Clean energy is the biggest market opportunity in a generation. Businesses can’t afford to ignore it

The government may have created the internet, but the private sector drove the information revolution. A similar opportunity now exists for companies to lead the transition to a cleaner economy. New funding and incentives—through the Inflation Reduction Act, bipartisan infrastructure law, and CHIPS law—will give smart businesses the chance to compete for a share in this multitrillion-dollar market. 

American companies have a choice: lead the net-zero transition, or let their competitors capture its opportunities. Businesses and investors who fail to seize the moment may find themselves becoming cautionary tales. As former California Governor Arnold Schwarzenegger once said, no one wants to be “the last investor in Blockbuster as Netflix emerged.”  

We’ve already seen a major transition begin in the auto industry. In the first five months of 2022, investments related to electric vehicles hit $24 billion, almost double the pace of 2021. Credit Suisse recently estimated that the Inflation Reduction Act will trigger $1.7 trillion in investments in the American economy.

Turmoil around the world—war, political change, and economic uncertainty—might lead some to wonder if the clean energy momentum will continue. But a new report from Rystad Energy demonstrates that this historic change is moving forward unabated, with investment in wind and solar this year likely to exceed oil and gas drilling for the first time.

The three new U.S. laws create $1.5 trillion in new market opportunities through tax incentives, spending on infrastructure, and promotion of domestic manufacturing. Historic investment at this level will supercharge an economic transformation. With the global clean energy market alone expected to reach $23 trillion by the end of the decade, it’s the biggest business opportunity of this generation.

Building healthier communities

Businesses investing in pollution reduction efforts are also helping to improve the health of their communities. Microsoft and Salesforce, for instance, are integrating health data to prioritize renewable energy procurement. BlocPower is replacing fossil-fuel-based heating and cooling systems with more efficient, healthier alternatives.

Importantly, the climate bills provide funds to cut the sticker price of clean midsize and heavy-duty vehicles. This is especially needed in communities living under a cloud of pollution. Regardless of their income, Black residents are exposed to levels of soot from heavy-duty diesel trucks at a rate that’s 26% higher than the national average. Electric trucks will be cheaper than diesel trucks for many uses as early as 2023. 

Financing a clean economy

Investors from 550 firms with more than $150 trillion in assets under management have made commitments to reach net-zero greenhouse gas emissions by 2050. And while the Glasgow Financial Alliance for Net Zero coalition has evolved, the mission has stayed the same: to provide financial institutions with the tools to follow through on their net-zero commitments.

For small and growing companies, the new “Green Bank” provisions in the Inflation Reduction Act will support state and local funding pools, which the Environmental Defense Fund estimates could unlock $72 billion in private investments. Models from the Connecticut Green Bank show how clean energy businesses like PosiGen can rapidly scale, particularly in disadvantaged communities. 

Bolstering U.S. manufacturing

The new laws also renew American competitiveness through manufacturing and investment in innovation. That’s critical because more than half of the technologies we need to reach net zero by 2050 are not yet commercially viable.

Many of the new incentives will make it cheaper for companies to meet their climate goals. Switching to solar energy in the U.S. could reduce commercial property owners’ electricity costs by an average of 75%. Building retrofits with existing technologies can cut energy use in commercial real estate by 40%, with a return on investment after just 15 months. 

What’s at stake

The Inflation Reduction Act will potentially cut U.S. climate pollution 40% by 2030, a big step toward our national goal of a 50% reduction by then. Support from leading businesses was instrumental in passing these laws and will be equally critical for the additional policies needed to meet our national and global targets. Companies must activate their powerful trade association muscle to lobby for continued government R&D and investments in supporting infrastructure.

Businesses face a critical moment for climate action and future growth. The International Energy Agency predicts the current global disruptions will speed the shift from fossil fuels to clean energy. Companies that keep pace with these fast-moving changes will be the market leaders in this new era.

Fred Krupp is president of the Environmental Defense Fund.