What do marijuana and electric vehicles have in common? They are two consumer products that Americans tend to strongly favor or disapprove of depending on their party affiliation. In other words, they are two of the most polarizing consumer products on the market.
Back in 2019, Colorado Governor Jared Polis (D) revealed that the state had hit $1 billion in cumulative cannabis tax revenue seven years after Colorado and Washington became the first states to legalize recreational use of cannabis. Last year, Colorado collected $305 million in marijuana tax revenue, with California leading in this metric after raking in over a billion dollars.
If you thought that becoming an important source of revenue would persuade more states to embrace weed, you are wrong: only 15 states have legalized marijuana since 2019, including voters in two deep-red states, Missouri and Montana.
But the current state of affairs might not last very long. Earlier this month, voters in red-leaning Colorado approved by a wide 14-point margin to legalize recreational use of the Schedule I drug, following reliably Republican Missouri last year and Montana in 2020. With a 2022 Gallup Poll revealing that the majority of Democrats and Democratic-leaning independents (83 percent), as well as Republicans and Republican-leaning independents (55 percent), back ending cannabis prohibition, the Ohio vote will ramp up pressure and tensions between Republican elected officials and their constituents in the mostly GOP-run holdout states. Related: Sanctioned Tankers Could Undermine India's Push to Buy Cheap Russian Oil
Whereas electric vehicles might not seem as controversial as marijuana, their approval rate follows even deeper partisan lines than marijuana's, with many more Democrats (22%) saying they are seriously considering purchasing an EV compared to just 1% of Republicans and 12% of independents, as per a recent Gallup survey. Currently, 6% of Democrats own an EV compared to just 1% of Republicans and 4% of independents.
But here's the kicker: although EVs have drawn the ire of virtually all leading GOP presidential candidates, they have emerged as an even more important source of tax revenue and employment than marijuana in key swing states.
Of the $128 billion that has flowed into the domestic EV and battery manufacturing sector since the passing of the historic Inflation Reduction Act (IRA) in August 2022, $48 billion, or more than a third, has gone to Georgia, Arizona, Nevada and Michigan. Those four, alongside Wisconsin, Pennsylvania and North Carolina, are the most important swing states where Trump holds a narrow 41% combined lead over Biden's 35%.
Some surveys have come up with a dead heat in some of those states, meaning those huge EV investments could soon become an important talking point in the current election cycle.
Republicans Benefit More From IRA Than Democrats
Last year, not a single Republican voted in favor of the IRA, with Iowa Republican Sen. Joni Ernst lambasting "the Democrats' push towards renewables," and claiming that "'Biden blackouts' will make it impossible to run even fans and air conditioners on the hottest days of the summer". It's, therefore, quite ironic that it's red states that are actually reaping the benefits of the IRA more than blue states, with red states claiming more IRA funds.
A report by Climate Central reveals that U.S. wind and solar capacity grew 16% Y/Y in 2022, with Iowa and Oklahoma, some of the 'reddest' states with Republican governors and majority Republican state legislatures, leading the nation in wind power production while Texas has retained its national leadership in both solar and wind power. The report says that state and federal incentives played a big part in growth being witnessed in renewable energy generation.
Back in 2005, Iowa enacted the country's highest state tax credit rate for wind energy at $0.015 per kilowatt-hour (kWh). Iowa is the only state where clean energy credits are transferable, with recipients able to sell the credits to third parties who can, in turn, use them to offset their taxes owed to the state.
An RMI analysis has found that Texas could receive $131 billion in IRA-linked investments in the current decade; Florida may see $62 billion while $16 billion could flow to Georgia. Further, the report has revealed that Republican-leaning states are receiving larger climate investments per capita than Democrat-led states.
Meanwhile, billions of dollars of new clean energy investments have been announced for EV and battery manufacturing in several southern states including Georgia since the passage of the IRA, giving rise to the famous "battery belt." And, it's these Republican-led states that have been claiming the lion's share of IRA dollars: Republican-held congressional districts are home to more than 80% of all utility-scale solar and wind farms as well as battery manufacturing projects currently under development.
By Alex Kimani for Oilprice.com
Alex Kimani is a veteran finance writer, investor, engineer and researcher for Safehaven.com. More