Inflation Reduction Act Q&A
Top two talking points about what the bill does:
- Incentivizes clean energy, electric cars, and electric homes
- Invests in green technology to ramp up domestic manufacturing
- It’s a really big deal.
- City, town and country...there’s something for every community.
- Affordable clean energy is a win-times-infinity.
- It will be a lot more affordable to electrify your home and transportation.
- America’s economy will be transformed (in a good way).
- But the work ain’t over.
How much will the IRA actually reduce emissions?
The IRA will help the U.S. achieve 40% emissions reductions by 2030 (from 2005 levels), based on modeling by Rhodium Group, Princeton University's REPEAT project, Energy Innovation, and the U.S. Department of Energy
It gets us close to, but not all the way to our Paris commitment of 50% by 2030 set by the Biden administration. The IRA closes more than half the gap from projected emissions to our Paris commitment.
How will the IRA help people electrify their homes?
The IRA contains multiple provisions to help people electrify their homes:
Low- and moderate-income households that install new, efficient electric appliances, can receive up to $14,000 in up-front rebates.
For low-income households (below 80% of their area’s median income) this can cover 100% of the costs.
For medium-income households (80–150% of median income) it will cover 50% of the costs.
Households can also deduct costs of certain efficiency upgrades from their taxes, saving them additional money.
People can use this calculator from Rewiring America to see which programs they qualify for (short url: cclusa.org/ira-calc).
A separate program, funded by the Hope for Homes Act, which can’t be combined with the rebates and tax credits above, allows up to $8,000 in rebates for improving a home’s efficiency.
The IRA has rebates and credits for homeowners. What does it have to support renters?
Renters can take advantage of some credits directly (see Rewiring America’s IRA calculator). In addition many of the IRA’s incentives for efficiency and electrification also apply to multi-unit buildings, so landlords can get support in improving the efficiency of their properties, saving renters money on their energy bills.
The IRA includes:
$2,000-$4,000 per unit for efficiency upgrades, and double that for low- and moderate-income units.
Funding for electrification rebates, including for multifamily properties.
$837.5 million for upgrades to affordable housing units.
The IRA also updates solar tax credits in ways that support community solar projects, by providing an additional 20% rebate if a project is installed as part of a low-income residential building project or economic benefit system.
How can my community benefit from this law?
We’ve outlined some benefits for different types of communities, disadvantaged communities, cities, and rural areas on our IRA web page. You can pick and choose to highlight the benefits that will be most compelling to your locale and your audience.
In addition, some tax credits are increased for projects in “energy communities” (e.g. brownfields, counties with coal mines or plants that have closed, etc.)
See this Columbia Law blog post for information on how various programs will affect cities and local governments.
How does the IRA affect EV credits?
The good news is that tax credits have been extended with up to a $7,500 credit on new EVs, and a new credit of $4,000 on used EVs. It gets complicated because the EV credits in the IRA are designed to promote domestic manufacturing of EVs, batteries, and critical minerals. As such, they immediately require EVs to be assembled in the U.S., and starting in 2023 that batteries be assembled in the U.S. or a free-trade country, and in 2024 that battery components (e.g. minerals) be sourced from the U.S. or a free-trade country. There are also income limitations for purchasers and price limits on vehicles.
Until 2024 it's just an extension of the current tax credit but in 2024 the credit can be transferred to car dealerships, so for consumers it will be like an upfront rebate on the purchase price.
For more details see this article in Technology Review.
The IRA supports electric vehicles, but what about transit, biking, walking, etc?
To fully decarbonize the transportation sector we need a variety of zero-emission mobility solutions, including active transport like walking and biking, public transit and zero-emission vehicles.
The IRA focuses on electric vehicles, whilethe Infrastructure Investment and Jobs Act (IIJA) passed in 2021 included significant funding for trains ($66 billion) and public transit systems ($44 billion), plus funding to improve safety for pedestrians and bikers ($11 billion), and money to cut emissions from ferries and buses ($7.5 billion).
In addition to subsidies for electric vehicles, the IRA provides $3 billion for a new program called Neighborhood Access and Equity Grants, which will help improve walkability, safety, and affordable transportation access, especially in underserved areas.
Tax credits for e-bikes were dropped from the IRA, but could be included in future legislation.
Some EV advocates are also concerned about the challenges that people without private parking spaces may have with charging EVs – a problem which certainly needs to be addressed. The IIJA includes $7.5 billion in funding for charging stations including at least $1.25 billion for rural and low- and moderate-income communities with a low ratio of private parking spaces.
What’s in the bill related to environmental justice?
First, see our blog post on EJ concerns with the bill and our CCU on Understanding Environmental Justice Perspectives About the IRA.
It’s important to acknowledge that many EJ advocates see the IRA as problematic or at least a mix of positives and negatives. Remember to focus on listening to and understanding people’s concerns, rather than focusing on convincing people they should see things differently.
For specific EJ provisions in the law see:
The Senate Democrats’ outline of numerous provisions that can support environmental justice.
An EJ organization’s take on what they find good and bad in the bill.
What about the requirement for oil and gas leases?
The IRA includes compromises that were added during final negotiations in the Senate. The bill requires the federal government to lease land and offshore areas for oil and gas development in any year where there are leases for renewable energy. It also specifically greenlights some development in Alaska and the Gulf of Mexico that had been tied up in the courts for environmental reviews.
This is a major concern for environmental justice groups. See our blog post for more info on EJ concerns and the answer to the question above for how you might respond.
Looking strictly from a GHG emissions standpoint these provisions are not considered a significant concern. Analysts think the IRA will deliver 25 to 50 times more GHG reductions in the US than the oil and gas leasing may produce, and 10 times more GHG reductions than the global increase in GHG emissions. This is because total fossil fuel use is driven primarily by demand and thus any change in production in one location is largely offset by changes in production elsewhere.
What should we say about the support for Carbon Capture and Storage (CCS)?
This Grist article gives a good overview of the CCS provisions in the IRA.
CCL supports Carbon Capture and Storage as an essential piece of the climate puzzle. We have lobbied for years on supporting asks on the topic (eg the USE IT Act and SCALE Act).
That said, some people have concerns about the carbon capture and storage and we should understand those concerns:
One concern is that CCS might prolong the use of fossil fuels, either because it promotes continued use of fossil fuel as an energy source, or because CO2 is used as part of enhanced oil recovery.
Another concern is that while CCS may capture CO2 from a smokestack, it does not address upstream emissions like leaked methane. Depending on the technology it may or may not address other harmful emissions from smokestacks.
Another concern is that money spent on CCS would be better spent on other emission mitigation measures.
Others are supportive of CCS for a variety of reasons:
Most analysts see CCS as an important part of decarbonizing the industrial sector. For instance cement kilns would produce CO2 even if they did not burn fossil fuels because of the chemical reaction involved. CCS is one of the few ways to deal with these “process” emissions (as compared to emissions from burning fossil fuels).
CCS is unlikely to play a major role in the electricity sector because renewables are cheaper, but CCS may be needed to help provide low-emissions dispatchable power to complement the renewables that will dominate the grid going forward.
The IPCC says the need to remove CO2 from the atmosphere is unavoidable if we want to stay under 1.5 or 2 degrees. The infrastructure for carbon transport and storage will likely be key to fulfilling that need, and so it is important that we invest in the sequestration technology and infrastructure needed for that.
Our goal is to eliminate emissions from fossil fuel combustion, but as long as there is still demand for fossil fuels, people will produce them. Enhanced oil recovery is preferable to drilling new wells that do not store carbon and instead expand the impact of fossil fuel extraction to other areas.
What should we say about the support for nuclear power in the IRA?
Some people have concerns about the impacts and risks of nuclear power, but many climate advocates voice support for nuclear power as part of our clean energy mix. For conservatives audiences, support for nuclear power is often seen as a big plus, whereas on the left it is seen as a problem or perhaps as a necessary but less desirable option. It is best to read your audience and build common ground with them where possible.
The IRA provides a $15/MWh credit to existing nuclear power plants to help keep them from closing down.
Starting in 2025, new nuclear power plants can take advantage of the same clean energy tax credits available to any zero-emissions energy source like wind, solar, geothermal, etc.
Why isn’t there a carbon price in the IRA?
The Senate came close to including a carbon price in the reconciliation bill, but a carbon price was not able to get that elusive 50th vote, and then issues around inflation made it politically difficult timing for a carbon price.
The IRA does include a price on methane pollution, which sets a price reaching the equivalent of $60 per ton of CO2. This sets a precedent and could help prove the benefits of pollution pricing as a climate solution.
The IRA also includes money for carbon capture and storage that pays $60–$85/ton of CO2 sequestered. While this is not a price on all carbon pollution, it does set a value for preventing such pollution, which could help pave the way for a carbon price. See the answer to the question above about carbon capture and storage for more information.
CCL will continue to advocate for carbon fee and dividend to help us reach our emissions reduction goals.
How do we get the rest of the way to our emissions goals?
CCL is focused on enacting policies that will get us to the emission reduction goals of 50% by 2030 and net zero by 2050.
A carbon price would be a great complement to these new policies and even a modest price could put us on target to meet our Paris agreements.
In addition, state and local policies could help us reach our goal, and it may be easier to get those passed given how the IRA will lower costs for clean energy, electrification, etc. Additional executive branch action could also drive further emissions reductions. Other federal legislation can also drive further and faster emissions reductions.
What are the data sources for the IRA page on the CCL website?
We have a page on the CCL website about the IRA that is linked to from our tabling flyers. It has numerous data points that people might ask about. Here are sources for that data:
40% emissions reduction by 2030 is below 2005 levels - based on modeling by Rhodium Group, Princeton University's REPEAT project, Energy Innovation, and the US Department of Energy
Save 180,000 American lives by 2030 - Drew Shindell, Duke University, via Yale Climate Connections, Experts: Senate-passed bill will yield myriad climate benefits
$200 per year thanks to lower electricity costs - Resources for the Future, Retail Electricity Rates under the Inflation Reduction Act of 2022
$14,000 in new rebates for home weatherization and electrification - For details and to see what you qualify for, see this calculator from Rewiring America
85% of our electricity will be from clean sources - Energy Innovation, Modeling the infrastructure bills Using the Energy Policy Simulator and Rhodium Group, A Turning Point for US Climate Progress: Assessing the Climate and Clean Energy Provisions in the Inflation Reduction Act
Clean power production from solar, wind and other clean sources will triple - American Clean Power Association via Politico
The vast majority of new cars and trucks sold will be electric - Princeton University’s REPEAT Project, Preliminary Report: The Climate and Energy Impacts of the Inflation Reduction Act of 2022 and Jesse Jenkins
Over 1 million new jobs will be created - Energy Innovation, Modeling the Inflation Reduction Act Using the Energy policy Simulator, and Blue Green Alliance, 9 Million Jobs from Climate Action: The Inflation Reduction Act
Over 20,000 jobs will be created in disadvantaged communities - includes environmental justice and neighborhood access jobs from Blue Green Alliance, 9 Million Jobs from Climate Action: The Inflation Reduction Act, which shows 210,000 job-years created over 10 years for the equivalent of 21,000 permanent jobs.
69,000 jobs in rural communities - includes Natural Infrastructure and Rural Electric Co-op jobs from Blue Green Alliance, 9 Million Jobs from Climate Action: The Inflation Reduction Act, which shows 690,000 job-years created over 10 years for the equivalent of 69,000 permanent jobs.
Farmers will also see benefits of up to $400 million each year thanks to improved crop yields due to reduced fossil fuel pollution - Drew Shindell, Duke University, via Yale Climate Connections, Experts: Senate-passed bill will yield myriad climate benefits