For over a decade, the U.S. has not been much active in reducing carbon emissions. Not any more. On August 12, 2022, the U.S. Congress passed the Inflation Reduction Act (IRA or the “Act”), which was signed into law by President Joe Biden.
The Act is the first substantive piece of climate legislation in U.S. history, including $369 billion in investments in climate and clean energy programs, mostly toward tax credits for renewable energy. The Act is a major step towards reducing the United States’ greenhouse gas (GHG) carbon emissions. According to the Biden Administration, the Act will invest $369 billion in energy and climate change programs. It will avoid 6.3 billion tons of cumulative GHG emissions by 2030, amounting to a 40 percent annual emissions reduction compared to 2005 levels, i.e., most of the U.S. commitment to reducing national GHG emissions 50–52% by 2030.
The Act brings along the financial weight of the Federal government. In essence, IRA is a set of policies consisting of investment subsidies, grants, rebates, loan guarantee programs, etc., designed to make clean energy technologies and climate solutions cheaper for all Americans.
The Act includes a $9.7 billion loan program for electric cooperatives that buy or build clean energy systems. IRA provides tax credits to purchase electric vehicles and make homes more energy efficient. There are incentives to encourage local utility companies to switch to renewable energies.
In addition, the Act diverts billions of dollars to several initiatives to reduce emissions from agriculture, decarbonize manufacturing for products like cement and steel, and creates a new fee on methane emissions to limit the release of the highly potent greenhouse gas from oil and gas operations.
Unfortunately, (thanks to Senator Joe Manchin) the Act also contains provisions allowing oil and gas leasing activities to expand onshore and offshore. Overall, the IRA may generate sufficient momentum to accelerate emissions reduction efforts. IRA could help the U.S. lead in the fight against climate change by setting increasingly ambitious emissions reduction goals without increasing the Federal Budget deficit.
Check this interactive graph for how money is raised and spent in the Act.
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