What the Inflation Reduction Act does on climate change

Editor’s Note, August 7: This story was originally published on July 28, 2022, and has been updated to reflect the Senate passage of the Reducing Inflation Act.

Congress overcame its biggest hurdle to finally pass historic climate legislation.After nearly 18 months of haggling and 15 straight After hours of weekend voting, Senate Democrats passed the Reducing Inflation Act on Sunday in a strictly partisan vote.

The bill includes $369 billion in funding for clean energy and electric vehicle tax breaks, domestic manufacturing of batteries and solar panels, and pollution reduction. This is the most important step the United States has taken to address the climate crisis. Arguably, this is one of the largest investments the world has ever made in climate.

If the bill’s policies work as intended, it will push American consumers and industry away from fossil fuels, punish fossil-fuel companies for excess methane emissions, and inject the money needed to clean up pollution.

The bill uses tax credits to incentivize consumers to buy electric vehicles, electric HVAC systems and other forms of clean technology that reduce emissions from vehicles and power generation, and includes incentives for companies to manufacture the technology in the United States. It also includes funding for many other climate priorities, such as investing in forest and coastal restoration and resilient agriculture.

These investments are spread over the next decade, and pollution could be about 40 percent lower than 2005 levels by 2030, according to three separate analyses by economic modelers. Rhodium Group, energy innovationand Princeton University. The legislation helps bring the U.S. closer to its stated goal of halving pollution within a decade.

Major components of climate change Inflation Reduction Act It looks strikingly similar to the version the House passed last fall, a measure widely celebrated by climate activists — although it $2 trillion Biden once envisioned it. To win the support of Sen. Joe Manchin (D-WV), Democrats added provisions that would clear licensing hurdles for some fossil fuel projects and force the Interior Department to hold more offshore oil lease sales. The Senate will also consider a separate bill that would expedite approvals and clear the way for energy infrastructure. Valley Pipeline Deliver fracking natural gas 300 miles to West Virginia.

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Even with these concessions, a climate deal that reserved tens of billions of dollars for clean energy and pollution cleanup would have been unimaginable just a few weeks ago.

The climate “complete game changer” is what Leah Stokes, a political scientist at the University of California, Santa Barbara, has advised Democrats on a settlement.

Much of the TIA investment targets climate change

The bill has a lot of behavior unrelated to climate change.Have funds Affordable Care Act and Prescription Drug Reform. It also sets a corporate minimum tax — one of the ways the bill helps fight inflation. But it’s arguably a climate bill, as climate initiatives make up the largest portion of the bill’s investments.

The agreement preserves most of the key programs of the House Build Back Better Act, including consumer tax credits for solar panels and electric vehicles and funding for domestic clean energy manufacturing.

Clean Energy and Electric Vehicles: There are plenty of tax breaks aimed at lowering the cost of solar, wind, batteries, cars, heat pumps and other clean technologies. The idea is to push as much renewable energy as possible in the most polluting parts of the economy: transportation and power generation.

A tax credit designed to let clean energy companies deploy more solar, wind and batteries on the grid extends existing credits for another 10 years.

The second type will seek to drive more renewable energy consumption, offering Americans incentives to install heat pumps, adopt solar power and buy electric vehicles.

On electric vehicles, for example, consumers could get $7,500 per new car and about $4,000 for used cars by 2032, but there are some new restrictions on where batteries can be made and income limits (Bloomberg goes in depth on Twitter). discuss) Tom Randall).

Some of these programs specifically help low-income people, such as a $9 billion home energy rebate program focused on retrofits and the electrification of appliances; an additional $1 billion helps improve energy efficiency in public housing.

The bill also provides $27 billion in funding for the creation of a National Green Bank, a program that will help use private money to fund cleaning projects, including in low-income communities.

fossil fuel: The bill has made some progress on methane, the second most problematic climate pollutant.Methane is 86 times stronger For 20 years, it’s a greenhouse gas that emits more carbon than carbon, and it’s also an incredibly leaky gas that’s emitted at any point in oil and gas production — at wellheads, compressor stations, and LNG terminal drilling. For the first time, Congress will set some industry-wide limits on methane leaks. Oil and gas companies that emit more than a certain level of methane across all operations trigger fees that will increase over time. New royalties on all methane extracted from public lands, including the common practice of emissions and flaring. To do all this, oil operators and the Environmental Protection Agency have provided additional funding for monitoring methane leaks.

There have also been some changes in what the oil industry pays to produce on public lands and waters. The bill increases oil industry royalties and raises minimum bids (from $2 to $10 per acre). The bill also includes some new oil leasing incentives, however, such as requiring the Interior Department to expand offshore oil supplies, the Environmental Group West First Center noted.

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Pollution Reduction and Environmental Justice: There is $60 billion for overall environmental justice priorities: $15 billion of that goes to a range of priorities, including clean energy and emissions reductions, that specifically target low-income and disadvantaged communities. Community groups, governments and tribes are also eligible for $3 billion in block grants for projects such as cleaning up abandoned mines, monitoring air quality and improving resilience to extreme weather. The bill contains $3 billion to restore and reconnect communities separated by highways.

industrial pollution: Now, industry is American The third most polluting sector, after transport and electricity. By 2030, it could be the most polluting industry. While cleaner vehicles and renewable energy are readily available technologies that must be adopted on a wider scale to make these industries cleaner, heavy industry still relies on fossil fuels because of the high temperatures required to produce the raw materials. As such, the Act helps the sector by incentivizing energy efficiency at industrial sites to reduce their footprint.

Domestic clean energy manufacturing: There is also $60 billion in incentives and funding to boost domestic manufacturing of clean energy technologies.

Much of these incentives will be used to accelerate U.S. manufacturing of solar panels, wind turbines, batteries and key minerals and help build facilities to make electric vehicles.

The $500 million allocation to heat pumps and critical minerals is a new initiative that funds Biden’s use of the National Defense Authorization Act to promote the manufacture of energy-efficient technologies.

Jason Walsh, executive director of the environment and workforce-focused BlueGreen Alliance, explains why domestic manufacturing of batteries, solar and offshore wind is so important. “These are big investments, and they’re risky investments. If we expect manufacturers to make them in the U.S., they’re going to need some long-term policy certainty and support,” he said.

The Big Picture of U.S. Climate Action

The news that climate is back on the table is a relief to advocates who have spent 18 months fighting for the passage of a climate deal.

In the absence of any new action from Congress or the president, economic modelers Rhodium Group It is estimated that by 2030, climate emissions are expected to be 24% to 35% lower than in 2005, the year of peak carbon emissions. That’s not a lot, even if it sounds like this: Biden has set a goal under the Paris climate accord to cut 2005 levels in half by the end of the century.

A lower inflation bill won’t necessarily make the U.S. all the way through. Federal regulations on power plants, auto pollution and methane are still important to fill the remaining gaps.

Still, it’s a far cry from a bleak picture when Biden appears to have few limited regulatory options for tackling climate change. While Biden faces pressure from the left to declare a climate emergency, his power and lasting impact will far exceed anything Congress can do.

Though imperfect, Democrats hailed the bill as an important step in tackling the climate crisis. Last week Sen. Brian Schatz (D-HI) Call It was “both historic and just a down payment.” On Sunday, Schatz reportedly left the Senate in tears. New York Times“Now I can look my kids in the eyes and say we’re really doing something for the climate,” he said.