What does the historic Inflation Discount Act say
US President Joe Biden holds out his pen to US Senator Joe Manchin (D-WV) while Senate Majority Leader Chuck Schumer (D-NY) and US House Majority Leader James Clyburn (D-SC) look on after Biden signs “The Inflation Reduction Act of 2022” during a ceremony in the State Dining Room of the White House in Washington, August 16, 2022.
Leah Millis | Reuters
The Biden administration this year signed a historic climate and tax deal that will pour billions of dollars into programs designed to accelerate the country’s clean energy transition and combat climate change.
While the US has grappled with climate-related disasters this year, from Hurricane Ian in Florida to the mosquito fire in California, the Inflation Reduction Act signed in August was a monumental development aimed at mitigating the effects of climate change across the country.
The bill is the most aggressive climate investment Congress has ever made, and is expected to cut the country’s planet-warming carbon emissions by about 40% this decade and move the country toward a net-zero economy by 2050.
The IRA’s regulations have major implications for clean energy and manufacturing companies, climate startups and consumers in the years to come. As 2022 draws to a close, here’s a look back at the key pieces of legislation that climate and clean energy advocates will oversee in 2023.
Incentives for electric vehicles
The deal offers households who buy new EVs a state tax credit of up to $7,500 and a used EV credit of up to $4,000 for vehicles that are at least two years old. Beginning January 1, people earning $150,000 per year or less or $300,000 for joint applicants are eligible for the new car loan, while people earning $75,000 or less or $150,000 for joint applicants are eligible for the used car loan.
Despite an increase in electric vehicle sales in recent years, the transport sector is still the country’s largest source of greenhouse gas emissions, with a lack of convenient charging stations being one of the obstacles to expansion. The Biden administration has set a goal of selling 50% electric vehicles by 2030.
The IRA limits EV tax credits to vehicles assembled in North America and aims to wean the US off battery materials from China, which accounts for 70% of the world’s battery cell supply for the vehicles. An additional $1 billion under the deal will provide funding for zero-emission school buses, heavy-duty trucks and public transit buses.
U.S. President Joe Biden gestures after driving a Hummer EV during a tour at General Motors’ Factory ZERO electric vehicle assembly plant in Detroit, Michigan November 17, 2021.
Jonathan Ernest | Reuters
Stephanie Searle, program director at the nonprofit International Council on Clean Transportation, said the combination of IRA tax credits and government policies will boost electric vehicle sales. The agency predicts that about 50% or more of the cars, SUVs, and pickups sold in 2030 will be electric. For electric trucks and buses, the figure will be 40% or more, the group said.
In the coming year, Searle said, the agency will oversee the Environmental Protection Agency’s plans to propose new greenhouse gas emissions standards for heavy-duty vehicles beginning in the 2027 model year.
“With the IRA 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 this term, and they should seize it well.”
Target methane gas emissions
At the Belridge Oil Field near McKittrick, California, some pumpjacks are working while others are idle. Oil prices rose in early Asian trade on the prospect that a stalled nuclear deal with Iran and Moscow’s new mobilization campaign would curtail global supplies.
Mario Tama | Getty Images
The package imposes a tax on energy producers that exceed a certain level of methane gas emissions. Polluters will be fined $900 per tonne of methane emissions emitted in 2024 that exceed federal limits, rising to $1,500 per tonne in 2026.
It is the first time that the federal government has levied a fee on greenhouse gas emissions. Global methane emissions are the second-biggest contributor to climate change after carbon dioxide and come mainly from oil and gas exploration, landfills and wastewater, and animal husbandry.
Methane is a key component of natural gas and is 84 times more potent than carbon dioxide, but doesn’t last as long in the atmosphere. Scientists have claimed that limiting methane is necessary to avoid the worst impacts of climate change.
The Harris Cattle Ranch feedlot off Interstate 5 is the largest beef producer in California and is capable of producing 150 million pounds of beef per year, as shown May 31, 2021 near Harris Ranch, California.
George Rose | Getty Images
Robert Kleinberg, a researcher at Columbia University’s Center on Global Energy Policy, said the methane emitted by the oil and gas industry each year would be worth about $2 billion if it were used instead to generate electricity or heat homes.
“Reducing methane emissions is the fastest way to mitigate climate change. Congress recognized this by passing the IRA,” Kleinberg said. “The methane levy is a draconian tax on methane emitted by the oil and gas industry in 2024 and beyond.”
In addition to the IRA regulation on methane, Biden’s Department of the Interior this year proposed rules to curb methane leaks from wells that will bring the US $39.8 million in royalties a year and prevent billions of cubic feet of gas from wasted on venting , flaring and leaks.
Promotion of clean energy production
The bill provides $60 billion for clean energy manufacturing, including $30 billion in production tax credits to accelerate domestic manufacturing of solar panels, wind turbines, batteries and critical minerals processing, and a $10 billion investment tax credit for manufacturing facilities who build electric vehicles and are clean energy technology.
Also, $27 billion will go to a green bank called the Greenhouse Gas Reduction Fund, which will provide funding for clean energy deployments across the country, but especially in overburdened communities. And the bill includes a hydrogen production tax credit that will give hydrogen producers a credit based on the climate attributes of their production methods.
Solar panels are placed at the University of California, Merced Solar Farm in Merced, California August 17, 2022.
Nathan Frandino | Reuters
Emily Kent, the US director of zero-carbon fuels at the Clean Air Task Force, a global climate nonprofit, said support for the low-emission hydrogen bill is particularly noteworthy because it could address sectors like heavy transportation and industry that are struggling to decarbonize.
“US climate policy took a major step toward zero-carbon fuels in the US and around the world this year,” Kent said. “We look forward to seeing the impact of these actions as the hydrogen tax credit, along with the Hydrogen Hub program, accelerates progress towards creating a global market for zero-carbon fuels.”
The IRA’s clean energy manufacturing provisions will also have a major impact on climate-related start-ups and the large venture capital firms that back them. Carmichael Roberts, head of investment at Breakthrough Energy Ventures, said the climate initiatives under the IRA would give private investors more confidence in the climate space and could even lead to the creation of as many as 1,000 companies.
“Everyone wants to be a part of this,” Roberts told CNBC after the bill passed in August. Even before the measure was passed, “there was already a big bump around the climate,” he said.
Investing in communities burdened by pollution
The legislation invests more than $60 billion to address the unequal impacts of pollution and climate change on low-income and communities of color. The funding includes grants for zero-emission technologies and vehicles, and will help clean up Superfund sites, improve air quality monitoring capacity, and provide money for community-led initiatives through environmental and climate justice block grants.
Smoke hangs over the Oakland-San Francisco Bay Bridge in San Francisco, California, United States on Wednesday, September 9, 2020. Strong, dry winds sweep across northern California for a third day, raising the risk of wildfires in a region that has been battered by blaze-ravaged heat waves, freak thunderstorms and dangerously poor air quality.
Bloomberg | Bloomberg | Getty Images
A study published in the journal Environmental Science and Technology Letters found that communities of color are systematically exposed to higher levels of air pollution than white communities because of redlining, a federal discriminatory practice in housing. According to the Clean Air Task Force, 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.
After taking office, Biden signed an executive order aimed at prioritizing environmental justice and helping reduce pollution in marginalized communities. The government launched the Justice40 initiative to deliver 40% of profits from federal investments in climate change and clean energy to disadvantaged communities.
Most recently, in September, EPA opened an office focused on supporting and providing IRA grant money to these communities.
Reduce emissions from agriculture
The agreement includes $20 billion for programs to reduce emissions from the agricultural sector, which accounts for more than 10% of US emissions, according to EPA estimates.
The President has pledged to halve emissions from agribusiness by 2030. The IRA funds grants for agricultural conservation practices that directly improve soil carbon levels, as well as projects that help protect wildfire-prone wildfires.
Farmer Roger Hadley harvests corn from his fields in his John Deere combine in this aerial photo from Woodburn, Indiana.
Bing Guan | Reuters
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