Since the passage of two landmark spending bills in the United States last year, domestic manufacturing investment has skyrocketed, with companies pouring over $200 billion into manufacturing projects since August 2022.
According to data compiled by the Financial Times (FT), these investments—mainly targeting clean technology and semiconductor manufacturing—are nearly double the total seen in all of 2021, and about 20 times higher than the investment rate in 2019.
This surge is fueled by a range of innovation tax credits and subsidies introduced through both the Inflation Reduction Act (IRA) and the Chips and Science Act (CHIPS). Together, these programs are channeling nearly $400 billion into the US clean technology supply chain.
The IRA alone provides $369 billion in tax credits for clean technologies, while the CHIPS Act allocates about $24 billion for manufacturing tax credits and an additional $39 billion to boost semiconductor production. Already, projects in Arizona, New York, Ohio, and Texas are moving forward with CHIPS funding. Since August 2022, the FT has identified more than 75 manufacturing projects worth at least $100 million each, focused on semiconductors, electric vehicles, and renewable energy components.
These new projects are expected to create over 82,000 jobs in the rapidly growing US clean tech sector—and this is just the beginning, as more details on tax credits and how businesses can benefit are on the way.
In a recent Tweet (featuring video from a factory floor), US Energy Secretary Jennifer Granholm emphasized that the impact goes far beyond the clean tech sector:
Investing in America is turning us into a clean energy and manufacturing powerhouse, helping us deploy clean energy resources in every corner of the country ?? — especially where it’s needed the most.
Clean Energy Investments Across North America
While both the IRA and CHIPS Act require that all manufacturing activities take place in the United States—and that companies meet business “best practice” standards for childcare, profit sharing, and stock buybacks, among others—there’s also strong momentum for clean technology development north of the border.
For example, as part of the 2023 Canadian Federal Budget, Finance Minister Chrystia Freeland announced over $83 billion in clean energy and technology tax credits. This includes a 15% refundable tax credit for clean electricity investments (totaling $6.3 billion over four years) and a 30% refundable tax credit for clean technology manufacturing ($4.5 billion over five years).
While seen as a direct response to the IRA and CHIPS Act, Freeland’s 2023 Budget builds on her Fall Economic Statement, where she committed to ramping up investment in renewable energy, carbon capture technologies, battery storage, and electric vehicles.
Canada is especially well-positioned to play a key role in the global renewable energy supply chain, thanks in large part to its abundant lithium reserves. That’s why Budget 2023 also includes a 30% tax credit for mining and developing these critical minerals.
Global Competitors Are Taking Notice
While the IRA and CHIPS Act have already delivered major benefits in the US—and spurred additional investment from Canada—other countries outside North America have been less enthusiastic about the US government’s incentives to boost domestic manufacturing.
Leaders in both France and South Korea have called the bills “protectionist”, with French President Emmanuel Macron stating that the IRA risks “fragmenting the West.”
Still, US manufacturing investment isn’t just coming from American companies—about one-third of the investments tracked by FT are from businesses headquartered in Asia.
Major changes are ahead for federal grants and tax credits that impact innovative companies across industries.
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