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On Friday, the United States House of Representatives passed the Inflation Reduction Act (IRA), clearing the way for President Biden to imminently sign the legislation, which passed the Senate last week, into law.
The IRA will direct roughly $370 billion dollars in funding toward climate-related incentives and infrastructure development over 10 years. It also establishes a new 15% minimum corporate tax, provides funding for improved Internal Revenue Service tax law enforcement, and reforms American prescription drug pricing law.
The law’s energy and climate provisions are forecast to potentially reduce America’s 2030 emissions by up to 44% below 2005 levels. The law includes:
Consumer tax credits for heat pumps, electric HVAC, and water heaters
Production tax credits for US solar panel, wind turbine, and battery manufacturing
$27 billion for a clean energy technology accelerator
Grants and tax credits to reduce emissions from industrial manufacturing processes
$10 billion in investment tax credits for cleantech manufacturing facilities (e.g., for electric vehicles (EVs), turbines, solar panels, etc.)
Tax credits for new and used EVs
$2 billion in grants to retool auto facilities for EV manufacturing
$9 billion for federal procurement of American-made clean technologies, including $3 billion for Postal Service EVs
$20 billion to support climate-smart agriculture practices
$5 billion in grants to support healthy, fire resilient forests, forest conservation, and urban tree planting
The IRA’s passage arrives after years of Democratic Party efforts to enact substantial climate legislation.
Though Democrats initially sought to pass a nearly $5 trillion dollar Build Back Better bill containing many of the climate-related spending provisions now contained in the IRA, in addition to other social infrastructure spending, West Virginia Democratic Senator Joe Manchin’s opposition doomed that prior effort. Holding 50 seats in the Senate, the party required all members voting in the bill’s favour to clear Congress’s evenly-divided upper house, with Vice President Kamala Harris casting the tie-breaking final vote.
With Republicans expected to regain control of Congress in the upcoming November midterm elections, until recently, many regarded a Democratic climate spending bill as hopeless given Senator Manchin’s intransigence. It was only the surprise announcement last month of a deal between Senator Manchin and Senate Majority Leader Chuck Schumer that revived the possibility of major US federal action on climate change during President Biden’s first term.
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