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A surprise proposed deal in the US Senate on billions of dollars of climate-related spending looks set to change the perception of the US’ role in the fight against climate change and could provide a significant boost to environmental solutions equities, write Edward Lees and Ulrik Fugmann of the Environmental Strategies Group. [1]  

Markets had not expected the news of a USD 369 billion climate and tax package. We had been hoping for one between USD 200-300 billion. The climate and energy proposals were seen as the ‘most ambitious climate action ever taken by the US’ (New York Times) and includes tax incentives to ramp up wind, solar, geothermal, battery and other clean energy industries over the next decade.

The raft of measures will be funded by USD 451 billion in new tax revenue over the next 10 years, while cutting federal spending on prescription drugs by USD 288 billion. The plan would raise most of its new tax revenue, an estimated USD 313 billion, by imposing a minimum tax on the so-called book income [2] of large corporations.

A number of legislative and procedural hurdles to the deal between Senator Joe Manchin and Democratic majority leader Chuck Schumer remain. It must adhere to strict budgetary rules since Democrats plan to advance it under the budget process known as ‘reconciliation’, which allows certain fiscal measures to pass with only a simple majority.

The bill is called the ‘Inflation Reduction Act of 2022’, to distinguish it from the ambitious multitrillion-dollar domestic policy plan that President Joe Biden had initially proposed and that Democrats in Congress spent most of last year toiling to pass. The name underscores the deflationary effect that clean energy technology is expected to have in the medium to longer term.

Our view confirmed

We have long held the contrarian view that after the death of the Build Back Better plan in December 2021 we would see a significant US climate bill voted through during the summer.

Our view was based on our assessment that clean energy investments are ultimately deflationary. They also help address the hot topic of energy security in the face of the war in Ukraine.

We believe that US power infrastructure is in a dire condition [3] and needs cheap, greener and reliable power.

While the final details of the bill could change, we understand that it currently includes: 

  • USD 30 billion in tax credits for solar panels, wind turbines, batteries and critical minerals processing
  • USD 10 billion in tax credits to build clean technology manufacturing facilities
  • USD 500 million for heat pumps and critical minerals processing
  • Tax credits to make new and used electric vehicles more affordable 
  • USD 20 billion to cut emissions in the agriculture sector 

We anticipate a major positive impact for shares in residential solar, hydrogen, wind, energy storage and electric vehicle (EV) manufacturers.


[1] Also see Environmental thematic strategies – BNPP AM Luxembourg professional investor (  

[2] Determined in accordance with generally accepted accounting principles (GAAP), this is the amount a corporation reports on its financial statements for its investors or shareholders, as well as for financial regulators. Source:  

[3] Progress on clean energy could be derailed without an overhaul of the electricity infrastructure – a task some industry experts say requires more than USD 2 trillion. The network is decaying with age and underinvestment, a condition highlighted by failures during increasingly frequent and severe weather events. Source:


Please note that articles may contain technical language. For this reason, they may not be suitable for readers without professional investment experience. Any views expressed here are those of the author as of the date of publication, are based on available information, and are subject to change without notice. Individual portfolio management teams may hold different views and may take different investment decisions for different clients. This document does not constitute investment advice. The value of investments and the income they generate may go down as well as up and it is possible that investors will not recover their initial outlay. Past performance is no guarantee for future returns. Investing in emerging markets, or specialised or restricted sectors is likely to be subject to a higher-than-average volatility due to a high degree of concentration, greater uncertainty because less information is available, there is less liquidity or due to greater sensitivity to changes in market conditions (social, political and economic conditions). Some emerging markets offer less security than the majority of international developed markets. For this reason, services for portfolio transactions, liquidation and conservation on behalf of funds invested in emerging markets may carry greater risk.

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