The U.S. Inflation Reduction Act And Its Global Ripple Effect On Climate Law, Energy Policy, And Legal Reform In Developing Economies
- IJLLR Journal
- Jun 21
- 2 min read
Omotola Osude, LLM in Energy and Climate Change Law, Queen Mary University of London, Center for Commercial Law Studies
ABSTRACT
The U.S. Inflation Reduction Act (IRA)a landmark $369 billion climate and energy lawhas not only transformed American climate policy but also reverberated across the globe. This three-part essay examines how the IRA has reshaped international climate leadership and law, its ripple effects on energy policy and investment in developing economies, and the emerging legal risks and gaps in the global response. The analysis finds that the IRA put the United States back on track to meet its Paris Agreement targets and reclaim a mantle of climate leadership. By demonstrating an unprecedented commitment to decarbonization home, the Act galvanized other major emitters and blocs to enhance their own climate ambitions, contributing to a new wave of climate legislation and policies worldwide. At the same time, the IRA’s domestic focus including provisions favoring U.S. manufacturing has sparked debates on fair competition and equity in international circles. Global South observers note that while the Act marks a positive shift in global climate action, its lack of direct support for developing countries and its protectionist features risk marginalizing poorer economies.
The first part of the essay details how the IRA reshaped global climate governance. After years of inconsistent U.S. engagement, the Act’s enactment restored U.S. credibility and shifted global climate law discourse toward concrete action. It also bolstered American leverage in multilateral climate negotiations, enabling the United States to push other nations toward higher commitments. The Act’s example also emboldened climate legislation abroad, as nations saw that aggressive emissions cuts and clean technology investments were politically and economically feasible. However, tensions emerged: European and Asian allies raised concerns that the IRA’s local content requirements might violate trade norms, prompting transatlantic legal consultations and highlighting gaps in WTO rules on green subsidies.
The second part examines the ripple effects on national legislation and green investment in the Global South, focusing on Kenya, Brazil, India, and Nigeria. The IRA’s signal of a global clean energy “race to the top” spurred these countries to accelerate their own climate law reforms and green investment plans. Kenya, for example, enacted the Climate Change (Amendment) Act 2023 to strengthen its climate governance regulating carbon markets and mandating more robust climate action at national and county levels. Nigeria built on its Climate Change Act 2021 by launching an Energy Transition Plan and a new electricity law to attract clean energy investment and reduce reliance on oil revenues. Brazil’s government under President Luiz Inácio Lula da Silva revitalized environmental enforcement and committed to ending Amazon deforestation by 2030, thereby reclaiming Brazil’s role as a climate leader in the developing world. India likewise expanded its renewable energy targets and green industrial policies (such as production-linked incentives for solar manufacturing and green hydrogen) to capitalize on the global investment wave, even as Indian officials called for more equitable trade terms in response to the IRA. These case studies illustrate a broader trend: developing economies are responding to the IRA’s opportunities and challenges by crafting domestic legal frameworks that integrate climate goals with development needs. Notably, many of these reforms incorporate a climate justice perspective for instance, provisions for community benefits, adaptation funding, and South–South cooperation in effect localizing the global climate agenda.
