Issue Briefing:
The Inflation Reduction Act
The Inflation Reduction Act is the largest climate investment in U.S. government history.
Climate modeling shows that this bill can put the U.S. on track to meet our emissions targets under the Paris Agreement, when coupled with state, local, and executive action.
Clear Policy Ask
This legislation is now law! State and local governments have opportunities to secure federal funding from the Inflation Reduction Act, which was passed in August of 2022. Specific policy asks will vary depending on the opportunity and will be outlined in corresponding Action Playbooks.
Projected Impact
A report from Energy Innovation estimates the following climate and economic impact from passing the Inflation Reduction Act:
The IRA’s climate provisions would result in U.S. emissions falling 37%–41% below 2005 levels in 2030. (In the business-as-usual scenario without the IRA, 2030 emissions are 24% below 2005 levels).
That means that in 2030, the IRA would cover two-thirds of the emissions gap between business-as-usual and the U.S. targets under the Paris Agreement, making it realistically possible for executive, state and local actions to bridge the remainder.
These reductions account for emissions increases from the new oil and gas supply provisions, which are unlikely to add more than 50 MMT of emissions in 2030. In other words, for every ton of emissions caused by the new oil and supply provisions, at least 24 tons of emissions reductions are achieved from other provisions in the IRA.
The IRA would add 1.4–1.5 million new jobs in 2030 and increase GDP by 0.8%–0.9% in 2030. The generous incentives to onshore manufacturing of clean energy technologies are key to this result.
It would also bring significant health benefits, avoiding 3,700–3,900 premature deaths per year in 2030, with reductions concentrated in communities of color. Avoided air pollution would also prevent up to 100,000 asthma attacks and up to 417,000 lost workdays in 2030.
Additional modeling from Princeton’s REPEAT Project available here.
Climate Provisions Deep Dive
The Inflation Reduction Act will make a historic investment in the clean energy transition. It invests in decarbonizing all sectors of the economy through targeted federal support of innovative climate solutions. Importantly, the bill will also be the largest-ever set of federal environmental justice policies, ensuring that disadvantaged communities will share in the benefits of the clean energy transition. Its significant investment in U.S. clean energy manufacturing addresses energy security concerns and creates millions of new American manufacturing jobs. The bill also specifically aids rural communities in the costs of the energy transition and helps ensure that farmers play a role in agricultural climate solutions.
To read about the specific benefits of each category, check out our Issue Briefings:
Read the official bill summary here and detailed summary from the Congressional Progressive Caucus Center here.
Major provisions of the bill include:
Decarbonizing the economy
Tax credits, grants, and loan programs for clean electricity and energy storage, with direct pay eligibility for non-profits, government agencies, and rural utility co-ops.
Tax credits and grants for clean fuels and clean commercial vehicles.
Grants and tax credits to reduce emissions from industrial manufacturing processes, targeted at the largest industrial emitters like chemical, steel and cement plants.
Federal procurement of clean technologies to create a stable market for clean products, including zero-carbon USPS vehicles.
A fully funded 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.
Department of Energy loan guarantees to encourage risk-taking and spur innovation in qualifying clean energy development.
Lowering consumer energy costs
Consumer home energy rebate programs, focused on low-income consumers, to electrify home appliances and for energy-efficient retrofits—making heat pumps, rooftop solar, electric HVAC, and water heaters more affordable.
Consumer tax credit for lower- and middle-income individuals to buy used and new electric vehicles.
Grant program to make affordable housing more energy-efficient.
Sustainable aviation fuel tax credit.
Investing in communities and environmental justice
Environmental and Climate Justice Block Grants invest in community-led projects in disadvantaged communities to address disproportionate harm from climate change.
Neighborhood Access and Equity Grants support neighborhood equity, safety, and affordable transportation access.
Grants to reduce air pollution at ports.
Grant for clean heavy-duty vehicles, like school and transit buses and garbage trucks.
Many of the clean energy tax credits include either a bonus or set-aside structure to drive investments and economic development in disadvantaged communities.
American energy security and domestic manufacturing
Production tax credits to accelerate U.S. manufacturing of solar panels, wind turbines, batteries, and critical minerals processing.
Investment tax credit to build clean technology manufacturing facilities, like facilities that make electric vehicles, wind turbines and solar panels.
Funding the Defense Production Act provisions for heat pumps and critical minerals processing.
Grants to retool existing auto manufacturing facilities to manufacture clean vehicles, ensuring that auto manufacturing jobs stay in the communities that depend on them.
Loans to build new clean vehicle manufacturing facilities across the country.
Funding for National Labs to accelerate breakthrough energy research.
Farmers and resilient rural communities
Support for climate-smart agriculture practices.
Grants to support fire-resilient, healthy forests.
Grants to conserve and restore coastal habitats and protect communities that depend on those habitats.
