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September 12, 2022
On August 16, 2022, President Biden signed a historic climate bill, the Inflation Reduction Act (P.L.117-18), into law. Along with tax reforms and investments in healthcare, the law provides $369 billion to confront the climate crisis by expanding tax credits for clean energy and electric vehicles, boosting energy efficiency, establishing a national climate bank, supporting climate-smart agriculture, bolstering production of sustainable aviation fuel, reducing air pollution at ports, and much more. The law represents the boldest action Congress has taken on climate yet—it will put the United States on a path to reduce greenhouse gas emissions by 40 percent below 2005 levels by 2030, according to several independent analyses.
The Inflation Reduction Act comes at a time when it is needed most—communities across the country are already living with the impacts of the climate crisis. This summer, more than 100 million people in the United States faced extreme heat, which can compound other climate-related disasters like droughts and wildfires. On top of that, coastal communities are predicted to experience 10 to 12 inches of sea level rise by mid-century. These climate impacts disproportionately fall on underserved communities that are least able to prepare for and recover from disasters.
The Inflation Reduction Act, coupled with the investments provided through the bipartisan Infrastructure Investment and Jobs Act (P.L.117-58), could help the United States unleash clean energy, reduce its dependence on fossil fuels, create new jobs, and drive down greenhouse gas emissions. The Infrastructure Investment and Jobs Act, enacted into law in November 2021, provides investments in energy modernization, transportation, workforce development, and building decarbonization. Taken together with the Inflation Reduction Act, these complementary investments will make crucial progress in addressing the climate crisis.
Below, we highlight four key areas of synergy between the Inflation Reduction Act and Infrastructure Investment and Jobs Act.
Investments in the Inflation Reduction Act will help decarbonize the transportation sector, which accounts for 27 percent of U.S. greenhouse gas emissions. For starters, it will catalyze adoption of electric vehicles. Over the next 10 years, the Inflation Reduction Act establishes a tax credit of $7,500 for new and $4,000 for used electric vehicles. The tax credit for new electric vehicles can also be transferred to the dealer at the point of sale, allowing customers to immediately save money off the purchase price instead of waiting for a tax refund. To keep up with the increase in demand for electric vehicles, the Inflation Reduction Act provides $2 billion in grants to incentivize domestic manufacturing.
While the investments in the Inflation Reduction Act will help people across the country purchase electric vehicles, the Infrastructure Investment and Jobs Act will make charging those vehicles more convenient by providing $7.5 billion to build out charging infrastructure. These investments will help the United States reach the Biden-Harris Administration’s goal of installing 500,000 chargers, making electric vehicles a more attractive option for people across the country. This investment is particularly important for rural areas, which disproportionately lack adequate access to charging stations.
In addition to addressing light-duty vehicles, the Inflation Reduction Act also takes aim at decarbonizing air and heavy-duty transportation. The law authorizes a credit for sustainable aviation fuels that reduce greenhouse gas emissions by 50 percent or more. The credit will be between $1.25 and $1.75 per gallon and is authorized through 2026 to help reduce greenhouse gas emissions from aviation. The Inflation Reduction Act will also help decarbonize ports, which currently spew toxic air pollutants and greenhouse gases into nearby communities, by providing $3 billion for ports to purchase zero-emissions equipment and develop climate action plans. Another provision targeting heavy-duty transportation provides $1 billion for grants and rebates for clean, zero-emission heavy-duty vehicles, including school buses—with 40 percent set aside for communities with above-average levels of air pollution.
Many investments in the Infrastructure Investment and Jobs Act will contribute to additional decarbonization of heavy-duty transportation. The Infrastructure Investment and Jobs Act allots $5 billion to replace fossil fuel-powered school buses with zero-emission or clean models. Across the country, there are already many success stories of electric school buses reducing emissions and improving local air quality, including in Durango, Colorado, which has the first school bus in the state with vehicle-to-grid capabilities. In addition, the law provides $2.5 billion to upgrade ferries, especially in rural areas, with low-emission models. These investments in decarbonizing heavy-duty transportation are crucial for advancing environmental justice as fossil fuels—especially diesel—create air pollution that harms human health and disproportionately impacts communities of color and low-income communities.
The Inflation Reduction Act and Infrastructure Investment and Jobs Act also invest in improving access to transportation infrastructure, especially for underserved communities. In the Inflation Reduction Act, $3 billion is set aside for Neighborhood Access and Equity Grants, which aim to improve transportation networks, as well as reduce air pollution, reduce the urban heat island effect, and expand urban tree canopies. The grants can be used to improve walkability and safety, install natural infrastructure like rain gardens, and create bike lanes. To complement these projects, the Infrastructure Investment and Jobs Act provides $39.2 billion for repairing buses, rail cars, and transportation facilities while also expanding transit systems. The law also provides $66 billion—or 12 percent of the overall total investments in the law—for passenger and freight rail, the largest investment in rail since Amtrak’s creation in 1970.
The Inflation Reduction Act will help decarbonize the U.S. electric grid, which currently relies on natural gas and coal for 60 percent of its electricity generation. The law provides a wide range of clean energy tax credits, worth about $270 billion over the next 10 years. Importantly, the Inflation Reduction Act modifies and extends the production tax credit (PTC) and the investment tax credit (ITC), which have historically helped spur wind and solar energy investments and projects. The law also establishes a new technology-neutral PTC and ITC for net-zero electricity-generating technologies. In addition, the Inflation Reduction Act creates or expands tax credits for nuclear, clean hydrogen, carbon capture, clean fuels production, clean manufacturing, and wind, solar, and battery manufacturing.
The law will also support rural communities with a $9.7 billion investment to improve the reliability and resilience of rural electric systems, as well as $2 billion for the Rural Energy for America Program to help farmers, ranchers, and small businesses access renewable energy and energy efficiency measures.
While the Inflation Reduction Act will bring additional clean energy resources onto the grid, the Infrastructure Investment and Jobs Act will make the grid more reliable, resilient, and modern. The Infrastructure Investment and Jobs Act provides more than $65 billion for upgrading the electric grid. These investments will go towards increasing grid reliability and resilience, expanding transmission lines, and improving grid flexibility. To help carry out the electric grid modernization provisions of the Infrastructure Investment and Jobs Act, the U.S. Department of Energy launched the Building a Better Grid Initiative in January 2022 to strengthen existing infrastructure and expand the transmission network.
Individuals will also have increased access to clean energy and energy efficiency technologies that will reduce emissions from their homes. Consumer tax credits for residential clean energy projects such as wind, solar, and geothermal are extended through the Inflation Reduction Act. The law also extends the tax credit for residential energy efficiency projects—like installing heat pumps and electric water heaters—and provides a total of $8.6 billion to be split evenly between the Home Energy Performance-Based Whole-House Rebate program and the High-Efficiency Electric Home Rebate Program, both of which provide rebates for homeowners to undertake energy efficiency upgrades.
Similarly, the Infrastructure Investment and Jobs Act also aims to improve the energy efficiency of buildings. To lower energy costs for low-income Americans and improve energy efficiency, the Infrastructure Investment and Jobs Act includes $3.5 billion for the Weatherization Assistance Program. Another $550 million is available to implement clean energy projects through the Energy Efficiency and Conservation Block Grant Program. A small but mighty section of the law known as the Energy Efficiency Materials Pilot Program includes $50 million to help nonprofits improve the energy efficiency of their facilities.
The Inflation Reduction Act takes aim at addressing the environmental and public health impacts of pollution and climate change by investing $3 billion in Environmental and Climate Justice Block Grants. These three-year grants are available for community-led projects that reduce extreme heat, monitor air pollution, or increase resilience and adaptation.
To clean up legacy pollution from fossil fuel development, the Infrastructure Investment and Jobs Act provides $21 billion in environmental remediation funds. Of that, $4.7 billion is set aside to plug, remediate, and restore orphaned oil and gas wells, which leak methane—a potent greenhouse gas—and pose threats to nearby communities. Some of these former mine sites can be redeveloped into clean energy hubs through another $500 million Infrastructure Investment and Jobs Act program.
The Inflation Reduction Act also launched the United States’ first national climate bank through a $27 billion contribution to the Greenhouse Gas Reduction Fund. Of that, $20 billion is set aside for non-profit green banks, with 60 percent going to underserved communities. These investments will help leverage private dollars to spur solar, wind, and energy efficiency projects, with the ultimate result of equitably reducing greenhouse gas emissions.
Not only does the Inflation Reduction Act invest in climate change mitigation technologies, it also dedicates funding to nature-based climate solutions. It allocates $19.5 billion for five U.S. Department of Agriculture programs—including the Environmental Quality Incentives Program (EQIP) and Conservation Stewardship Program (CSP)—to help farmers, ranchers, and forest landowners adopt climate-smart agricultural practices and bolster climate resilience. These programs have been crucial for advancing practices like cover crops and agroforestry, but demand for conservation funding has outpaced supply. Only 31 percent of EQIP applicants and 42 percent of CSP applicants are awarded contracts. The Inflation Reduction Act aims to meet this pent-up demand for investments in sustainability.
The Infrastructure Investment and Jobs Act also invests in nature-based solutions by authorizing over $2.1 billion for ecosystem restoration activities and over $3.3 billion for wildfire risk reduction. These investments will help to build climate resilience and sequester carbon. The law also includes the Repairing Existing Public Land by Adding Necessary Trees (REPLANT) Act, which will help the U.S. Forest Service plant 1.2 billion trees. The Infrastructure Investment and Jobs Act also allocates $1.5 billion to the U.S. Forest Service’s Urban and Community Forestry Program, which helps cities and towns plant trees.
With the passage of the Inflation Reduction Act and the complementary investments of the IIJA, the United States has taken a critical step closer to meeting its climate goals of halving greenhouse gas emissions by 2030. But with less than eight years until 2030, the work is far from done. The U.S. Congress must accelerate its momentum on confronting the climate crisis to ensure that climate goals are met.
The funding figures in this article are informed by the following resources:
Author: Savannah Bertrand
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