One year on from the Inflation Reduction Act

Think tank: Social Market Foundation

Author(s): Gideon Salutin

August 16, 2023

This report from UK think tank the Social Market Foundation looks at international responses to the IRA.

The success of the US Inflation Reduction Act (IRA) has triggered significant changes in international trade and manufacturing, as other OECD governments have sought to imitate its approach. This briefing surveys international responses to the IRA to identify how the can UK take advantage of the opportunities in this new economic regime. The US Inflation Reduction Act (IRA) has successfully stimulated economic growth, attracting billions of private investment and creating thousands of clean energy jobs. Other OECD governments have adopted similar policies, yet the feared wave of protectionism has not materialised. This new economic environment presents opportunities for the UK economy, but the government should learn from the examples of other OECD countries to take advantage. The UK should provide at least £54 billion over 10 years in direct and indirect subsidies to attract investment and remain competitive with other countries. It should set legally binding benchmarks for net zero production to reassure businesses and streamline the approval process for net zero projects. And it should secure a trade deal with the EU to accelerate trade on net zero goods in specific industries.