The International Energy Agency (IEA) recently observed that “the energy world is at the beginning of a new industrial era – the era of manufacturing clean energy technologies.” Capitalizing on this opportunity, while also improving energy security and meeting today’s energy needs reliably and affordably, is the main challenge of today.
A trio of laws enacted starting in 2021—the Bipartisan Infrastructure Act, the Inflation Reduction Act (IRA), and the CHIPS and American Science Act—are ushering in this new era. Countries around the world are actively evaluating similar laws to unlock clean energy investment.
Building on years of national policies that accelerated the start of low-carbon innovation, we now have the momentum to revitalize domestic manufacturing, build resilient supply chains, create good jobs, and reduce energy costs—all while making progress on climate challenges.
The private sector – including global banks – has an important role to play. At JPMorgan Chase, we have funded more than $170 billion in green initiatives over the past two years and aim to fund an additional $800 billion in green by 2030.
At the same time, we provide critical financing today for almost all sectors, including power, transportation, oil and gas, manufacturing, and heavy industry. That’s why we have more than doubled our dedicated investment and commercial banking client teams to serve our clients’ carbon transition goals. And we are not the only ones. Clean energy investment will reach a record $1.1 trillion by 2022, the first time investment in the energy transition has equaled global investment in fossil fuels, according to BloombergNEF.
The task ahead is to deploy capital on an unprecedented scale to power the American economy in cleaner ways, to ensure that Americans do not have to choose between access to affordable and reliable energy and environmental progress.
IRA unlocks business opportunities in two important areas: how to generate energy and how to use it.
On the production side, capital is needed to develop and deploy clean energy solutions and reduce the carbon intensity of traditional energy production. Such efforts are important because although we will rely on hydrocarbon supplies for years to come – including aircraft and heavy industry – reducing associated emissions can slow the rate of warming even in the transition.
How we use energy is another critical piece of the climate puzzle – and a capital-intensive area of economic rewiring. For example, funding will be needed to grow businesses in the value chain that creates the adoption of electric vehicles, from battery manufacturing and vehicle assembly to charging point installations.
The IRA also provides incentives for carbon capture and storage (CCUS) – a climate solution provided by some of the most innovative companies in the field, which we helped raise over $1 billion in private equity capital by 2022, doubling the total raised previously. five years combined in all carbon capture venture capital space. CCUS will play an important role in addressing climate change and also in keeping critical industries in a position to responsibly meet society’s needs, which is why we want to drive capital to expand these solutions.
These developments and more—from hydrogen and sustainable aviation fuel to geothermal and home retrofits—will only be possible through ambitious and skillful implementation of the legislation currently on the books, with additional public policy considered as needed.
For example, building a low-carbon economy at scale depends on hundreds of successful and permitted projects, from long-distance electricity transmission lines and offshore renewable installations to manufacturing plants and natural gas pipelines. That’s why it’s important to reform the broken permit system, provide the speed and certainty needed to help business leaders invest, as well as involve communities and respect environmental considerations.
Another key to the success of IRA implementation is the establishment of a secure supply chain, including responsibility for developing domestic resources and increasing collaboration with foreign allies and trading partners. We must pursue a race to the top marked by diplomacy, partnership, and healthy competition.
Furthermore, given that the IRA breaks new ground on how tax credits are traded, it will be important for the government to provide clear guidance to market participants on what they must do to qualify, while also inspiring the confidence needed for companies and investors with tax appetite. to buy credits in the market as the financial fuel needed to enable the development of low carbon projects.
In this new era, we’re increasing JPMorgan Chase’s focus on financing the energy transition because it’s the right thing for our clients, customers, communities, and shareholders. Americans can seize the opportunity to drive economic growth through innovation while creating jobs and delivering market-driven progress to advance the energy transition.
Heather Zichal is the global head of sustainability at JPMorgan Chase. Ramaswamy Variankaval is global head of JPMorgan’s Carbon Transition Center.
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