Opinion | The New Climate Law Is Working. Clean Energy Investments Are Soaring.

Last summer, in a meeting with business and labor leaders as Congress prepared to vote on the landmark Inflation Reduction Act, President Biden argued that it would result in “the largest investment ever in clean energy and American energy security — the largest in our history.” He added, “It will be the largest investment in American manufacturing as well.”

Nine months since that law was passed in Congress, the private sector has mobilized well beyond our initial expectations to generate clean energy, build battery factories and develop other technologies to reduce greenhouse gas emissions.

The law is doing exactly what it was designed to do: encourage private investment in clean energy. Tax incentives make the investments attractive, but businesses, along with rural cooperatives, nonprofits and others, must judge whether investing their own money in a hydrogen factory or a wind farm will pay off. In the end, the law will be only as successful as their appetite to invest at a scale that will meaningfully reduce emissions warming the planet and increase the nation’s energy security.

Over the past few months, we have begun to see how large that appetite may be. It seems clear already that the law will stimulate significantly more investment in clean energy than was at first thought possible while generating more revenue from high-income taxpayers to reduce the deficit.

But despite all the encouraging signs, still more needs to be done to achieve the nation’s climate goals and energy needs. For instance, the often cumbersome and time-consuming process of siting and building clean energy projects must be streamlined. And Congress needs to take additional steps to reduce emissions from heavy industries like steel, cement and chemicals.

But let’s first see how far the country has come since the I.R.A. became law. Companies have announced at least 31 new battery manufacturing projects in the United States. That is more than in the prior four years combined. The pipeline of battery plants amounts to 1,000 gigawatt-hours per year by 2030 — 18 times the energy storage capacity in 2021, enough to support the manufacture of 10 million to 13 million electric vehicles per year. In energy production, companies have announced 96 gigawatts of new clean power over the past eight months, which is more than the total investment in clean power plants from 2017 to 2021 and enough to power nearly 20 million homes.

Scott Moskowitz, the head of market strategy and public affairs for Qcells North America, which manufactures solar panel components in Georgia, summed up the impact of the law this way: “We will always look at the history of our industry in two eras now that the Inflation Reduction Act has passed” — meaning the before and the after.

“The I.R.A. contains some of the most ambitious clean energy manufacturing incentives enacted anywhere in the world,” Mr. Moskowitz said.

The investment appetite is defying geographic and political boundaries. From Oklahoma and Ohio to North Carolina and Nevada, new investment is breathing economic life into communities that have seen their economies decline. This is in part because the I.R.A. provides an explicit incentive to invest in places with contaminated industrial sites, communities with a significant economic reliance on traditional fossil fuel production or those with shuttered coal mines or coal-fired power plants.

The investment surge has prompted forecasters to significantly update their views on the long-term potential of the law. Analysts at two research organizations, the Brookings Institution and the Rhodium Group, have estimated that over 10 years, private investment could be at least one and a half to three times as much as initial projections. The largest increase is projected to be in industrial and manufacturing activity for hydrogen, carbon capture, energy storage and critical minerals — areas key to long-term energy security.

This overall investment wave has the potential to drive a more rapid and efficient decarbonization of the economy while increasing the supply of clean energy and maintaining the country’s competitive edge of stable, low-cost energy. Rhodium, for example, along with researchers from the University of Chicago, found that I.R.A. energy production tax credits would lower energy costs for consumers and businesses while reducing power sector carbon dioxide emissions at an average cost of $33 to $50 per metric ton — considerably less than recent estimates of the social cost of carbon, the economic damage that would result from emitting additional carbon.

But these early encouraging signs do not guarantee long-term success. The law did not provide all the necessary tools to achieve national goals for expanding our supply of clean energy. Congress and the Biden administration have more work to do.

First, lawmakers must make it easier to build clean energy infrastructure in America. Congress should immediately go beyond the permitting provisions included in the recently announced debt limit compromise bill and pass comprehensive legislation to speed energy development, an idea that has bipartisan support. The administration should use its authority to streamline project timelines. The Federal Energy Regulatory Commission should more aggressively clear backlogs preventing clean energy projects from connecting to the grid. Policymakers should consider new incentives to expand energy capacity, like conditioning federal assistance to states and localities that reform land-use policies to allow clean energy development.

Second, lawmakers should continue to encourage efficient, low-carbon investments. For example, Congress could develop an industrial competitiveness program for heavy industries like cement, steel and chemicals that includes an emissions-based border adjustment fee on imported industrial goods from countries with less ambitious emissions controls. This would bolster the I.R.A.’s incentives, increase the competitiveness of American industries and address China’s nonmarket practices in these areas, such as flooding the market with products at far below their fair value.

Third, we need to work with allies across developed and emerging markets to build a cooperative international framework around the I.R.A.’s investment incentives. Our allies have little to fear and much to gain from working with the United States to expand incentives domestically to deploy clean energy technology because it must be deployed everywhere, and the I.R.A. incentives will drive down the global cost of energy technologies. The administration has already forged agreements to harmonize these incentives with the European Union, Japan and Canada but will need to use all levers of its foreign policy to secure cooperative arrangements to build resilient energy supply chains, particularly for critical minerals.

Fourth, policymakers and the public need better tools to close the gap between splashy corporate clean energy announcements and speculative long-term projections to understand where investments are being made and what they are achieving.

Finally, policymakers should remain vigilant about budgetary effects. The Congressional Budget Office recently estimated that the private sector’s enthusiasm for the I.R.A.’s clean energy incentives could increase the cost to the federal budget by about $200 billion over 10 years.

But that is only part of the overall calculation. The I.R.A. is about more than just clean energy. It also includes corporate tax increases and reductions in prescription drug spending by Medicare. That’s why the I.R.A. overall is still projected to reduce the deficit over 10 years, with the reduction growing to $50 billion a year by 2032.

Recent academic research has shown that the long-term deficit reduction could be much greater than these estimates anticipate, with the I.R.A.’s innovative investments in technology and audit capacity generating about $500 billion and potentially much more over the next decade. While it is a mistake to undercut those investments, the savings are achievable even with the rescissions to Internal Revenue Service funding included in the debt limit compromises.

If we build on the I.R.A.’s investment-driven model, the optimistic outcome of more clean energy, more economic potential and a stronger fiscal future is within reach.

Brian Deese was the director of the National Economic Council for the first two years of the Biden administration and helped shape the Inflation Reduction Act.