The Inflation Reduction Act Includes Dramatic Investments in Clean Energy

Brian McCowan, Zondits staff, 8/18/2022

After what has often seemed a roller coaster headed off the rails, President Biden has signed the Inflation Reduction Act. Like everything in modern politics, the interpretation of the content, intent, and impacts varies greatly. Zondits has scoured analyses from multiple news outlets, progressive and conservative, to accurately summarize the landmark legislation’s energy-related provisions.

The overall energy goal of the act is for the combined investments to result in a 40% emissions reduction by the year 2030. Included are investments in biofuels, Hydrogen, solar, wind, transportation and building electrification, carbon capture, nuclear, and many other technologies and strategies. The Biden administration promotes the legislation as the single biggest climate investment in U.S. history.

The bill itself is over 700 pages long. Many of the key energy provisions are outlined below:

Consumer Clean Energy Incentives

  • Up to $7,500 in tax credits to buy new electric and hybrid vehicles. This provision is an extension of existing incentives but adds buyer income and vehicle price caps to better address moderate-income buyers. The extension also adds a provision that the vehicles must be “assembled” in the United States.
  • A $4,000 maximum tax credit for the purchase of clean energy used vehicles. The vehicle must be at least 2 model years old, and again, the provision is income restricted.
  • Home energy rebate programs totaling $9 billion to electrify home appliances and for energy efficiency retrofits. Individual states will decide the details of implementing the programs in their state.
  • A 10-year tax credit program for residential energy efficiency and clean energy investments, including heat pumps for space and water heating, and solar PV.
  • $1 billion in grants for energy efficiency improvements for affordable housing.

Clean Energy Investments in Disadvantaged Communities

  • $27 billion clean energy technology accelerator fund, also termed a “Green Bank” to support the deployment of clean energy technologies, especially in disadvantaged communities.
  • $3 billion in Environmental and Climate Justice Block Grants for investment in community-led projects to address environmental and public health related to pollution and climate change issues disproportionately affecting disadvantaged communities.
  • An additional $3 billion for The Neighborhood Access and Equity Grants program supporting neighborhood equity, safety, and access to affordable transportation.

Investments in Rural Communities

  • $5 billion in grants to support smart forestry practices including urban tree planting, fire resilient forests, and forest conservation that promotes carbon reduction.
  • $20 billion to support climate-smart agricultural practices.
  • Tax credits and grants to support the production of biofuels and the infrastructure needed to produce and deploy sustainable biofuels for aviation and other transportation needs.
  • $2.6 billion in grants to conserve and restore coastal habitats and protect communities that depend on those habitats.

Business Sector Clean Energy Investments

  • Grants totaling $2 billion for the retooling of existing auto manufacturing facilities to manufacture EVs, hybrid, and other clean energy vehicles.
  • $30 billion in production tax credits in support of the U.S. manufacture of solar panels, wind turbines, energy storage, and the processing of critical minerals.
  • Investment tax credits totaling $10 billion for the construction of clean energy manufacturing facilities producing solar, wind, and battery storage systems and components as well as EVs and other clean transportation systems.
  • $500 million earmarked in the Defense Production Act for heat pumps and critical minerals processing.
  • A $20 billion loan program for the construction of clean vehicle manufacturing facilities.
  • $2 billion for National Labs to accelerate breakthrough energy research across a wide range of technologies including microelectronics, solar, hydrogen, nuclear, biofuels, etc.

Additional Carbon Emissions Reduction Investments

  • $30 billion in targeted grant and loan programs for states and electric utilities to accelerate the transition to clean electricity.
  • $9 billion for the Federal procurement of American-made clean energy technologies to create a stable market for clean products. This includes $3 billion for the U.S. Postal Service to expand its purchase of zero-emission vehicles.
  • Tax credits and grants for clean fuels and clean commercial vehicles.
  • Grants and tax credits for emissions reductions from industrial manufacturing processes.
  • Deployment Program to speed the reduction of emissions from the largest industrial emitters including chemical, steel, and cement plants.
  • A Methane Emissions Reduction Program to reduce the leaks from the production and distribution of natural gas.
  • $3 billion in grants addressing air pollution at ports and supporting the purchase of zero-emission equipment at ports.
  • $1 billion for the purchase of clean school and transit buses, garbage trucks and other heavy-duty vehicles.

Fossil Fuel Provisions

Although some climate activists are crying foul, some fossil fuel industry provisions were included to gather support from West Virginia Senator Joe Manchin, and hopefully some Republican Senators. In the final vote, no Republicans supported the bill, but all Democrats, including Manchin supported the bill with Vice President Harris breaking the 50-50 tie.

Some fossil fuel provisions restrict the oil and gas industry while others provide support. American Petroleum Institute CEO Mike Sommers stated after the House of Representatives sent the bill to Biden for signing, “While we’re encouraged that the bill will likely open the door to more federal onshore and offshore lease sales and will expand and extend tax credits for carbon capture, we remain opposed to policies that raise taxes and discourage investment in U.S. oil and natural gas.”

  • Federal lands and offshore waters developed for renewable energy production must also be opened for oil and gas drilling. According to the web trade magazine, “The bill ensures oil and gas drilling leases in the Gulf of Mexico and Alaska’s Cook Inlet. It also would require that the federal government continue to hold regular auctions for oil and gas leases alongside any new plans for wind or solar projects on federal land.”
  • The streamlining of permitting processes for a West Virginia gas pipeline and other new fossil-fuel energy projects.
  • Incentives for the installation of efficiency upgrades and carbon capture solutions at petroleum facilities.
  • Both new punitive fees and taxes for natural gas extraction and methane leaks, and incentives for the reduction of methane leaks.
  • Grants for air pollution monitoring, including methane.

There is much rule-making that must take place at both the Federal and State levels before many of the provisions become active.

The following articles provide further details regarding the act: