What does Inflation Reduction Act do to address climate change?

University of Colorado Boulder

After a long series of negotiations in the Senate, the House of Representatives passed the Inflation Reduction Act (IRA) and this week President Biden signed the historic piece of legislation into law. It’s the largest bill the U.S. has ever passed to address climate change, with nearly $370 billion assigned to speed up the transition to carbon-free energy and cut emissions nearly 40% by 2030.

The IRA will achieve this through tax credits and rebates for various renewable technologies, such as solar panels, heat pumps and electric vehicles. It also earmarks money to promote energy efficiency, retire polluting power plants and support communities disproportionately affected by pollution and climate change. And it includes $4 billion to deal with “unprecedented drought” in the West.

Max Boykoff, professor and chair of the Environmental Studies Department and fellow in the Cooperative Institute for Research in Environmental Sciences (CIRES), discusses the legislation’s impact.

Max Boykoff

Max Boykoff leads the Media and Climate Change Observatory (MeCCO) and co-Directs Inside the Greenhouse at CU Boulder.

Just how big is this bill for climate change?

This is a massive spending bill on climate change. It is a step forward that provides momentum for more needed steps to follow. To put it into context, this funding for climate action is about four times greater than the amount of Obama’s stimulus bill in 2008. This is really a strong industrial policy bill that is about reducing emissions, making clean energy cheaper, and helping accelerate the decarbonization of energy systems. It is a real inflection point in terms of putting forward real money to really influence change from the demand side.

How much will it help fight climate change?

This particular step is going to take us significantly towards the U.S. government’s commitment in the Paris Climate Agreement to reduce emissions by 2030. It gets us in the realm of reducing up to 900 million to 1 billion tons (1 gigaton) of carbon emissions, about two thirds of the way to get to the needed 50% reduction below 2005 levels.

What will this money fund?

There is a methane emissions reduction program within this as well, so it’s not only about carbon dioxide. There will be financial penalties and there’s $1.5 billion that’s been put in place for monitoring methane emissions and leaks. There’s also $3 billion devoted to clean, heavy duty vehicles. That’s a lot of money. The United States Postal Service, for instance, can draw on those funds for cleaning up (electrifying) heavy duty vehicles.

There also have been analyses that have found this is going to be significant, and not just in terms of the emissions reductions. There’s also funds in there for helping out with climate justice and just transition efforts benefiting frontline communities. One analysis estimates that there’s going to be about 9 million green jobs created, good-paying jobs for this transition from fossil fuels to green energy. There’s a credit for manufacturing plants that are working in low-income communities to bring those green jobs into what have been disadvantaged communities.

Turbines in Denver

Solar panels near Boulder

Top: Wind turbine blades being transported by train through Denver. (Credit: Dennis Schroeder / NREL) Bottom:A photovoltaic array at the Flatirons Campus of the National Renewable Energy Laboratory (NREL), with backdrop of the foothills of the Rocky Mountains. (Credit: Werner Slocum / NREL)

What does this mean for the average American? For Coloradans?

This law is very important for the average American. There are all kinds of elements we’re going to start to see. There has been a $27 billion commitment to what’s called a Green Bank, which is going to be a clean energy accelerator. It earmarks $15 billion for disadvantaged communities and incentivizes the adoption of community solar. It’s worth pointing out that solar prices have dropped 90% since 2009 and wind has gone down almost 70% as well, so the barriers to put solar on one’s roof are already much lower.

For those of us who are fortunate enough to buy new vehicles, there are going to be really strong incentives and tax rebates for the purchasing of electric vehicles. There will also need to be a certain percentage of domestic production for the batteries and other car parts to meet that rebate-that then incentivizes automakers to stimulate the U.S. economy and bring home green jobs.

There’s also $4.5 billion earmarked for heat pumps. If you move to a heat pump in your home, you’re moving towards electrification. If you’re pulling electricity off a clean energy grid, then you’re not relying on natural gas. That’s one that I get really excited about. Early estimates from the REPEAT group at Princeton and other places find that U.S. households could save hundreds, if not thousands, of dollars per year on energy bills: irrespective of environmental gains, IRA will save us money.

How does this legislation advance environmental justice?

There’s $60 billion earmarked for environmental justice. But, like climate change, environmental justice can’t be separated out from other elements. There is $30 billion earmarked to clean up the electricity sector. That’s going to help states and local governments move to solar and wind, but it’s also going to help retire dirty coal plants and oil refineries. I can’t help but to think quite a lot about the Commerce City refinery: the most polluted zip code in the country is not too far from where we are. This is effectively a spending bill that has the potential to help residents of Globeville and Commerce City.

What was lost during the negotiations?

The bill is imperfect. This was the outgrowth of compromise. There are valid criticisms about what’s been dropped out, such as the Civilian Climate Corps. The Build Back Better Act was going to get us about 1.2 billion tons of carbon dioxide reductions by 2030, whereas this is going to be about 900 million to 1 billion tons. So we see fewer emissions reductions in this version. But there are other elements in the bill that help us retrieve some of the essence of the efforts there in terms of long-term commitments to tax credits that means consistent signaling to the business sector to make these changes.

Some of the final wrangling and negotiations, particularly by Senator Manchin, had pushed for leasing of land for oil and gas that also came along with leasing of land for clean energy. While this is a blow, I think that it could largely remain a symbolic concession that’s been made as only 1 to 3% of those leases are purchased and developed. Some of these losses are real, but they’re counteracted by many other opportunities that we’re going to see come forward.

What other effects will this bill have?

IRA effectively catalyzes work to decarbonize and embrace a clean energy economy. That comes with all kinds of benefits. Climate change is not a single issue that we can separate from things like public health, national security, and so on. Climate change is a set of intersectional challenges. We will start to see benefits in terms of local air quality and public health as oil refineries or coal generation plants start to be phased out. This is going to be wonderful for people who are living at the forefront of climate impacts. It’s also going to benefit us in our everyday lives: We’ll start to feel that we’re living in much more healthy communities.

This is something to be proud of as the U.S. heads into the U.N. climate negotiations in Egypt (COP27) in November, but it is one step with many more needed to follow.

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