The Inflation Reduction Act (IRA) and Blockchain: A Collaborative Force for Decarbonization

Thomas Iseler
June 26, 2023

The Inflation Reduction Act (IRA) is a crucial piece of legislation that has put a spotlight on the role of blockchain in enhancing supply chain transparency and accountability, while accelerating the transition to clean energy. Blockchain technology is increasingly recognized as a pivotal tool in driving forward the global decarbonization agenda. 

Introduction: The Inflation Reduction Act (IRA) and Its Impact

The IRA is a recent legislation that has garnered significant attention as a consequential climate policy. This Act has allocated an impressive $370 billion for climate and clean energy projects, marking a historic investment in the United States’ efforts towards decarbonization and climate resilience. It is projected that the IRA will reduce U.S. greenhouse gas emissions by approximately 40 percent by 2030. 

The clean energy portion of the package affects almost every sector within the energy transition and requires around 270 billion in investment in the form of tax credits. Of these, approximately half will be for wind, solar, and storage energy.

The IRA: A Catalyst for Clean Energy Economy

Beyond its environmental implications, the IRA also signifies a major investment in American competitiveness and innovation. It aims to shape a new landscape for clean energy, fostering technological advancements and incentivizing domestic manufacturing. The goal is not just to reduce emissions, but to position the United States as a global leader in the clean energy industry. 

The Act includes a number of measures to reduce emissions in all sectors of the economy, including electricity production, transportation, industrial manufacturing, buildings, and agriculture, as well as to promote clean energy. It proposes tax credits for clean electricity, grants for clean fuel and sustainable vehicles, and programs to reduce emissions from industrial emitters and natural gas production. For consumers, it offers rebates and credits for energy-efficient home improvements and the purchase of clean vehicles. The Act also includes provisions for fossil fuels, aiming to encourage efficiency improvements and carbon capture solutions, along with new fees for natural gas extraction and methane emissions. The legislation allocates over $60 billion to support green energy manufacturing in the U.S., including tax credits for the production of solar panels, wind turbines, and batteries, and grants for retrofitting automobile factories.

The Act has established a new Clean Energy and Sustainability Accelerator, which will fund state and local clean energy financing institutions. This will facilitate the deployment of zero-emission technologies such as heat-pumps, community solar, and electric vehicle charging. The Accelerator is also committed to investing more than half of its funds in disadvantaged communities, expanding opportunities for clean energy entrepreneurship.

Blockchain: Enhancing Supply Chain Transparency and Accountability

The IRA underscores the urgent need for transparency and accountability in supply chain management. It mandates manufacturers to provide verifiable evidence about their supply chains, including the origin of raw materials and the environmental impact of their production processes. 

Certain incentives are contingent upon sourcing a specific amount of raw materials from within the U.S., constructing the end product domestically, or complying with worker rights and competitive wage benchmarks.

Similarly, in the European Union, the proposed Battery Regulation, puts the responsibility for supply chain accountability squarely on automotive manufacturers. As such, EV manufacturers will have to require that their suppliers provide evidence of their material sources and their compliance with the regulation all the way back to the mine. Supply chains, however, have proven extremely difficult to track and validate.

This is where blockchain technology steps in. A decentralized ledger, blockchain securely stores and shares information. It provides an unalterable record of transactions that can be accessed by stakeholders.

The Power of Digital Product Passports

One of the significant advantages of blockchain technology is its ability to track the movement of goods across the entire supply chain. By logging every transaction on the blockchain, companies can produce a transparent and auditable record of their supply chain activities. This can mitigate fraud and corruption, while enhancing trust between suppliers and customers.

Digital product passports (DPPs) are instrumental in increasing transparency and accountability. This digital record details a product's lifecycle, including its origin, composition, and environmental footprint. By utilizing blockchain technology, businesses can create secure and tamper-proof DPPs, ensuring the authenticity of the information contained.

The Role of Blockchain in Advancing Green and Clean Energy

The transition to green and clean energy is a critical step in achieving decarbonization and complying with the IRA.

Blockchain can facilitate the adoption of decentralized energy systems, such as microgrids, which rely on clean energy sources like solar and wind power. By providing a secure and transparent platform for energy trading, blockchain allows businesses and consumers to buy and sell clean energy directly, fostering a more sustainable energy market. 

Blockchain: Promoting Sustainability and Circular Economy

Blockchain technology can also offer detailed insights about the environmental impact of production processes and promote the circular economy. By recording data related to energy consumption, water usage, and waste production on the blockchain, businesses can balance their carbon emissions and contribute to the energy transition. This not only ensures compliance with regulatory frameworks but also fosters consumer trust and confidence.

Blockchain: Facilitating Compliance with Regulatory Framework and Sustainable Practices

As businesses strive to comply with the IRA, they must adhere to a robust regulatory framework and adopt sustainable practices. Blockchain technology can support businesses in meeting these requirements by enhancing transparency and accountability in their operations.

For instance, blockchain can help businesses comply with environmental, social, and governance (ESG) standards, which are becoming increasingly important in the global business landscape. By providing an immutable record of ESG performance data and enabling the verification of sustainability claims, blockchain can help businesses demonstrate their commitment to sustainable practices and attract investment.

Conclusion: Embracing Blockchain for a Climate-Positive Future

As the global business landscape continues to evolve, it is crucial for businesses to embrace innovative technologies and sustainable practices to stay ahead of the curve. By embracing blockchain technology, businesses can pave the way for a climate-positive future, where transparency, accountability, and sustainability are the norm.

The adoption of blockchain technology can also have a positive impact on businesses' bottom lines by reducing costs, enhancing efficiency, and improving supply chain management. Furthermore, by demonstrating their commitment to sustainability and compliance, businesses can attract investment, improve their reputation, and gain a competitive edge in the market.

For more information on how blockchain can support your business's sustainability initiatives, visit