Climate Corner: The Inflation Reduction Act

Many bills pass through Congress under the radar without sparking much conversation within the general public. This was not the case for the Inflation Reduction Act, proposed by Rep. John. A Yarmuth [D-KY] and pushed by the House Budget Committee₁. It became law August 16th, 2022, after passing in the House of Representatives with a vote of 220-207₂. What made this bill so special? On the surface, it seems like any other, full of tax credits and fund allocations. The IR (Inflation Reduction) Act gains its fame in the fact that it is the largest singular piece of climate legislation in American history. This act could help the United Nations reach their ambitious 2030 climate goals, and it may have significant financial effects on individuals and families around the nation. In today’s “Climate Corner,” we’ll be going over exactly what the IR Act is, and how it can affect (and possibly work for) you.

What Is It?

The IR Act has several subtitles, spanning across many sectors of the economy from healthcare to IRS reform₃. Here, we’ll focus more on the provisions around the environment, energy, and climate change, but you can find information on the other sections through the White House or the National Conference of State Legislatures. Overall, the bill invests $408 billion in energy and climate through tax credits and funding, which is about ten times the climate impact of any other single piece of legislation.

See the general IRA budget breakdown here. 

See a more specific budget breakdown here. 

Energy

The IR Act creates tax and program incentives for electric vehicles (EVs), solar, wind, and nuclear energy, zero-emission energy, low-carbon construction, and much more. While many credits discuss and are targeted towards businesses, the act also allocates several tax credits focused on incentivizing the individual homeowner to invest in lower impact energy and energy efficiency upgrades. To help mitigate any job losses caused by this push towards renewable energy, there’s also included tax credits to encourage businesses to practice fair labor practices and promote hiring in disadvantaged communities and communities that previously had a heavy reliance on coal or fossil fuel energy. These include energy communities like “brownfields,” or areas polluted from energy development, as well as coal communities₄.

In rural areas, the act provides funding for climate resilience and adaptation projects, as well as funds to support underserved farmers. Many of these same areas in the US also lack reliable access to electricity, so the IR act includes provisions to local, state, and tribal governments for the upgrade, maintenance, and expansion of interstate transmission lines. Finally, when it comes to transportation, more than just EVs, the bill looks to encourage businesses to use and develop sustainable aviation technology. All of these tax credits and program funding hope to push the US into a new era of energy and decrease reliance on fossil fuels while helping elevate communities traditionally left behind in bills of the past₅.

See the IRA's energy budget breakdown here. 

Climate Change and the Environment

When it comes to the environment and climate change, the Inflation Reduction Act continues to provide funding and tax incentives to encourage sustainable change across homes and businesses, as well as local, state, and tribal governments. For example, the bill provides billions to forestry programs for land acquisition for conservation as well as to implement climate adaptation strategies, addressing weather events and their effects on federal wildlife management areas. It also looks to aid coastal areas in their extreme weather adaptation and climate resiliency upgrades by providing them with over $2 billion in funding. The bill looks to aid not only just weathering the effects of climate change, but also in mitigating effects we’re already seeing and reducing current emissions to hopefully create a better environment for future generations.

When it comes to mitigation, the bill provides billions in funding for water-based projects such as addressing drinking water shortages in disadvantaged communities and drought in water reclamation states. In cities, funding and grants are provided to help reduce the human health impacts of extreme heat, wood heater effects, and wildfire impacts. Additionally, more grants aim to reduce issues arising from the “urban heat island” effect, which discusses how cities, on average, have much higher temperatures than surrounding nature due to how materials like asphalt can hold a lot of heat. Looking to improve conditions for the future, the act allocates a large amount of funding in the creation of grants and loans for several projects. These include $7 billion to the Greenhouse Reduction Fund to help disadvantaged communities implement zero-emission technology and another $8 billion so disadvantaged communities can reduce greenhouse gasses. There are also several other projects, including implementing technology to improve indoor air quality, air pollution monitoring and remediation, and reduction of emissions across state, local, and tribal governments from electricity production₆. 

See the IRA's climate budget breakdown here. 

What This Means For You

The IR Act has effects in all three pillars of sustainability: economic viability, social equity, and environmental conservation. It aims to allow families to save potentially over $1000 a year by taking advantage of the energy tax credits, reduce national deficit, and decrease the inflation rate. Many of its sections also look to create millions of new jobs in energy industries with better labor protections and incentives for increased labor equity. It also looks to improve equity across communities with environmental justice-driven grants and loans, improving electricity access and reducing particulate matter (usually concentrated in disadvantaged communities) to prevent 3,900 premature deaths and 10,000 attacks annually. Environmentally, this legislation could be a major step towards reaching the United Nations’ 2030 climate goals, allowing for 950 million solar panels, over 100,000 wind turbines, conservation of around two million acres of forest, and a reduction of greenhouse gasses by one gigaton or one billion metric tons. Across several aspects of life, the Inflation Reduction Act has the potential to have substantial effects for governments, businesses, and individuals. 

Want To Know More?

Want to know more and get more in-depth explanations on environmental news and what it could mean for you? Keep an eye on our website and find all of our Climate Corner articles under the “Blog” section! Looking for more immediate, quick-read information for sustainability on campus and beyond? Stay up to date on our Instagram at @fsusustainable!

Sources:

₁ H.R.5376 - 117th Congress (2021-2022): Inflation Reduction Act of 2022 ... https://www.congress.gov/bill/117th-congress/house-bill/5376.

₂ “Garamendi Votes for Inflation Reduction Act, Sends Bill to President's Desk.” Congressman John Garamendi, 22 Aug. 2022, https://garamendi.house.gov/media/press-releases/garamendi-votes-inflation-reduction-act-sends-bill-president-s-desk.

₃ Smith, Kelly Anne. “The Inflation Reduction Act Is Now Law-Here's What It Means for You.” Forbes, Forbes Magazine, 23 Aug. 2022, https://www.forbes.com/advisor/personal-finance/inflation-reduction-act/.

₄ “What Is an ‘Energy Community’?” Resources for the Future, https://www.resources.org/common-resources/what-is-an-energy-community/.

₅ “By the Numbers: The Inflation Reduction Act.” The White House, The United States Government, 15 Aug. 2022, https://www.whitehouse.gov/briefing-room/statements-releases/2022/08/15/by-the-numbers-the-inflation-reduction-act/.

₆ “Understanding the Inflation Reduction Act: CSG Analysts Have Compiled Elements of the Bill That May Directly Impact States.” The Council of State Governments, 16 Aug. 2022, https://www.csg.org/2022/08/16/understanding-the-inflation-reduction-act/.