The Climate Benefits in the Inflation Reduction Act

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This training on the Climate Benefits in the Inflation Reduction Act reviews all the energy and climate items in the bill, how much it will reduce US greenhouse gas emissions, and the health benefits of the cleaner air that will result from the bill's provisions. 

TOC and Guide Section
Why is a climate bill called “The Inflation Reduction Act (IRA) of 2022”? 
  • The IRA modestly curbs inflation in the short-term by raising more revenue through tax reforms and other measures than it spends on clean energy and other policies. As a result it effectively takes some money out of circulation and thus cools the economy. 
  • The IRA guards against long-term inflationary pressures by accelerating the transition away from fossil fuels and their volatile prices towards electricity and its stable prices, as illustrated in the chart below.
  • Moody’s Analytics thus says the IRA will “nudge the economy and inflation in the right direction, while meaningfully addressing climate change and reducing the government’s budget deficits.”
  • And the Center for a Responsible Federal Budget says: “we expect the IRA to very modestly reduce inflationary pressures in the near term while lowering the risk of persistent inflation over time.”
What’s in the bill on climate? Tons!

$386 billion, according to the Congressional Budget Office. That makes the IRA by far the largest-ever federal climate package, more than 3 times bigger than any before. That total includes:

  • $15 billion in EV tax credits: $7,500 for new, $4,000 for used
    • Max individual income: $150k for new EVs, $75k for used EVs
    • Max EV price: $80k for new SUVs/pickups/vans, $55k for new cars, $25k for used EVs
    • 40–100% of battery components & minerals must come from the US or a free trade partner to qualify for the tax credits
  • ~$150 billion in clean electricity production & investment tax credits
    • Very important! Renewable energy deployment had been stalling a bit, but is now projected to accelerate rapidly, as illustrated in the chart below from the Princeton REPEAT energy modeling group.
A fee on methane pollution!
  • The first ever federal fee on climate pollution
  • 2024: $900/ton ($36/ton CO2 equivalent)
  • 2025: $1200/ton ($48/ton CO2e) 
  • 2026 and thereafter: $1500/ton ($60/ton CO2e)
  • About 60% of methane leaks fixed for $5/ton, 70% for $40/ton CO2e
  • Projected to raise $8 billion in revenue, boost the economy, create jobs to fix all those methane leaks
  • Provides $1.5 billion in grants to oil & gas companies for methane reductions, monitoring, reporting
  • Facilities are exempt if in compliance with EPA methane regulations
Nature-based climate solutions
  • $5 billion for forestry programs
    • $2 billion for wildfire prevention
    • $1.5 billion for urban and community forestry grants
    • $1 billion for forest conservation
    • $450 million for climate-smart private forest management incentives
    • $100 million for wood innovation grants
  • $21 billion for climate-smart agriculture and conservation including agroforestry, silvopasture, cover cropping
Electrification, green bank, and environmental justice
  • $10 billion in consumer home energy rebate programs, including rebates & tax incentives for heat pump water and space heaters, clothes dryers, electric stoves, insulation, windows, wiring
  • $200 million to train contractors in electrification & efficiency
  • $3 billion for the Post Office to buy more EVs
  • $27 billion for a green tech accelerator (national green bank)
  • $60 billion in environmental justice priorities to invest in disadvantaged communities
Domestic manufacturing and innovation
  • ~$60 billion for domestic clean energy manufacturing
  • $40 billion tax credits for US solar, wind, batteries, EVs, and critical minerals
  • Up to $20 billion in loans to build EV manufacturing facilities
  • $2 billion to retool car plants to make EVs
  • $2 billion to National Labs to accelerate breakthrough energy research
  • $500 million for the Defense Production Act
  • $250 billion in loan authority to the Department of Energy for lending to new green companies/technologies
And much more!
  • 45Q tax credit for carbon sequestration ($3 billion)
  • $85/ton for stored CO2, $60/ton for use in enhanced oil recovery
  • Production tax credit for nuclear power ($30 billion)
  • Extended tax credits for biodiesel fuel ($5.6 billion)
  • Tax credit for aviation biofuel reducing emissions by at least 50% ($50 million)
  • New tax credit for clean (low-CO2) hydrogen ($13 billion)
  • Permanent coal tax extension to fund Black Lung Disability Trust Fund
  • Requires 2 million onshore & 60 million offshore acre acres offered for lease per year as a prerequisite for similar solar & wind leases
How much will it cut emissions?
  • Where we started: 6.6 gigatons (Gt) of CO2 emissions in 2005
  • Where we’re heading: 3.3 Gt emissions target in 2030 (50% cut)
  • Where we’re at: 5.6 Gt in 2021 (17% below 2005)
    • 1 Gt down, 2.3 Gt to go … with 8 years left
  • Based on current policies: headed for ~27% cuts by 2030
  • That’s about 4.9 Gt CO2 in 2030; almost halfway short of our Paris target!
  • Wide range of uncertainty: 22–35% below 2005 by 2030
  • IRA is projected to reduce emissions by about 900 million tons (Mt) per year by 2030, bringing US emissions down to about 4 Gt that year, or ~40% below 2005
    • That would close more than half of our remaining Paris emissions gap
Rough emissions cuts breakdown

~900 million tons (Mt) fewer CO2-equivalent emissions per year in 2030:

  • ~300 Mt (33%) cut from clean energy tax credits
  • ~220 Mt (25%) from electric vehicle tax credits & incentives
  • ~140 Mt (15%) cut from methane regulations and fee
  • ~100 Mt (11%) from industrial carbon capture
  • ~100 Mt (11%) cut from natural climate solutions
  • ~40 Mt (5%) cut from building electrification & efficiency
Job growth & household energy costs reduction
  • About 1.5 million more new jobs in 2030, according to Energy Innovation
  • Household energy bills (electricity and vehicle fuel) projected about $1,000 per year lower in 2030 than 2021, thanks in part to the IRA provisions, per Rhodium.

How many lives will it save?

Based on research led by Drew Shindell, cumulative benefits 2023–2030 resulting from reduced air pollution due to burning less fossil fuels:

  • ~180,000 premature deaths avoided
  • 10 million fewer lost workdays worth $2 billion
  • 60,000 fewer incidences of dementia
  • Increase wheat production by 75 million bushels worth $440 million
  • Increase corn production by 250 million bushels worth $1 billion
  • Increase soybean production by 250 million bushels worth $2.7 billion
What about the oil &gas leases?

Numerical analyses of the oil & gas lease impacts:

  • NRDC: “the emissions cuts from the legislation would be as much as 10 times greater than the effects from the support it extends to fossil fuels.”
  • Energy Innovation: “for every ton of emissions increases generated by IRA oil and gas provisions, at least 24 tons of emissions are avoided by the other provisions.” Less than 50 Mt of CO2 added by leases.
  • Princeton REPEAT: Less than 50 Mt of CO2 “which would be within rounding error”
The IRA is very popular

Polling by Data for Progress found that the IRA is very popular, and that Americans are more likely to vote for candidates who support the bill:

What doesn’t the bill accomplish?
  • Leaves us ~10% (~700 Mt CO2) shy of our 2030 Paris commitment
    • We still have time to make up that gap with additional policies
  • It contains a methane fee, but no carbon fee
  • There’s still a long way to go to reach net zero emissions by 2050
  • No resolution on carbon border adjustments, which the European Union plans to implement beginning in 2023
Press play to start the video (41m 13s)
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Skip ahead to the following section(s):
  • (0:00) Intro & Agenda
  • (2:34) Background
  • (5:30)What’s In the Bill On Climate?
  • (20:54) How Much Will It Cut Emissions?
  • (27:09) How Many Lives Will It Save?
  • (35:11) What Doesn’t It Accomplish?
  • (36:54) Taking Action
  • Dana Nuccitelli
Audio length
Press play to start the audio (41m 13s)
Audio embed code
Audio Outline
Skip ahead to the following section(s):
  • (0:00) Intro & Agenda
  • (2:34) Background 
  • (5:30)What’s In the Bill On Climate?
  • (20:54) How Much Will It Cut Emissions?
  • (27:09) How Many Lives Will It Save?
  • (35:11) What Doesn’t It Accomplish?
  • (36:54) Taking Action
  • Dana Nuccitelli
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