As the annual GreenBiz publication, ‘State of Green Business 2023’, rolls off the presses, one thing is clear: U.S. President Joe Biden’s Inflation Reduction Act (IRA) will have a big influence on environmental business trends this year.
When the IRA was signed into law in August 2022, not everyone was sure whom it would benefit.
Businesses are figuring it out. Many environmental sectors are taking advantage of the loans and tax breaks the Act makes available and using the money to investigate both new and existing technologies.
Take carbon capture for example.
Carbon capture is everywhere these days. It has gone from 0 to 100 in the last year or so, says Leah Garden in the State of Green Business 2023 report, “Carbon technology captures billions in funds.” Yet, carbon tech and capture has been around for about 50 years.
The process of capturing carbon dioxide emissions from industrial facilities and reusing or storing them, instead of releasing them into the atmosphere, “was long considered too expensive and inefficient to be a viable climate solution,” writes Garden. “Now it’s the tech sector to watch.”
Why? Primarily, thanks to the IRA.
According to Garden’s sources, the IRA “will encourage investors to increase spending on carbon capture ventures and will undoubtedly catalyze future boosts in funding.” In addition to financing the green sector, the IRA has made significant 45Q tax credit amendments.
The U.S. federal 45Q tax credit originally allotted carbon tech companies $50 per ton of carbon captured and stored. This incentive was too low to create sustainable revenue streams. “The 2022 amendment from the IRA boosts those returns to as much as $180 per ton while lowering the project eligibility threshold, unlocking a financially lucrative market for more companies,” writes Garden.
Interestingly, oil and gas companies such as Occidental Petroleum and Talon Energy are some of the biggest investors in this area. ExxonMobil entered into a $2.5 billion agreement with Indonesia’s state-owned energy company to develop a carbon capture sequestration hub in the country, supporting its national 2060 net-zero goals.
In the meantime, carbon capture “remains a key technology that can bridge the transition between fossil fuels and renewable energy,” writes Garden.
Because the IRA includes tax credits for all forms of carbon-free energy, geothermal is getting another look.
Geothermal power plants date back to 1904, says Sarah Golden, VP Energy at GreenBiz. Yet it only makes up 0.4% of the energy industry. According to Golden, this is about to change as businesses and governments seek to implement 24/7 carbon-free electricity.
Technology advancements are providing less expensive and easier access to geothermal energy. “Those bullish say addressing the technological barriers could catapult geothermal to become upwards of 20 or 30 percent of the global energy mix,” writes Golden in the State of Green Business 2023 report.
Many start-ups are looking to this as a potential carbon alternative.
As is the U.S. Department of Energy (DOE).
In September 2022, the DOE announced its goal to make enhanced geothermal systems (EGS) a widespread renewable energy option in the U.S. by slashing geothermal’s cost by 90% to $45 per megawatt hour by 2035.
This plan is part of the DOE’s Energy Earthshots Initiative, a program that aims to break down the biggest remaining scientific and technical barriers to solving the climate crisis. Previous Earthshots initiatives include a focus on hydrogen, carbon negative solutions, and long-term energy storage.
There are drawbacks to using heat from underground. Seismic activity is a potential hazard, as it is in fracking.
Despite this, Golden believes that the energy industry is poised to see the use of geothermal heat up.
In the State of Green Business 2023 report, Jon Smieja focused on new models that are being tried to help push for a more circular economy.
Smieja named “redesign and rethink” one such innovation. In this scenario, products are designed specifically for circularity and offered to consumers through subscription services or take-back programs. Returned products can be recycled or refurbished and put back into use.
Smieja cites On CloudNeo shoe company as an example. A shoe made from a single material is offered only through subscription. “The difficulty will come as companies like On try to scale,” writes Smieja, “which requires cooperation and reverse logistics hubs.”
Another idea is called the “milk bottle method.” Recycling is an important part, but can’t get us all the way there,” Smieja said. “We have to go back to the milk bottle method and reuse or refill the milk bottle.”
For “no-next-life” products, companies are becoming their own material suppliers by breaking down and reusing recovered products. An example of this, Smieja says, is the investment major roofing companies such as GAF and Owens Corning are putting into recycling asphalt shingles.
Yet another trend: customers are demanding longer use products.
“We are moving from the era of convenience to a more circular economy,” says Smieja. “We just need to move faster.”
Moving faster towards a greener economy is one trend that echoed throughout the entire report.