracuse, N.Y. Micron has projected that the facility will employ up to 9,000 people.Kenny Holston for The New York TimesNew York played host to a series of chip companies considering potential investments, particularly for the plot that Micron now plans to build on. TSMC looked at the site in 2019 before it chose Arizona, and Intel considered the same location but ultimately chose Ohio.Micron was ready to write off New York because the state did not have a big enough site, Ryan McMahon, the local county executive, said. To win the final bid, the county spent tens of millions of dollars acquiring land, including buying out a street of homeowners, and running gas and electricity to the site, he said.“If Schumer didn’t introduce us, it’s one of those things, you wonder if it ever would have happened,” Mr. McMahon, a Republican, said.Mr. Schumer, along with other proponents, secured an investment tax credit in the chips legislation that Micron saw as key to making the economics of the project work. And at the urging of Gov. Kathy Hochul, New York state lawmakers passed their own chips subsidy bill to complement the federal one, approving up to $500 million a year in tax abatements to chip manufacturers.Micron has said it plans to start construction next year and complete the first $20 billion phrase of the factory by 2030. New York State has promised to give Micron $5.5 billion in tax credits over the life of the project if the company meets certain employment targets.As the biggest maker of memory chips with headquarters in the United States, Micron is seen as a likely candidate for a federal grant. But other developments have thrown the project into question: Micron has recently become the subject of a crackdown in China that could cost the company an eighth of its global revenues, potentially undercutting its ability to make ambitious investments.The deal has also been met with skepticism from local government watchdogs, who fear that Micron will become the latest firm to be offered taxpayer subsidies but fail to deliver the promised economic impact.“It might be good geostrategic policy for the United States,” said John Kaehny, executive director of Reinvent Albany, a watchdog focused on the New York government. “But for New York, it’s an incredibly low return on the investment of subsidy dollars.”For both Mr. Schumer and Governor Hochul, the Micron investment became a centerpiece of their electoral strategy last fall. With Republicans on their way to the best statewide showing in two decades, both Democrats packaged clips of themselves with Micron’s chief executive into TV ads that blanketed parts of the state otherwise wary of Democrats’ economic agenda.“Transformational for upstate New York, transformational for America,” Mr. Schumer said in one.Nicholas Fandos More

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    Energy Tax Credits, Meant to Help U.S. Suppliers, May Be Hard to Get

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    The Inflation Reduction Act contains tax breaks for solar and wind companies to buy American equipment. Qualifying won’t be easy.In April, Vice President Kamala Harris visited Qcells, a solar panel manufacturing facility in Dalton, Ga., to announce an early triumph of the Inflation Reduction Act: Summit Ridge Energy, one of the nation’s largest developers of community solar projects, would purchase 2.5 million U.S.-made solar panels.Subsidies under the new law brought the price in line with that of imported panels, allowing the companies to fight climate change and promote American manufacturing in one fell swoop.A month later, the Treasury Department issued guidance that functionally would require the solar cells — not just the panels — to be made in the United States for Summit Ridge to have confidence that it will get its 10 percent tax credit on installations that use them. Qcells won’t be able to produce cells until late 2024, sending Summit Ridge scrambling to find cheaper components for projects currently in its pipeline.“There’s not a single solar manufacturer who fully qualifies for this at this moment in time, which makes it difficult and is actually starting to cool investment,” said Leslie Elder, Summit Ridge’s vice president of political and regulatory affairs. “Now we have to re-evaluate based on what can pencil.”On paper, the Inflation Reduction Act is transformative for electricity generation in the United States.The law offers tax credits that could cover up to 70 percent of a renewable energy project’s cost if it checks several boxes meant to support American workers and communities. A new analysis finds that those incentives more than offset the additional expense associated with using domestically produced goods and paying prevailing wages.But guidance rolling out from the Biden administration — presaging formal rules — has raised alarm among energy companies that some of the credits might be difficult if not impossible to use, at least in the near term. The resulting frustration is emblematic of the current stage of climate action: an eye-straining haze of technical rule-making that reflects a tension between urgency and ensuring that the benefits of the energy transition are widely shared.Wally Adeyemo, the deputy secretary of the Treasury, expressed confidence that in combination, the rules would strike that balance.“We have a great deal of clarity about the strategic objectives, and we’re already seeing the impact of that in terms of the economy,” Mr. Adeyemo said. “It isn’t about any one rule. It’s about an ecosystem of rules that have been created under the I.R.A. that put us in a position to go from a country that had underinvested in the clean energy transition to being at the head of the pack.”The analysis, overseen by professors at Princeton and Dartmouth experienced in modeling climate policy’s effects, finds that the incentive aimed at U.S. manufacturers makes domestic solar panels more than 30 percent less costly to produce than imports. With incentives claimed by clean energy developers that meet labor standards and use domestic content, the total cost of generating utility-scale solar electricity could be lowered by 68 percent, and onshore wind energy by 77 percent.The study was funded by the BlueGreen Alliance, a partnership of unions and environmental groups. The organization has championed elements of the Biden administration’s climate agenda that support domestic manufacturing, particularly in places hurt by globalization, automation and the decline of fossil fuels.“Until now, the moral case and the business case did not always align,” said Ben Beachy, the organization’s vice president for industrial policy. “The I.R.A. changes that by offering developers an airtight business case for supporting high-paying jobs and a stronger and fairer U.S. manufacturing base.”The impact of the climate law is already evident, with announcements of 47 new plants to make batteries, solar panels and wind turbines since it was passed, according to American Clean Power, a trade association. Other analyses, including a paper by economists and engineers at the Electric Power Research Institute, the Federal Reserve Bank of Minneapolis and the University of California, Berkeley, found that the law would encourage more low-emissions projects eligible for uncapped tax credits than anticipated, potentially making the costs to the government substantially higher than earlier estimates.A recent study found that federal incentives could reduce the total cost of utility-scale onshore wind energy generation by 77 percent.Alisha Jucevic for The New York TimesBut the BlueGreen Alliance’s study shows significant uncertainty about the impact of rising material costs as demand for domestically sourced aluminum, steel and concrete increases, and doesn’t account for profits manufacturers might command before more competition enters the market. It also projects four million more jobs will be available in wind and solar energy by 2035 than if the I.R.A. hadn’t passed — more than eight times the current employment base — but does not model whether labor supply will measure up.“I find some of their key results to be highly optimistic, and that they likely underestimate some of the economywide costs associated with this scale of clean energy deployment,” said Daniel Raimi, a fellow at the think tank Resources for the Future who reviewed the analysis.At the same time, clean energy companies are digesting the administration’s guidance on how the tax credits will be allocated, and finding some unworkable in ways that may slow deployment.Take the bonus of up to 20 percent for developers that locate projects in low-income communities (which is separate from a bonus of 10 percent for locating in areas struggling with the transition away from fossil fuels). The Treasury Department, wanting to ensure that credits give rise to projects that wouldn’t otherwise happen, will award them only to projects not yet completed. Solar installers would have to sell the system and then wait to see if they got the credit before starting work.“I think we will lose some development in low-income communities this year because of the way that credit has been constructed,” said Sean Gallagher, a vice president for policy at the Solar Energy Industries Association. “Either the developer is going to absorb that difference, or they’ll have to go back to the customer to renegotiate the price, or the project’s not going to happen.”An even thornier issue is the extra 10 percent for using domestically manufactured components. Manufacturers are concerned that while effectively requiring solar cells to be made in the United States to qualify for the credit, the Treasury Department did not require their foundational component — the wafer, a thin slice of silicon that conducts energy — to be domestically produced. That could allow Chinese factories to continue to dominate a key part of the supply chain.“The prices they’re ultimately getting from the developers are undermined because the Chinese wafer manufacturers can crash the prices,” said Mike Carr, the executive director of the Solar Energy Manufacturers for America Coalition.Developers are upset because receiving the credit will, in most cases, require a complex calculation of the cost of each component to reach the threshold of 40 percent U.S.-produced content, and manufacturers are loath to disclose sensitive pricing information. Many also expected a more gradual phase-in process that would allow some of the current U.S. factory output to qualify for the credit, while planning for more stringent requirements.Brett Bouchy is the chief executive of Freedom Forever, a residential solar installation company that did more than $1 billion in business last year. He had planned to build a solar module and cell manufacturing plant in Arizona, which would cost $100 million and employ 1,000 people, to supply his own operations. After the guidance came out, he halted those plans — he couldn’t be confident his panels would qualify for the domestic content credit on top of the 7 cents per watt available to manufacturers.“We cannot make it work,” Mr. Bouchy said. “There is no benefit, because that 7 cents is eaten up with increased U.S. labor costs. Why would you invest $100 million when you really can’t get a return?”Those who support the administration’s approach emphasize that the bonus tax credits are just that: bonuses, not requirements, to offset costs associated with going the extra mile. Developers already get a 30 percent base incentive — and at least 10 years of certainty — for paying prevailing wages and employing apprentices, which most don’t consider very difficult.Todd Tucker, the director of industrial policy and trade at the Roosevelt Institute, said high standards were necessary to make investors confident that new U.S. factories would have enough orders to stay in business.“Once you start indicating that you’re going to allow some flexibility, that, by definition, softens the market signal,” he said.The Treasury Department is still taking comments on the rules for all of the credits, and industry trade associations are vying to change them. Even so, most companies say that the Inflation Reduction Act overall is a powerful force for decarbonization, and that companies have a strong incentive to seek every credit it allows.“It’s amazing how focusing this is for the mind, when people start throwing these kinds of dollars around,” said Sheldon Kimber, the chief executive of Intersect Power, a clean energy developer. “We’re being asked to do a hard thing, but there’s a lot of money in it for us.” More