Hello and welcome to the Strawman, the daily climate newsletter that’s like a midnight snack - there for you when you need it most.

Today we’re diving deeper in to the inequities in the climate transition and exploring how incentives in the U.S. put pressure on developing economies. Let’s get in to it.

Two Sides of The Same Panel

When Biden announced the Inflation Reduction Act (IRA) in 2022, he unveiled $369 billion in new spending and tax breaks specifically focused on the green energy transition.

Climate campaigners generally welcomed the new legislation but if there’s one thing we’ve learned it’s that you can’t keep everyone happy and that things are always more complicated than they seem. Fine, we’ve learned two things.

This week, India’s power and renewable energy minister, Raj Kumar Singh, argued that the IRA undermines clean energy production in markets like India.

You see, the Indian minister argues that these incentives are designed so that developing economies can’t compete in global green energy markets. A big part of India’s competitiveness comes from a multitude of free-trade deals that prevent government incentives for consumers to to prefer a domestic product to an international one.

Coupled with a lower cost-base, India should be a great place to invest in green energy. However, with the IRA, the U.S. has suddenly become way more competitive. It’s like the kid who comes back after a summer holiday with a hell of a glow-up and now everyone wants be friends with him.

With an average of $3 per KG of subsidies in the U.S. versus $1 per KG in India, many of the companies already operating in India might shift their focus to the U.S. in a bid to maximise incentives and then look to sell back to India. The power minister has insisted that this behaviour will be heavily taxed.

Coaling ‘Foul Play’

On top of this, the minister has argued that the phasing out of coal has been pursued more aggressively than oil and gas. To be fair, coal is dirtier than alternatives but it’s also the fossil fuel that India (and other emerging economies) are most reliant on.

In other words, the coal crack-down is hampering India’s development ambitions and green energy incentives in the U.S. are competing with investment in India. India’s not alone, countries further along their economic development from France to South Korea have also voiced concerns.

While it’s clear that recent U.S. legislation is a step in the right direction, better global co-ordination is key to ensuring that the environmental transition is completed sustainably. Faced between development and the green energy transition, it’s clear that development speaks loudest - let’s hope that we can deliver on both.

The Strawman

P.S. If you’re new here and you like what you’ve read so far, consider giving us a share. Hit forward and share with someone you love. Or someone you hate. We don’t mind either way.