What’s in the Historic Inflation Reduction Act?

Senate Majority Leader Chuck Schumer (D-NY) and US House Majority Whip James Clyburn (D-SC) US President Joe Biden hands his pen to US Senator Joe Manchin (D-WV) after Biden signs “The Inflation Reduction” . The 2022 Act” was enacted in a ceremony held in the State Dining Room of the White House in Washington on August 16, 2022.

Leah Millis | Reuters

The Biden administration signed a deal this year. historic climate and tax treaty this will pour billions of dollars into programs designed to accelerate the country’s clean energy transition and combat climate change.

As the United States grappled with climate-related disasters this year, from Hurricane Ian in Florida to the Mosquito Fire in California, the Inflation Relief Act, which includes $369 billion in climate provisions, was a tremendous advance in mitigating the effects of climate change across the country. .

What bill is the president Joe Biden Signed in August, it is the most aggressive climate investment ever received by Congress and is expected to reduce the country’s planet-warming carbon emissions by nearly 40% this decade and move the country towards a net-zero economy by 2050.

The provisions of the IRA will have significant implications for clean energy and generation businesses, climate initiatives and consumers in the years to come. As 2022 draws to a close, let’s take a look at the key elements of legislation that climate and clean energy advocates will follow in 2023.

Incentive for electric vehicles

The agreement offers up to $7,500 in federal tax credits to households purchasing new electric vehicles and up to $4,000 in used EV credits for vehicles that are at least two years old. Beginning January 1, individuals earning $150,000 or less per year or co-payers are eligible for a new car loan of $300,000, while individuals earning $75,000 or less or earning $150,000 for co-payers are eligible qualify for a car loan.

Despite the increase in EV sales in recent years, the transportation sector is still the country’s largest source of greenhouse gas emissions, and the lack of suitable charging stations is one of the barriers to expansion. Biden administration, set and target 50% electric vehicle sales by 2030.

The IRA limits EV tax credits to vehicles manufactured in North America and aims to discourage the US from battery materials from China, which account for 70% of the global battery cell supply for vehicles. The additional $1 billion in the deal will provide financing for zero-emission school buses, heavy-duty trucks and public transit buses.

US President Joe Biden gestures after driving a Hummer EV during a tour at the General Motors “Factory ZERO” electric vehicle assembly plant in Detroit, Michigan, November 17, 2021.

Jonathan Ernst | Reuters

The combination of IRA tax credits and government policies will boost EV sales, said Stephanie Searle, program director at the nonprofit Clean Transport Council International. The agency estimates that roughly 50% or more of passenger cars, SUVs and pickups sold by 2030 will be electric. The group said that number will be 40% or higher for electric trucks and buses.

Over the next year, Searle said the agency is following the Environmental Protection Agency’s plans to propose new greenhouse gas emission standards for heavy-duty vehicles starting with the 2027 model year.

“While the IRA is already promoting electric vehicles, the EPA can and should be bold in setting ambitious standards for cars and trucks,” Searle said. “This is one of the Biden administration’s last chances for strong climate action during this period and they need to make good use of it.”

Targeting methane gas emissions

Some pumps are working, while others stand idle at the Belridge oil field near McKittrick, California. Oil prices rose in early Asian trade on anticipation that the halting of the Iran nuclear deal and Moscow’s new mobilization campaign will curb global supply.

Mario Tama | Getty Pictures

The package imposes taxes on energy producers who exceed a certain methane emission level. Polluters pay a fine of US$900 per metric ton of methane emissions released in 2024 that exceed federal limits and will rise to US$1,500 per metric tonne by 2026.

It is the first time the federal government has imposed a fee for any greenhouse gas emissions. Global methane emissions are the second largest contributor to climate change after carbon dioxide and come primarily from oil and gas extraction, landfills, wastewater and livestock.

Methane is a major component of natural gas and is 84 times more potent than carbon dioxide, but it doesn’t stay in the atmosphere that long. scientists they claimed to limit methane It is necessary to avoid the worst consequences of climate change.

Located along Interstate 5, Harris Cattle Ranch fattening is the largest producer of beef in California and can produce 150 million pounds of beef per year, as seen near Harris Ranch, California on May 31, 2021.

George Rose | Getty Pictures

Robert Kleinberg, a researcher at Columbia University’s Center for Global Energy Policy, said the methane emitted by the oil and gas industry each year would be worth about $2 billion if used to generate electricity or heat homes.

“Reducing methane emissions is the fastest way to mitigate climate change. Congress accepted this as it passed the IRA,” Kleinberg said. “The methane charge is a brutal tax on methane released by the oil and gas industry in 2024 and beyond.”

In addition to the IRA’s methane provision, this year Biden’s Home Office Recommended rules to prevent methane leaks from drillingHe said it would generate $39.8 million a year in royalties for the United States and prevent billions of cubic feet of gas from being wasted through venting, flare-ups and leaks.

Increasing clean energy production

The bill includes $30 billion in production tax credits to accelerate domestic production of solar panels, wind turbines, batteries and critical mineral processing, and $60 billion in clean energy generation, including $10 billion in investment tax credits to EVs and clean-building manufacturing facilities. provides. energy technology.

There’s also $27 billion going into a green bank called the Greenhouse Gas Reduction Fund, which will fund clean energy deployment across the country, particularly in overburdened communities. The bill includes a hydrogen production tax credit that gives hydrogen producers a credit based on the climate characteristics of their production methods.

The solar panels were installed on the solar farm at the University of California, Merced, in Merced, California on August 17, 2022.

Nathan Frandino | Reuters

Emily Kent, director of zero-carbon fuels in the US for the Clean Air Task Force, a global nonprofit climate organization, said the bill’s support for low-emission hydrogen is particularly notable because it can appeal to difficult sectors such as heavy transport and heavy industry. it decarbonizes.

“U.S. climate policy took a big step forward this year on zero-carbon fuels in the United States and globally,” Kent said. “We look forward to the impact of these policies, implemented as hydrogen tax credits, to accelerate progress towards creating a global market for zero-carbon fuels, along with the hydrogen distribution centers program.”

The clean energy generation provisions in the IRA will also have significant implications for climate initiatives and the large venture capital firms that support them. Carmichael Roberts, head of investment at Breakthrough Energy Ventures, said climate initiatives under the IRA would give private investors greater confidence in the climate space and could even lead to the creation of up to 1,000 companies.

“Everybody wants to be a part of it,” Roberts said. told CNBC After the bill passed in August. Even before the measure was passed, “there was already a big ground wave on climate,” he said.

Investing in communities bearing the burden of pollution

Legislation is investing more than $60 billion to address the unequal effects of pollution and climate change on low-income and non-white communities. The funding includes grants for zero-emission technology and vehicles and will help clean up Superfund sites, build air quality monitoring capacity, and fund community-led initiatives through Environment and Climate Justice block grants.

Smoke hangs over the Oakland-San Francisco Bay Bridge in San Francisco, California, USA on Wednesday, September 2. September 9, 2020. Strong, dry winds are also blowing in Northern California for its third day, increasing the risk of wildfires in an area battered by heat waves, crazy lightning storms and dangerously low air quality from the flames.

Bloomberg | Bloomberg | Getty Pictures

Research published in the journal Environmental Science and Technology Letters to create that non-white communities are systematically exposed to higher levels of air pollution than white communities because of the red line, a federal housing discrimination practice. Black Americans are 75% more likely than white Americans to live near hazardous waste facilities and are three times more likely to die from exposure to pollutants. according to this Clean Air Task Force.

After taking office, Biden signed an executive order that aims to prioritize environmental justice and help reduce pollution in marginalized communities. The administration established the Justice40 Initiative to deliver 40% of the benefits from federal investments in climate change and clean energy to disadvantaged communities.

More recently, the EPA launched an office in September focused on providing and distributing grant money from the IRA to these communities.

Cutting agricultural emissions

The agreement includes $20 billion for programs to reduce emissions from the agricultural sector, which, according to EPA estimates, accounts for more than 10% of US emissions.

there is a president promised to reduce emissions The IRA provides grants to agricultural conservation practices that directly improve soil carbon, and to projects that help protect forests prone to wildfires.