Climate change

How does the Inflation Reduction Act tackle climate change?

Senate Majority Leader Chuck Schumer said the Senate plans to hold its first vote Aug. 6 on the Cut Inflation Act, surprising legislation that he and West Virginia Sen. Joe Manchin, a former recalcitrant, announcement on July 27.

The budget reconciliation invoice that the two Democratic senators agreed on goals, in part, to fight inflation as well as lower health care costs and prescription drug prices for millions of people. But if it receives enough votes to become law, most of the bill’s spending – an estimate $369 billion over the next 10 years – would go toward efforts to combat climate change while investing in “energy security” for the United States.

Proponents of the bill have said it would reduce U.S. carbon emissions by about 40% below 2005 levels by 2030 — an estimate that falls within the range of possible outcomes projected by at less of them research firms who have analyzed the legislation in its current form. LLast year President Joe Biden announcement that his administration would aim for a 50 to 52 percent reduction in greenhouse gas emissions from 2005 levels by the end of the decade.

Assuming every Republican in the Senate votes against the bill, as expected, Democrats would need the support of their 50-member caucus — and Vice President Kamala Harris to cast a deciding vote — for the legislation to pass. But Democratic Senator Kyrsten Sinema of Arizona, who has raised concerns about the bill’s provisions taxing corporations and investment income, has yet to publicly say how she will vote. (For more on these taxes, see “Sorting Out the Partisan Tax Spin on Inflation Reduction Act.”)

Here we review some of the climate-focused provisions of the bill.

Clean energy production

According to a Democrat summarythe bill includes more than $60 billion for clean energy manufacturing in the United States

An estimated $30 billion in production tax credits to increase the manufacturing of solar panels, wind turbines and batteries, as well as the processing of critical minerals, such as lithium and nickel, used in electric car batteries. There is also $10 billion in investment tax credits for the construction of facilities where these and other clean technologies would be manufactured.

The bill would make available $20 billion in loans to build new US facilities to manufacture clean vehicles, as well as $2 billion in grants to reconfigure existing auto plants for the same purpose.

In addition, the bill includes $500 million for heat pump production and mineral processing under the Defense Production Act, which can be invoked by the President. Heat pumps can be used to heat or cool homes and other buildings. The devices are considered more environmentally friendly than heaters and air conditioners because they don’t run on oil or gas and use less electricity.

Reduction of emissions from various sources

Many of the tax credits included in the bill are aimed at reducing emissions from transportation, industrial manufacturing, buildings, agriculture and electricity generation.

About $30 billion in the bill is earmarked for grant and loan programs for states and power companies to accelerate the transition to clean electricity. Another $6 billion is earmarked for a new Advanced Industrial Installations Deployment program to reduce emissions from chemical, steel and cement plants, which are among the biggest emitters.

The bill too increase the value of one tax credit for Carbon Capture and Storage Investments, which encourages sequestration projects that remove or remove certain carbon emissions from the atmosphere.

In addition, $27 billion would go to a “clean energy technology accelerator”, or greenhouse gas reduction fundwhich allows states to provide financial assistance to low-income communities to benefit from technologies such as rooftop solar installations.

As for agriculture, there is at least $20 billion to finance practices considered “climate-smart”. according a Democratic summary. For example, the Environmental Quality Incentive Program would get $8.45 billion in funding, which the Secretary of Agriculture could use to improve soil carbon, reduce nitrogen losses or greenhouse gas emissions, or capture or sequester carbon emissions. greenhouse gases from agricultural production.

Consumption tax credits and incentives

The bill also aims to reduce energy costs and utility bills for individuals through additional tax credits that encourage the purchase of energy-efficient homes, vehicles and appliances.

Notably, there is an extension of an existing tax credit of up to $7,500 for income-qualifying individuals who purchase qualifying electric vehicles. For joint filers to qualify, their adjusted gross income cannot exceed $300,000; for a head of household it is $225,000 and for other filers it is $150,000.

In addition, the bill offers a tax credit of up to $4,000 for the purchase of certain used electric vehicles. To get the credit, joint filers must have an AGI of less than $150,000. For a head of household or other filer, the AGI thresholds are $112,500 and $75,000, respectively.

There is also $9 billion for home energy rebate programs aimed at retrofitting homes and appliances to be more energy efficient.

Oil and gas rental

At the same time, however, the legislation would further facilitate domestic energy production from fossil fuels, including oil and gas drilling, which would offset some of the emission reductions resulting from other climate-related provisions in the law Project.

It’s because he requires the Home Office to effect a number of oil and gas lease sales in the Outer continental shelfwhich includes the Gulf of Mexico. The department should also periodically make a minimum amount federal lands and offshore waters available for lease by oil and gas companies before the agency can grant or sell leases to renewable projects using wind and solar power.

But the bill would also have charge a fee on operators of oil and gas facilities with annual methane emissions greater than 25,000 metric tonnes of carbon dioxide equivalent. The fee would start at $900 per metric ton of reported methane emissions above the allowable threshold for calendar year 2024. This would increase to $1,200 for excess emissions in 2025 and $1,500 for excess emissions in 2026.

Projected emission reductions

Overall, some groups that analyze energy and climate policy predicted that the bill’s provisions could lead to more emissions reductions than expected under the current law.

The Rhodium Groupa research company, said its “preliminary estimate is that the IRA can reduce net greenhouse gas emissions in the United States by 31% to 44% below 2005 levels by 2030…compared to 24% to 35% under current policy”.

In addition, Energy innovationa think tank that produces custom research and policy analysis on how to reduce emissions, said its modeling found that the legislation – despite its oil and gas leasing requirements – “could reduce greenhouse gas (GHG) emissions by 37-41% below 2005 levels”. That’s more than the projected 24% drop in emissions by 2030 under a business-as-usual scenario that holds current policy constant, the think tank said.

What happens next?

As mentioned, Schumer said he plans to take the bill to the Senate for a vote this week. The Senate is program to suspend for summer vacation on August 8 and would not meet until September 6.

Before a vote can take place, the Senate Member must reign whether the provisions of the bill can be taken into consideration as part of the budget reconciliation process.

In the Senate, treat allows bills to pass by a simple majority rather than the usual 60 votes needed to avoid potential filibuster. There is also a limit on the length of debate on a bill, which must not exceed 20 hours. To qualify reconciliationthe provisions of a bill must change the revenue, the expenditure or the debt ceiling.

Again, if all Republicans vote against the Cut Inflation Act, Democrats would need yes votes from all 50 members of the Senate Democratic caucus for the vice president to break the tie.

If the bill passes the Senate, then it will need to be approved by the House of Representatives. At this point, Biden would be able to sign it into law.

Since 1980, reconciliation has been used 22 times to enact laws, according the Congressional Research Service.

For example, Democrats used the process to pass the Affordable Care Act in March 2010 and Republicans used it to pass the Tax Cuts and Jobs Act in December 2017. More recently, Democrats used the reconciliation to pass the US bailout in March 2021. does not accept advertising. We rely on grants and individual donations from people like you. Please consider a donation. Credit card donations can be made via our “Donate” page. If you prefer to give by check, send it to:, Annenberg Public Policy Center, 202 S. 36th St., Philadelphia, PA 19104.