The Inflation Reduction Act (IRA) of 2022 is the single largest clean energy investment in U.S. history, supporting the Biden Administration’s climate goals of a net-zero economy by 2050 and the acceleration of renewable energy projects. According to Princeton researchers, the IRA could reduce U.S. greenhouse gas emissions up to 41% by 2030. Passage of the Act also spurred Canada and Europe to announce similar policies in order to compete with the U.S. in attracting energy companies and manufacturers.i
Since the IRA was passed, development has begun on 56 new solar and 29 new wind projects, with investments around $40 billion. The U.S. Postal Service received $3 billion to switch its’ entire fleet to electric vehicles. The EPA received $1 billion to aid school districts in replacing old diesel buses with electric buses. In total, there has been $44.1 billion invested in 65 new electric vehicle projects.ii
American consumers can take advantage of the IRA’s tax credits and rebates in numerous ways. The Residential Clean Energy Act Tax Credit gives households 30% of funds spent on the installation of wind, solar, or geothermal systems. The Energy Efficient Home Improvement Tax Credit provides up to $1,200 a year for energy-saving home improvements such as the installation of more efficient windows or heat pumps. The Home Owner Managing Energy (HOMES) rebate program gives consumers money back when they provide proof of renovations that saved them energy. Low-income families can get up to $14,000 each year in discounts for electrification renovations such as heat pumps and electric stoves. Finally, the IRA renewed the Clean Vehicle Credit, which provides up to $7,500 in savings to encourage consumers to purchase electric vehicles.iii
The IRA appropriated $11.7 billion for the Loans Program Office (LPO) to issue new loans and increased the current loan program authority by $100 billion. Some of the exciting new programs funded by the Act will take direct action to solve the climate crisis. These programs includeiv:
The Innovative Clean Energy Loan Guarantee Program which received $3.6 billion in credit subsidies and up to $40 billion in loan authority. This program supports all energy projects under the Title 17 Innovative Clean Energy category, and will support new projects in critical minerals processing, manufacturing, and recycling.
The Energy Infrastructure Reinvestment Program (EIR) received $5 billion in funding and up to $250 billion in loan authority. This vital new LPO effort will provide loans to replace defunct energy infrastructure or re-purpose existing infrastructure to reduce or eliminate air pollution and greenhouse gas (GHG) emissions. The EIR requires that any fossil fuel projects receiving loans must incorporate technologies to reduce or eliminate air pollution, including GHG emissions.
The Advanced Technology Vehicles Manufacturing (ATVM) Direct Loan Program received $3 billion in credit subsidies and up to $40 billion in loan authority. The ATVM loans were at first available only to electric vehicles owners. The loans have now been expanded to include heavy-duty trucks, trains, and ships used for offshore wind, aviation, and high-speed transportation systems.
The Tribal Energy Loan Guarantee Program (TELGP) received $75 million in funding and up to $20 billion in loan authority. The TELGP was initially established in 1992 to provide loans for energy infrastructure to Native tribes and corporations, as well as tribal energy development organizations.
This brief introduction is merely a glimpse of what the IRA authors and the Biden Administration intended to accomplish by creating solutions to mitigate the climate crisis with the passage of the Act. The U.S. and the world will certainly need many more bold government policies in order to reverse climate change. The ongoing Canadian wildfires and the record-breaking, month-long heat wave in Phoenix, Arizona are just two examples of why we can’t delay any longer in addressing the climate crisis. Climate scientists agree that it is not too late to prevent the worst outcomes of climate change, but we must take drastic action now.v