Just weeks ago, the Inflation Reduction Act (IRA) appeared to be only a pipedream as it lay slain on the Senate floor. Now, after months of negotiations, the landmark climate bill moves from the Senate to the Democrat-controlled House. Among a wealth of climate measures, the historic act includes provisions that will devote hundreds of billions of dollars to clean energy sources and speed the U.S. transition away from fossil fuels.
With midterm elections just three months away, the bill will be seen as a major win for Democrats but is also being passed at an imperative time, as sweltering heat waves and flooding persist across the country. As climate change intensifies these natural disasters, the Biden administration’s answer is in the clean energy sector.
On top of fundamentally changing how Americans will get their energy, the IRA includes $369 billion in climate and energy provisions that will shape the country’s climate and industrial policy for decades to come.
Senate Majority Leader Chuck Schumer, who submitted the final vote, called the legislation “the boldest climate package in U.S. history.”
“It will kick start the era of affordable clean energy in America. It’s a game changer, it’s a turning point, and it’s been a long time coming,” he said.
While the climate portions of the IRA were far lower than the initial $550 billion envisioned as part of a broad $2.2 trillion bill a year ago, it remains to represent the largest ever federal investment into clean energy, besting the Obama-era incentives American Recovery and Reinvestment Act of 2009 by four times.
The House of Representatives is expected to take up the bill later this week. While the House still needs to vote, the passage of the bill is virtually assured.
In addition to incentivizing mass adoption of electric vehicles, the bill will also include billions of dollars to expand the tried and true renewables solar and wind, while investing in the development of newer technologies such as carbon capture and sequestration, hydrogen and small nuclear reactors.
These technologies, experts say, will be imperative in propelling the U.S. to net-zero emissions by 2050: the year by which most scientists agree, the globe must reach net zero in order to combat the changing climate.
How much will the bill cut emissions?
Under current policy, the U.S. is positioned to reach a reduction in carbon that pales in comparison to the lofty goal. In order for darts to hit the net zero 2050 target, emissions must be (at least) cut in half by 2030. However, by then, America may only reach a 24-35 percent reduction under the current policy. This reduction represents a pruning of emissions, down from the nation’s peak in 2005.
It would be an understatement to say that under the current policy it’s not looking good. Nevertheless, IRA seats the U.S. much closer to its goal, placing emissions into the more defensible 31-44 percent range by 2030, as calculated by the non-partisan research firm, Rhodium Group.
While the estimates don’t quite hit the halfway mark, they bring the coveted 50-52 percent range closer to our grasp. Within this time frame, 1 billion tons of greenhouse gasses will be eliminated. That number, while only a significant fraction of U.S. emissions is more than double that of the UK.
While this range depends on factors such as future economic conditions, experts foresee a cascade of positive climate impacts from curtailing fossil fuels to slashing oil use to making wind and solar more economical. Investments across the clean energy sector will also create as many as 1.5 million jobs, according to the research firm Energy Innovations.
With the ultimate goal of making the grid renewable, let’s break down how exactly the bill aims to electrify America without relying on fossil fuels.
Supercharging Renewables
For starters, the Act would nearly double investment in wind power and solar PV to $321 billion by 2030, surpassing the current $177 billion devoted to the sectors.
Princeton University’s Rapid Energy Policy Evaluation and Analysis Toolkit (REPEAT) breaks down how exactly the investment would affect the industry and energy output. REPEAT, in collaboration with Dartmouth College, Evolved Energy Research, and Carbon Impact Consulting, was released last week.
According to the analysis, U.S. wind will double. Increasing from an annual of 15 gigawatts (GW) in 2020 to an average of 39 GW between 2025 and 2026. Simultaneously, utility-scale solar PV will surge from 10 GW to 49 GW over the same period, increasing the current output by nearly 5 times.
The legislation also attempts to make U.S. clean energy more competitive with China, the world’s leading manufacturer of solar panels, batteries, and other renewable materials. In the last decade, tax credits fueled the dramatic increase in solar and wind production.
Through the bill, these benefits would be locked in for the next decade by extending the investment tax credit for solar installations and the production tax credit for wind by 10 years. The credits lower the cost of projects for developers across the country from the windy Great Plains and Atlantic coast states to the bright Sun Belt states from Florida to California.
The bill provides similar incentives for hydropower CO2 transport and storage, and nuclear, by expanding the tax credit amount for qualified projects. For nuclear in particular, it addresses economic hurdles through incentives for operating nuclear power plants, advanced reactors, and manufacturing, while adding funding for high-assay low enriched uranium (HALEU), a resource used at most university research reactors.
While wind and solar stand to hold their top spots in renewable generation with the lion's share of investments, hydropower and carbon capture see what may be the biggest increases.
Of the $3.5 trillion in capital investment the IRA is set to catalyze, REPEAT reports the annual investment in hydrogen production will increase to $3 billion annually by 2030, tripling current policy levels, and soaring to over $50 billion by 2035. The bill also includes more than $20 billion in annual investment in CO2 transport & storage and fossil power generation with carbon capture by 2030.
All of these large numbers add up to a renewable wave that will be riding across the United States. It positions carbon capture specifically to become a more economically viable option, as the high cost has presented an obstacle and point of criticism in the past.
The economics might make it a feasible alternative for the most polluting of industries: steel, cement, refineries, and power generation from coal and natural gas. REPEAT projects that over the next 8 years, carbon capture will increase in use 13-fold. The positive numbers only unfold from there, with a likely deployment of 110 million tons across industries and 90 million across power generation. Retrofitting old coal plants to produce renewables is currently all the rage. REPEAT models that carbon capture retrofits of retired plants will account for much of the increase.
The early market support for innovation in developing sectors doesn’t stop at carbon capture. Throughout the 2030s and 2040s, the bill also aims to drive the deployment in the lesser known industries of zero-carbon liquid fuels and geothermal energy. For many of the sectors, it will be the first time they receive such robust federal subsidies, marking the IRA as a fundamental change in the U.S. will deal with energy, From expanding supply chains, to ramping up scale, to creating hundreds of manufacturing jobs, and lowering energy costs for many Americans, the Act gives countless communities a stake in the clean energy transition.
Does the bill represent a Just Transition?
Notably, the IRA includes environmental justice provisions that go hand-in-hand with its industry-focused incentives. Why? Because as these technologies see immense, never-before-seen growth, it's imperative communities that need them most have equitable access to them. A variety of programs will direct funding to cut pollution in low-income communities and areas burdened by the worst air pollution in the country. It invests heavily in air monitoring, community-led environmental and climate justice projects, pollution reduction, climate resilient affordable housing and transportation, and accessible renewable electrification opportunities. All of this adds up to a $60 billion package of environmental justice initiatives.
Most significantly, the $27 billion Greenhouse Gas Reduction Fund bundled up in the bill, devotes more than half of this funding to deploying clean energy and pollution-reducing technologies in low-income and disadvantaged communities. The fund is also to establish ‘green banks’ to provide financial assistance for clean energy projects benefiting disadvantaged communities. The Tribal Energy Loan program devotes hundreds of millions of grants to help Tribal and Native Hawaiian communities improve climate resilience, access clean electricity, and electrify buildings. Moreover, the IRA includes two rebate programs that provide $8.8 billion to ensure access to energy efficiency and build electrification funds for low- and middle-income households lacking the tax liability necessary to take advantage of other tax credits.
However, environmental justice groups see places where the bill can be strengthened in order to ensure a truly just transition as the administration moves to sustainably electrify the country. Missing from the bill are previous Build Back Better investments such as updated public school infrastructure and the removal of lead pipes. Groups also express contempt for the oil and gas lease sales present in the Act. The Green New Deal Network — a national table of 15 prominent climate justice organizations — notes that “the climate funding in this bill is a start to protect our communities from future destruction and heal past climate injustice,” but more urgency is needed to meet the crisis. The urgency, the group writes, must invest in the communities while securing labor and justice protections.
The Inflation Reduction Act reports a historical shift in the way America will get its power, poising renewables to play an even greater role in the grid. It makes the country’s net-zero goals all the more feasible while promoting early market investment in developing technologies that will likely play a huge role in the transition. Justice provisions underscore the bill in order to ensure that transition serves those disproportionately affected by the climate crisis, and as it passes, represents a giant step in the right direction.
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