'Inflation Reduction Act': What you need to know about major effort to fight climate change
For more than a decade, Congressional Democrats and a growing share of their political base have chased a dream: legislation to combat climate change, large enough to transform our society into one equipped to avert the worst catastrophes of a rapidly warming planet.
On Wednesday the dream made a giant leap toward reality.
In a stunning reversal from when he appeared to kill a climate deal just two weeks ago, U.S. Sen. Joe Manchin, a conservative West Virginia Democrat, announced support for the Inflation Reduction Act of 2022, a bill that would invest about $370 billion into a range of policies aimed at reducing U.S. greenhouse gas emissions. That would make it the most substantial effort by the federal government to tackle climate change in history.
A vote on the bill could come within a week, though supporters are bracing for any last-minute hurdles.
Early reaction suggests the bill could transform the American energy and transportation sectors. Tens of billions of dollars will go toward supporting renewable energy development, lowering the costs of electric vehicles, building out public charging stations, weatherizing homes, plugging leaks of greenhouse gases from pipelines and wells, lowering emissions from the agricultural sector, and supporting communities located near polluting industries.
In total, the measures could, by 2030, reduce U.S. greenhouse gas emissions 40% from where they were a quarter-century earlier. That would leave the nation within striking distance of the emissions reductions international scientists say are needed to avoid the worst effects of climate change. It could even set an example for other nations to also reduce emissions.
"It's a hell of a lot ... that seems to be targeted at all the right things," said Jonathan Foley, executive director of Project Drawdown, a nonprofit that ranks the importance of climate solutions. "It's a really good down payment."
Foley also noted that the bill is designed with the economy in mind, with analysts predicting it will lower the U.S. deficit and have an anti-inflationary effect.
What's in the bill?
An analysis released by Congressional Democrats says the bill will have $433 billion in investments: $369 billion for "energy security and climate change" and $64 billion for health care through an "Affordable Care Act Extension."
They say the bill will pay for itself and further reduce the federal deficit by raising $739 billion in new revenues, primarily by creating a 15% minimum tax on corporations and by reforming prescription drug pricing.
A more detailed summary highlights billion-dollar line items:
- "Over $60 billion" to support U.S. clean energy manufacturing, including $30 billion in incentives for wind, solar, and battery production. Plus, another $10 billion in tax credits for the construction of facilities that make electric cars and renewable energy technologies, and another $2 billion in grants to "retool" existing car factories for electric vehicles.
- Another $60 billion to invest in low-income communities that bear a disproportionate burden of pollution, including funds to reduce pollution from factories and ports and purchase cleaner public transportation vehicles.
- $30 billion in grants and loans to states and electric utilities to help them transition to cleaner forms of electricity.
- $27 billion for a clean energy technology accelerator to "support deployment of technologies to reduce emissions, especially in disadvantaged communities."
- "More than $20 billion" in investments to support agricultural practices that reduce emissions.
What's in it for me?
The bill also offers some direct benefits to consumers. It continues a $7,500 tax credit for purchasers of new electric vehicles and creates a $4,000 tax credit to purchase a used electric vehicle. Both credits would be available only for low or middle-income purchasers.
In addition, Democrats say the bill will provide about $10 billion in grants and rebates for homeowners to make their homes more energy efficient. It would offer 10 years of tax credits to help offset the costs of installing rooftop solar panels, electric appliances and efficient HVAC technologies like heat pumps.
The bill would "enable major efficiency and electrification upgrades in millions of homes and buildings to save energy and improve comfort and health, especially for low- and moderate-income households," the American Council for an Energy-Efficient Economy wrote in a statement.
"It would accelerate the shift to clean, electric vehicles while widening access to affordable transportation and cutting air pollution in disadvantaged communities," the group added.
What are climate advocates saying?
The bill is widely being hailed as a breakthrough by climate groups.
"This is a game changer," Leah Stokes, a climate policy expert at the University of California Santa Barbara and adviser to Congressional Democrats, wrote on Twitter. "It would be the largest climate investment in American history—4 times bigger than the recovery act. It would bring clean energy jobs to America and lower energy bills for American families."
Jesse Jenkins, an energy expert whose ZERO Lab at Princeton University models greenhouse gas reductions, wrote on the platform that he calculates the bill could provide up to 75% of the reductions needed to meet the U.S. goal of halving its greenhouse gas emissions by 2035.
"This is huge," Jenkins wrote.
Appalachian Voices, a nonprofit supporting a clean environment and energy transition in the coal-heavy region, noted the bill also "restores a tax on coal to support the Black Lung Disability Trust Fund" and provides $10 billion to rural electric cooperatives.
"Historically, rural communities were the last to gain access to electricity but have long borne the burden of polluting energy infrastructure, extraction and energy waste," Brianna Knisley, Tennessee Campaign Manager for the group, stated in an email. "We are thrilled to see provisions in this bill that provide funding for renewable and efficient rural energy infrastructure so that rural communities are not left behind in the clean energy transition."
Varshini Prakash, executive director of the Sunrise Movement, a youth-led movement advocating political action on climate change said it is "critical that we pass the best possible version of this bill that we can."
"We just experienced an atrocious heat wave," Prakash added. "There are droughts, floods, and increasingly worsening climate disasters. This is just the beginning of the climate crisis. There is no option to give up or sit this one out."
Rundown of bill's climate initiatives
- $60 billion to address the disproportionate burden of pollution on low-income communities and communities of color;
- $30 billion investment in production tax credits for solar panels, wind turbines, batteries and critical minerals processing;
- $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;
- $20 billion for programs that can cut emissions in the agriculture sector;
- Up to $20 billion in loans to build new clean vehicle manufacturing facilities;
- $10 billion in tax credits to build clean technology manufacturing facilities;
- $9 billion in consumer home energy rebate programs, focused on low-income consumers, to electrify home appliances and for energy efficient retrofits;
- $9 billion for federal procurement of American-made clean technologies to create a stable market for clean products, including $3 billion for the U.S. Postal Service to purchase zero-emission vehicles;
- $6 billion for a new Advanced Industrial Facilities Deployment Program to reduce emissions from the largest industrial emitters like chemical, steel and cement plants;
- $5 billion in grants to support healthy, fire resilient forests, forest conservation and urban tree planting;
- $2.6 billion in grants to conserve and restore coastal habitats and protect communities that depend on those habitats;
- $2 billion for National Labs to accelerate breakthrough energy research;
- $2 billion in grants to retool existing auto manufacturing facilities to make clean vehicles;
- $1 billion grant program to make affordable housing more energy efficient;
- $500 million to be used through the Defense Production Act for heat pumps and critical minerals processing.
- $7,500 means-tested tax credit on purchase of new electric vehicles, with a $4,000 tax credit for used electric vehicles, both credits available only to lower and middle-income consumers.
- Ten 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 (no dollar estimate provided);
- Tax credits and grants for clean fuels and clean commercial vehicles to reduce emissions from all parts of the transportation sector (no dollar estimate);
- A Methane Emissions Reduction Program to reduce the leaks from the production and distribution of natural gas (no dollar estimate);
- Tax credits and grants to support the domestic production of biofuels, and to build the infrastructure needed for sustainable aviation fuel and other biofuels (no dollar estimate).
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