In a significant development, President Biden signed the ‘Inflation Reduction Act 2022’ into law. The Act was designed to reduce the deficit and lower inflation while investing in domestic energy production and lowering healthcare drug costs.
The Inflation Reduction Act lowers prescription drug costs, health care costs, and energy costs. It is the most aggressive action on tackling the climate crisis in American history.
The Act has the provision of $369.75 billion, the biggest investment in clean energy ever made in U.S. history. It contains decade-long tax incentives for solar and storage deployment, investments in domestic solar manufacturing, and other critical energy provisions.
It will create a stable policy environment for years to come, helping to grow private investments, create American jobs, and make noteworthy progress on climate change. It will eventually help the U.S. Solar manufacturers to equip them with government support to compete with Chinese and Canadian Solar energy products.
According to the White House, Spending is designed to lower energy costs, increase cleaner energy production, and reduce carbon emissions by 40% by 2030.
Following is a statement by Abigail Ross Hopper, president, and CEO of the Solar Energy Industries Association (SEIA):
“After months of negotiation, the Inflation Reduction Act is now law, and the United States is on a path to becoming the world’s unequivocal leader in clean energy. Now a long-term framework is in place for the solar and storage industry to drive economic growth in every zip code across the country.
“This new law will help the United States deploy enough clean energy to decarbonize the electric grid and tackle climate change. It features long-term investments in clean energy and new incentives for energy storage, which give solar and storage businesses a stable policy environment and the certainty they need to deploy clean energy and meet the President’s ambitious climate goals.
The bill also includes Senator Ossoff’s Solar Energy Manufacturing for America Act, which will support domestic solar production through new tax credits, lay the groundwork for thousands of new manufacturing jobs by the end of the decade, and usher in a new era for solar manufacturing in the United States.”
Major Takeaways from IRA 2022 on Clean Energy
- The Act provides a range of incentives to consumers to decrease utility bills. The most important ITC for residential consumers has increased from 26% to 30% until 2033. It will drop to 26% in 2033, 22% in 2024, and to zero in 2035.
- Standalone energy storage will also be eligible for ITC for installation of 3kWh or more.
- The Act provides $4.3billion to state energy offices to establish rebates for various home energy upgrades under Homeowner Managing Energy Savings (HOMES) rebate program.
- The act has also set aside $9.6 billion to develop advance cost-saving clean energy projects at rural cooperatives serving 42 million people.
- $29 billion is allocated to The Environmental Protection Agency on account of the “Greenhouse Gas Reduction Fund”
- Excise tax increase from 9.7 to 16.4 cents per barrel on imported petroleum and crude oil products to fund the cleanup of industrial disaster sites increases.
- Affordable Care Act extension: The legislation extends financial assistance to help people enrolled in ACA through 2025. Without this action, extra assistance would have stopped at the end of 2022. The provision also expands eligibility to allow more middle-class people to receive premium help. The extension of ACA help is estimated to cost $64 billion.
- Western drought resiliency: A last-minute addition to the Inflation Reduction Act includes $4 billion in new funding for the drought scorching the Western U.S. The law calls for the Bureau of Reclamation to address the 22-year drought impacting that part of the country. Funds will be used to compensate farmers who voluntarily reduce their water deliveries under short-term or multi-year agreements, as well as projects that conserve water in Lake Mead and Lake Powell.
- Made in the USA: Last year the US Congress passed the $1trillion Bipartisan Infrastructure Law (Infrastructure Investment and Jobs Act), a once-in-a-generation investment in the nation’s history aimed at improving the country’s infrastructure.
Will It Help US in Achieving Climate Targets?
The Inflation Reduction Act can prove to be a turning point for global climate action as the U.S. is one of the largest emitters of greenhouse gases globally. However, it must be seen as the first step toward achieving the climate target.