What is in the Inflation Reduction Act, and how will we pay for it?Date:
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Earlier this week, the U.S. Senate passed Senate Concurrent Resolution 14, otherwise known as “the Inflation Reduction Act,” – the latest iteration of what was once known as “Build Back Better.” The House is expected to pass the bill later this week, approving $369 billion in funding for clean energy projects, pollution controls, tax breaks on electric vehicles, and solar and battery manufacturing. This will be the largest climate spending package ever. Below is a summary highlighting exactly what is included in the package and how Congress intends to pay for it.
According to Senate Democrats, the bill targets clean energy and climate spending in five major areas, with expenditures as follows:
Lower Consumer Energy Costs
- $9 billion in consumer home energy rebate programs.
- 10 years of consumer tax credits to make homes energy efficient and run on clean energy, making heat pumps, rooftop solar, electric HVAC and water heaters more affordable.
- $4,000 consumer tax credit for lower/middle income individuals to buy used electric vehicles, and up to $7,500 tax credit to buy new electric vehicles.
- $1 billion grant program to make affordable housing more energy efficient.
American Energy Security and Domestic Manufacturing
- Production tax credits to accelerate U.S. manufacturing of solar panels, wind turbines, batteries, and critical minerals processing, estimated to invest $30 billion.
- $10 billion investment tax credit to build clean technology manufacturing facilities for technologies like electric vehicles, wind turbines and solar panels.
- $500 million in the Defense Production Act for heat pumps and critical minerals processing.
- $2 billion in grants to retool existing auto manufacturing facilities to manufacture clean vehicles.
- Up to $20 billion in loans to build new clean vehicle manufacturing facilities across the country.
- $2 billion for National Labs to accelerate breakthrough energy research.
Decarbonize the Economy
- Tax credits for clean sources of electricity and energy storage and roughly $30 billion in targeted grant and loan programs for states and electric utilities to accelerate the transition to clean electricity.
- Tax credits and grants for clean fuels and clean commercial vehicles to reduce emissions from all parts of the transportation sector.
- Grants and tax credits to reduce emissions from industrial manufacturing processes, including almost $6 billion for a new
- Advanced Industrial Facilities Deployment Program to reduce emissions from the largest industrial emitters like chemical, steel and cement plants.
- Over $9 billion for Federal procurement of American-made clean technologies to create a stable market for clean products, including $3 billion for the U.S. Postal Service to purchase zero-emission vehicles.
- $27 billion clean energy technology accelerator to support deployment of technologies to reduce emissions, especially in disadvantaged communities.
- A Methane Emissions Reduction Program to reduce the leaks from the production and distribution of natural gas.
Invest in Communities and Environmental Justice
- The Environmental and Climate Justice Block Grants, funded at $3 billion, invest in community-led projects in disadvantaged communities and community capacity building center.
- The Neighborhood Access and Equity Grants, funded at $3 billion, support neighborhood equity, safety, and affordable transportation access.
- Grants to Reduce Air Pollution at Ports, funded at $3 billion, support the purchase and installation of zero-emission equipment and technology.
- $1 billion for clean heavy-duty vehicles, like school and transit buses and garbage trucks.
Farmers, Forestland Owners and Resilient Rural Communities
- More than $20 billion to support climate-smart agriculture practices.
- $5 billion in grants to support healthy, fire resilient forests, forest conservation and urban tree planting.
- Tax credits and grants to support the domestic production of biofuels, and to build the infrastructure needed for sustainable aviation fuel and other biofuels.
- $2.6 billion in grants to conserve and restore coastal habitats and protect communities that depend on those habitats.
To pay for these, and other expenditures in the bill, (primarily focused on healthcare and prescription drug reforms) the package is projected to raise $739 billion of revenue in four ways:
- Implementing a 15% Minimum Corporate Tax – projected to raise $313 billion.
- Prescription drug pricing reforms – projected to raise $288 billion.
- Expanded IRS tax enforcement – projected to raise $124 billion.
- Targeted closing of a carried interest tax loophole – projected to raise $14 billion.
CEN will continue to keep a close eye on this bill as it continues to move through the legislative process. Be sure to stay tuned for more updates.