The Inflation Reduction Act

New: The Sabin Center for Climate Change Law and Environmental Defense Fund are announcing the launch of an additional resource on the Inflation Reduction Act Tracker website: the IRA litigation case chart! Found on the new Litigation page, the chart records court cases that directly impact or implicate the climate change-related provisions of the 2022 Inflation Reduction Act (IRA). The chart already contains information on eleven cases or appeals filed in federal courts.

New: The State Funding Readiness Project (SFRP) provides free technical support to states implementing funding from the Infrastructure Investment and Jobs Act (IIJA) and Inflation Reduction Act (IRA) in ways that advance climate equity priorities and reduce greenhouse gas emissions.

New: In July 2024, Lawyers for Good Government launched their Clean Energy Tax Navigator, a tool to help under-resourced communities access funding from the Inflation Reduction Act. The tool has an interactive form that walks applicants through determining eligibility, offers technical resources, and even directs to pro bono legal and tax services.

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With the passage of the Inflation Reduction Act, the United States takes the largest single legislative step in its history to combat climate change. This wide-reaching law touches on myriad sectors and sources of emissions, and, according to most estimates, makes the goal of reducing economy-wide emissions 40% over 2005 levels by 2030 attainable. The Act expands tax credits for clean electricity and hydrogen production; offers rebates and incentives for building efficiency; subsidizes EVs; provides a just transition for former fossil fuel communities; accelerates low-carbon cement, steel, aluminum and chemicals; supports existing nuclear generators; reduces oil and gas sector methane leaks; increases the availability of sustainable aviation fuel; and accelerates Direct Air Capture of CO2, among its many provisions.

Several independent modeling studies released in the days before the IRA’s passage assess its cumulative emissions reduction capacity, as well its impacts on infation and employment. RFF’s analysis shows that the legislation would save typical American households up to $220 per year over the next decade; BlueGreen Alliance estimates that the Act will create 9 million jobs over the next decade; Energy Innovation estimates a 37-41% reduction in GHGs over 2005 levels by 2030, noting that for every ton of GHGs added by fossil fuel provisions in the law, 24 tons are avoided elsewhere; REPEAT’s analysis compares the effects of the Act with previously proposed legislation and model emissions pathways; and Rhodium’s analysis, models different emissions pathways between now and 2030 and estimates potential reductions between 31-44% over 2005 levels.

Other official analyses have been forthcoming recently. The climate pollution cuts enabled by the Inflation Reduction Act could prevent or reduce damages by climate impacts by as much as $1.9 trillion over the next 28 years, according to an analysis by the Office of Management and Budget, based on modeling from Princeton, Energy Innovation, and Rhodium Group. Using social cost calculations to estimate longer-term savings, the analysis finds the “cumulative climate-related benefits” of the IRA would be at least $700 billion. The Dept. of Energy has put forward similar modeling of the energy sector particularly.

At the state level, the  White House has put forth a fact sheet describing the state-by-state benefits of the IRA. At the individual level, Rewiring America has developed a calculator that estimates the total amounts that a household might be eligible for in rebates for different environmentally-superior purchases, thanks to the IRA.

A partial summary of the Act’s provisions follows, aided in parts by Bipartisan Policy’s bulleted summary of the Act’s spending provisions:

• Hydrogen Support: A new hydrogen production tax credit, creating a 10-year incentive for clean hydrogen production with four tiers and a maximum of 4 kilograms of CO2 equivalent per kilogram of hydrogen.
• Clean Manufacturing: A new manufacturing tax credit for the production of clean energy technology components, including solar components, wind turbine and offshore wind components, inverters, many battery components, and the critical minerals needed to produce these components.
• Supporting Nuclear: A nuclear power production tax credit through 2032, helping keep existing nuclear power online. The credit is for 1.5 cents multiplied by kilowatt hours (kWh) of electricity produced minus 16% of the facility’s gross recipients in excess of 2.5 cents per kWh.
• Clean Buildings: Extends tax credits for home energy efficiency and clean energy. Approximately $4B is allocated, each, for states to develop home efficiency rebate programs and home electrification rebate programs. RMI’s analysis finds that the bill could result in 650,000 newly constructed energy-efficient homes, 2.4 million electrification upgrades, and the installation of 7.2 million highly efficient heat pumps.
• Renewable Energy: For renewable energy, extends existing tech-specific Production Tax Credits (PTC) and Investment Tax Credits (ITC) through 2024, and introduces new tech-neutral Clean Electricity PTCs and ITCs in 2025. The new PTC and ITC will apply bonuses for domestic construction, and siting in justice or low-income communities.
• Low Carbon Fuel: A new technology neutral 2-year tax credit for low-carbon transportation fuel.
• Aviation: A new sustainable aviation fuel credit.
• EVs: Maintaining existing $7,500 consumer credit for the purchase of a qualified new clean vehicle, including electric vehicles, plug-in hybrids, and hydrogen fuel cell vehicles, and creating a consumer tax credit for the purchase of previously owned clean non-commercial vehicles, including electric vehicles and plug-in hybrids. That credit is equal to the lesser of $4,000 or 30% of the vehicle cost.
• Developing low-carbon construction materials: EPA is given $250M to support the development of standardized, high-quality, transparent environmental product declaration of greenhouse gas emission associated with construction materials, and $100M to identify and label low-carbon construction materials used for federal buildings and federal transportation projects.
• Industrial emissions: $5.8B to invest in projects aimed at reducing emissions from energy intensive industrial sources.
• Offshore wind support: Makes $100M available for the planning, modeling, analysis, and development of interregional transmission and optimized integration of energy generated from offshore wind.
• Methane Leak Reduction: $1.55B for EPA to invest in methane reduction programs, and maximum methane emissions rates for facilities, with strenuous penalties.
• Community Investment and Environmental Justice: $2.8 billion to the EPA for grants and $200 million for technical assistance. Additionally, $3 billion, with $1.1 billion set aside for disadvantaged communities, to the FHA for grants to improve transportation access in disadvantaged communities.
• Clean Ports: $3B to EPA to award rebates and grants to port authorities for the purchase or installation of zero-emission port equipment, for associated planning, and to develop climate action plans. Canary Media reports on ways that the IRA helps clean up port emissions.
• Carbon Capture: Increasing and extending carbon capture tax credits. The current tax credit for direct air capture (DAC) goes from $50 to $180/tCO2 for qualifying DAC projects. This could represent a 30-50% subsidy for DAC projects.
• Forestry: Grants for the Forest Service (to use directly or to administer to states) to reduce fuel emissions and promote conservation programs.
• Agriculture: $20B in agricultural grants for easements, conservation, and technical assistance for low carbon agricultural practices. Carbon180 summarizes some of these agricultural investments.
• The Greenhouse Gas Reduction Fund: EPA funding for grants to state, local, regional, and Tribal programs that provide financial support to low and zero carbon technologies and can act as seed capital for regional, local, state, or Tribal green banks that provide financial support for low or zero emission projects.