How the Inflation Reduction Act Will Impact Climate Action
The Inflation Reduction Act contains climate provisions that aim to reduce U.S. greenhouse gas emissions by 40% below 2005 levels by 2030
The provisions aim to reduce energy costs and accelerate the transition to clean energy
Many climate activists think the bill does too little, while other critics think it does (spends) too much
The Inflation Reduction Act of 2022 has passed in both houses of Congress and was sent to the President, who is expected to sign it sometime during the week of August 15. The bill addresses health care, climate, and taxes. Today we’ll be focusing on understanding the impacts of the sections pertaining to climate and energy.
The climate provisions of the bill aim to lower consumer energy costs, invest in domestic clean energy production, decarbonize the economy, support communities and environmental justice, and invest in farmers, forestland and rural communities. Experts believe that the bill will help the U.S. reduce greenhouse gas emissions by 40% below 2005 levels by 2030. The following contains information from Senate Democrats’ summary of the bill, which you can find here.
Lower Consumer Energy Costs
The bill includes a range of incentives to accelerate the clean energy transition and reduce energy costs for consumers, especially low income households.
$9 billion in consumer home energy rebate programs, focused on low income consumers, to electrify home appliances and for energy efficient retrofits
10 years of consumer tax credits to make homes energy efficient and run on clean energy, making heat pumps, rooftop solar, electric HVAC and water heaters more affordable
$4,000 consumer tax credit for lower/middle income individuals to buy used clean vehicles, and up to $7,500 tax credit to buy new clean vehicles
$1 billion grant program to make affordable housing more energy efficient
Investment in American Clean Energy Production
This bill includes over $60 billion to invest in on-shore clean energy manufacturing in the U.S. The goal of these incentives is to reduce inflation and increase domestic clean energy production.
An estimated $30 billion in production tax credits to accelerate U.S. manufacturing of solar panels, wind turbines, batteries, and critical minerals processing
$10 billion investment tax credit to build clean technology manufacturing facilities, like facilities that make electric vehicles, wind turbines and solar panels
Up to $20 billion in loans to build new clean vehicle manufacturing facilities across the country
Decarbonize the Economy
This bill aims to reduce greenhouse gas emissions in all sectors of the economy, especially electricity production, transportation, industrial manufacturing, buildings, and agriculture.
Tax credits for clean sources of electricity and energy storage and roughly $30 billion in targeted grant and loan programs for states and electric utilities to accelerate the transition to clean electricity
$27 billion clean energy technology accelerator to support deployment of technologies to reduce emissions, especially in disadvantaged communities
Invest in Communities and Environmental Justice
$60 billion has been allocated to invest in disadvantaged communities, with a total of $9 billion going to environmental justice grants:
Environmental and Climate Justice Block Grants invest in community led projects to address disportionate harm from pollution and climate change
Neighborhood Access and Equity Grants support equitable and affordable public transportation
Grants to Reduce Air Pollution at Ports support purchase and installation of zero-emissions technology
Farmers, Forestland Owners and Rural Communities
The bill invests in climate-smart agriculture, forest restoration and land conservation as tools in the fight against climate change.
More than $20 billion to support climate-smart agriculture practices
$5 billion in grants to support healthy, fire resilient forests, forest conservation and urban tree planting
Reactions to the Bill
Climate activists have mixed reactions to the bill. Some call it a win, but want much more. Others are going as far not to support it due to some provisions that benefit the oil and gas industry. The incentives in the bill work to increase demand for renewable energy and supply of domestic renewable energy and infrastructure. Some activists are disappointed that instead of directly decreasing supply of fossil fuels the bill relies on increased renewable energy demand replacing fossil fuel demand.
Critics of the bill argue that its spending will not reduce inflation but instead exacerbate it. They also argue that the tax provisions in the bill will cause a loss in jobs and worry about too much government spending up front, with deficit-reducing revenues kicking in too far down the road.
Conclusions
No matter where you stand on the political spectrum, we can all agree that action on climate change is necessary for the future of our planet. Disagreements on the best way to tackle this issue will prevail and no single bill can make everyone happy. We’re excited that nature-based solutions like forest conservation and tree planting are part of the conversation because we really believe in their power. We’ll be keeping an eye on how well the provisions in this bill address climate change, so we can learn what works, what doesn’t, and how we can best fight for ourselves and the planet.
