One year on from Biden’s Inflation Reduction Act

Today’s top stories

• China’s securities regulator has announced a package of market-friendly reforms to try to boost investment and trading after months of underwhelming economic growth that has hit stocks and bonds.

• The US on Friday approved requests by Denmark and the Netherlands to export American-made F-16 fighter jets to Ukraine, marking a significant upgrade of Kyiv’s military capabilities in its war against Russia.

• Former Austrian chancellor Sebastian Kurz has been charged with giving false testimony to parliament. Kurz and his ex-chief of staff Bernhard Bonelli are alleged to have misled a parliamentary committee in relation to questions over the establishment of Austrian sovereign wealth fund.

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Good evening.

This week marks one year since the Inflation Reduction Act and the Chips and Science Act were signed into law, within days of each other, by President Joe Biden. The two laws amounted to more than $400bn in tax credits, subsidies and loans, to spark development of a domestic cleantech and semiconductor supply chain.

The past year has seen over 110 large-scale manufacturing announcements — including in semiconductors, electric vehicles, batteries and solar and wind parts — boosted by this new era of US industrial policy. In total, the roughly $224bn in cleantech and semiconductor manufacturing projects announced since the IRA and the Chips Act promise to create 100,000 jobs.

Schemes announced this month include Singapore-based Maxeon Solar Technologies’s $1bn solar cell and panel facility in Albuquerque, New Mexico, and US manufacturer First Solar’s fifth factory, worth $1.1bn, in Iberia Parish, Louisiana — the largest capital investment in the area’s history.

The largest commitments have come from semiconductor groups: Intel will expand a campus in Arizona and Taiwan Semiconductor Manufacturing Company will build a second fabrication plant in the same state; IBM will invest in New York’s Hudson Valley region and Micron will build the US’s largest semiconductor plant in Clay, New York.

The investment has not fallen evenly across red and blue states. The FT found that more than 80 per cent of cleantech and semiconductor investments announced in the past year are heading to Republican districts, despite there having been no votes from congressional Republicans for the IRA and only lukewarm support for the Chips Act.

The reason for these districts’ success in attracting investment is in part due to them having large areas of available land and cheap labour. However, others, like Georgia and Ohio, have also used sizeable tax breaks and subsidies to attract developers, including through roadshows in Europe and Asia.

“That hasn’t stopped them [Republican lawmakers] from claiming credit for the billions of dollars and thousands of jobs that are coming to their states,” President Biden told a crowd at a new wind tower factory in New Mexico last week.

The president made similar attacks on Republican senator Lindsey Graham and congresswoman Marjorie Taylor Greene during a tour of a new solar inverter facility in South Carolina last month. Greene and Graham both represent constituencies at the front lines of the cleantech boom. Greene’s, in particular, is home to the largest solar supply chain investment since the IRA’s passage.

This represents a growing problem for Republicans who want to welcome new projects and jobs in their own districts but are, in Washington, launching efforts to repeal or water down pieces of the IRA, which passed in the Senate along party lines.

However, the White House is also struggling to translate the IRA’s successes into votes for the Democrats. Biden’s approval ratings are currently languishing amid persistently high inflation. Meanwhile, a Washington Post and University of Maryland survey in July found that more than half of US voters disapprove of his actions on climate and are unaware of the IRA clean energy tax credits.

Europe has also taken notice, with Paolo Gentiloni, the EU’s economy commissioner, telling the Financial Times last month that the “pull factor of the IRA is increasing” and called on Europe to step up its response. In February, the EU announced a rival industrial plan, including subsidies to keep developers in the bloc.

The threat to the EU comes from companies like Meyer Burger, a Swiss solar manufacturer, that last month announced it was putting its German expansion plans on hold to open a $400mn factory in Colorado to receive tax credits from the IRA.

Similarly, a few Chinese companies have made investments — defying the worsening relations between Beijing and Washington — but many are too small to be included in the FT analysis. Among the largest are Gotion’s $2.4bn battery factory in Michigan and Fuyao Glass’s $300mn expansion of its automotive glass factory in Ohio.

Need to know: UK and Europe economy

The Belgian justice minister called cocaine trafficking an “even bigger” challenge than terrorism in Belgium. Vincent Van Quickenborne has called on the EU to speed up international co-operation to help catch drug lords hiding abroad. Belgium’s port city of Antwerp is the largest cocaine trafficking hub in Europe, with a record of almost 110 tonnes seized last year, up from about 90 tonnes in 2021 and 66 tonnes in 2020, according to customs authorities.

The passage of a cargo ship from Ukraine to Turkey this week vindicated Kyiv’s gamble that Russia would not act on threats to attack commercial shipping in the Black Sea. However, the successful gambit leaves a bigger question for Ukraine: will any other commercial vessels follow the Joseph Schulte and dare to call Russia’s bluff?

Need to know: Global economy

Foreign investors have dumped Chinese stocks and bonds after losing confidence in Beijing’s promises to step in and address the country’s flagging economic recovery.

Around Europe’s tourism hotspots, visitors have faced sharp price increases as businesses pass on rising costs to their customers. Now rate-setters at the European Central Bank are becoming concerned that a fresh wave of summer inflation spurred by tourism could complicate their efforts to keep prices under control.

Japan’s consumer price growth in July slowed from the previous month, complicating the central bank’s task as it debates a historic shift in monetary policy. The “core” inflation rate, which excludes volatile fresh food prices, retreated to 3.1 per cent in July from 3.3 per cent the previous month, leading some economists to predict that inflation in the country had peaked.

“Project Cheetah”, a landmark conservation effort by the Indian government that, if successful, could provide a global blueprint for reviving animal populations and ecosystems, has taken a dark turn. Nine cats — including three cubs born in India — have died of causes from malnutrition to collar infections that critics blame on inexperience, mismanagement and the government sidelining experts.

Spain’s acting prime minister Pedro Sánchez achieved his first tactical win in the country’s post-election wrangling as lawmakers elected his party’s candidate as Speaker of Congress yesterday. The country has been in stasis since an inconclusive general election on July 23 that left neither Sánchez’s Socialists nor Alberto Núñez Feijóo’s People’s party with a clear path to taking office.

Need to know: business

Official data suggests that UK companies are not pursuing “greedflation” as some have claimed, with profitability levels remaining stable in the first quarter of 2023.

The Ukraine war is proving to be a huge opportunity for businesses to try out new technologies, fuelling hopes that the country might one day develop its own version of Silicon Valley, writes academic and EU adviser Marietje Schaake.

Have we reached peak coffee? Our latest visual presentation looks at whether the world can produce enough beans to fulfil growing demand as climate change hits yields.

Science round up

Scientists have recreated a song (Pink Floyd’s “Another Brick in the Wall”) from the brain activity of patients who had been listening to it, raising hopes for helping people with severe neurological damage to communicate.

Genetically modified pig kidneys have for the first time provided “life-sustaining renal function” for a week after transplantation into a human recipient. The success fuels hopes for xenotransplantation — using organs from animals genetically engineered to prevent rejection — to address the severe worldwide shortage of kidneys from human donors.

Our battery series continues with a look at “solid-state” technology, seen as the most promising development to solve the problems of the lithium ion batteries in use at present, but which until now has been dismissed as too expensive and difficult to produce.

Something for the weekend

Soraya Roberts examines the chest thumping machismo of sports-adventure films which went out with the 1990s. Are they set for a return?

Some good news

This week, a judge in Montana ruled in favour of youth climate activists in a landmark decision that established young people had a right to a “clean and healthful environment”. The court case, Held vs Montana, was filed in March 2020 in Lewis and Clark county, which is where the state capital of Helena is located.