The most significant action to fight climate change in US history was taken in August 2022, when the Inflation Reduction Act 2022 (IRA22) was signed. Here’s how cement producers can maximise the opportunities presented by this paradigm shift.
The Inflation Reduction Act 2022 (IRA22), signed into law by the Biden Administration, is an ambitious investment in domestic energy production and manufacturing with intent to fight inflation and reduce CO2 emissions in the US by 40% by the end of 2030. Unprecedented in scale, IRA22 will create a paradigm shift within the nation’s building materials manufacturing industry, including cement.
What is IRA22?
IRA22 is a 728 page document, signed into law on 16 August 2022. It details the direction of more than US$738bn of public funding and investment to fight climate change and inflation in the US. IRA22 seeks to raise revenue from numerous sources to invest in deficit reduction, energy security and climate change programs over the next 10 years (Table 1).
| Source of Funding | Value (US$bn) | Distribution of Funds | Value (US$bn) |
| 15% Coporate Minimum Tax | 313 | Energy Security and Climate Change | 369 |
| Prescription Drug Pricing Reform | 288 | Affordable Care Act Extension | 288 |
| IRS Tax Enforcement | 124 | Deficit Reduction | >300 |
| Carried Interest Loophole | 124 | ||
| TOTAL | 739 | TOTAL | 739 |
Table 1: Sources of funding and distribution of funds under IRA22.
Incentives for cement plants
A large part of the fight against climate change is tied up in cement, which represents around 8% of global anthropogenic CO2 emissions. European manufacturers have had a green focus for some time and IRA22 will help the US catch up. By enhancing existing incentives for environmentally-cleaner production through renewable energy and CO2 capture, and by introducing new credits that encourage manufacturing and logistics systems with reduced environmental impacts, IRA22 will help significantly improve US cement manufacturers’ environmental credentials. Manufacturers can also receive tax credits when investing in new projects that either produce energy to help run their facilities, or upgrade parts of production to make equipment or components which are used in renewable energy production.
Put simply, there is now a tangible and significant tax relief offered to organisations that either contribute to clean energy infrastructure, or produce and transport their products with the use of sustainable fuel sources. For cement producers, there is now a competitive advantage to be found by reducing their CO2 footprint and investing in large-scale projects that decrease their environmental impact. At the same time, this will increase their profit margins.
Capturing the value of IRA22
Beaumont Bailey has spoken with senior executives from within the industry, to identify the three core questions being asked of existing business operations, in order to maximise the impact of IRA22 on their organisations.
1 What are we making?
In the US, the lack of environmental consideration was once seen as a competitive advantage compared to European-made cement. Some US-based senior leaders we spoke to before the legislation was passed were open in saying that environmental impact was not a priority when committing resources to new product development.
Within just a few months, perspective has changed rapidly and now the materials, methods of production and CO2 capture ability of products are being heavily reviewed, prompting mass manufacturing changes and heavy investment into more sustainable products. Common approaches include using ‘waste’ products to bring down the net CO2 impacts of the final product, and in some cases store further CO2 through processes like mineral carbonisation. These approaches are not completely novel and have been developed by other international markets for many years. However with the US now faced with this problem, we will see a substantial increase in the innovation of new sustainable and environmentally considerate product portfolios as a result.
2 How are we making it?
The best way businesses can benefit from the new IRA22 regulations is to switch to renewable or sustainable fuel sources in production. Energy creation methods such as hydrogen, biofuels, wind or solar power, can now contribute to a growing renewable energy infrastructure ecosystem. Significant capital investments are now being made across the major manufacturer’s portfolios to retrofit energy production with new renewable sources, and to capture and reuse more CO2 across the plant’s activities. This has also led to an explosion in demand for key strategic talent, such as specialist project managers capable of implementing change with minimal disruption.
3 Where are we making it?
With production being constantly refined to improve profit margins, some US-based facilities have been designed with the sole intention of reducing cost and maximising output. Facilities and production lines with historically high output and margins have favoured ‘dirty’ production methods but now run the risk of losing huge value if they do not adapt. Strategic portfolio management has become an imperative across the industry, with organisations reviewing their assets and seeking to modernise or, in some cases, move entire facilities, in an effort to move away from non-IRA22-compliant facilities and reputations. Since additional credits are granted to organisations that produce sustainably in low-income areas, the cost involved in strategic relocation is now being considered by some businesses, given the scale of the potential tax benefits.
How to react effectively
The race is now on for US cement producers to become the greenest and most sustainable in the market. Those able to act quickly, decisively and invest in the appropriate resources will be best placed to benefit from the opportunities IRA22 presents over the coming years. Key leadership and executive talent capable of delivering on this new strategy will play a significant role in how businesses react and capitalise on the potential of IRA22.
Expanding production capacity of a cement plant typically costs tens of millions of dollars and will require strategic project managers able to deliver complex projects to tight budgets and timeframes. Changing and modernising the energy infrastructure of a plant is an entirely new challenge, but one that countless organisations are already planning for. This has led to a sudden increase in demand for senior project delivery and sustainability talent across the industry.
After years of meeting with, and working alongside senior leaders across the US, Beaumont Bailey’s consultants understand the career objectives and desires for executives across the industry, as well as the motivations that make many of them seek new opportunities. The company has built a network of high-performing talent, capable of maximising the potential benefit from the IRA22 within manufacturing organisations. Beaumont Bailey is well positioned to support industrial and manufacturing businesses to navigate and capitalise on the realities IRA22 brings with it.
