We've Gotta Talk About It - The Inflation Reduction Act

You’ve probably seen it in the news - the Inflation Reduction Act (IRA) is undoubtedly a huge step in American government to address a number of our most pressing issues, including climate change.

There’s been a lot of chatter surrounding the topic (I don’t know about you, but I’m feeling major information overload), so today I thought I’d take a minute to do a little deep dive and go over all the points that are in it. Side note: I’m just covering the climate part of the act and I’m only going to be using one source. 

A little background on the bill:

• The bill passed on August 7th, 2022 in the Senate
• It addresses climate, fighting inflation, and healthcare
• Currently, the bill got through the House and is on its way to the President’s desk for a signature. 

As I mentioned, there’s a lot included in this bill, but we’re just going to stick with the climate portion and there’s plenty to unpack there.

According to the summary:

“…the combined investments in the FY2022 Budget Reconciliation bill would put the U.S. on a path to roughly 40% emissions reduction by 2030, and would represent the single biggest climate investment in U.S. history, by far.” 

All this sounds great, but how is this going to be accomplished? 

The Democratic party listed 5 points that will help us achieve this goal - let’s get into each one.

1. Lower Consumer Energy Costs

Aimed at reducing prices at the gas pump and electricity bills, policies will be adopted that will help Americans afford technology designed to lower emissions and energy prices. 

For as long as I can remember, renewable energy and high-efficiency products have been too expensive for the average consumer. Remember when hybrid & EV vehicles used to cost an arm and a leg (well, some of them still do ;)? Thankfully, times are changing.

Hybrids and EVs used to be out of most people’s budget, but the IRA will give lower-income to middle-class families a $4,000 tax credit for used high-efficiency vehicles and up to $7,500 in credits for those who buy a new clean car. 

Also, the bill will provide incentive programs to consumers including $9 billion in home energy rebates that will be directed at low-income families to “electrify home appliances and for energy-efficient retrofits.” Heard of heat pumps?? Plus, 10 years of tax credits to make homes more efficient and run on renewable energy. Those solar panels will soon be able to fit into your home renovation budget!

The last part of this first section is that the bill will create a $1 billion grant program to make affordable housing more energy efficient. They didn’t say how this will be accomplished, but I’m betting this is going to include solar panels and high-efficiency appliances throughout each unit. Affordable housing is reserved for those whose income is below the median income for the nation and/or region, which is predominately people of color, people with disabilities, and women. We already know that these are the communities that feel the strongest effects of climate change (i.e. climate justice), so including them in the solutions to creating cleaner energy is imperative to creating a more just society.

The IRA not only wants to make clean energy more affordable, but it also seeks to advance the production of clean energy in the United States.

2. American Energy Security and Domestic Manufacturing

 Using clean or renewable energy is great, but we also have to think about where we’re getting it from. Thankfully, the bill addresses this by putting “$60 billion to on-shore clean energy in the U.S. across the full supply chain of clean energy and transportation technologies.” 

There’s a lot of potential for success with this approach, but there are also some pitfalls that we’ll get into in a second. So, how will the IRA move clean energy manufacturing to the United States?

The bill will provide tax credits to accelerate our production of solar panels, wind turbines, and much more, while also providing a $10 billion investment tax credit to build facilities necessary for the manufacturing of clean energy. 

And what about those hybrids and EVs? How are we going to scale their production?

$2 billion in grants will be awarded to retool manufacturing facilities to be able to make clean vehicles. This will ensure that auto manufacturing jobs will stay in the communities dependent on this industry, but one thing not mentioned is the reskilling of current employees. One of the biggest reasons people are skeptical of switching to clean alternatives is a fear of losing their jobs. Hopefully, these grants will allocate money to reskill their current employees. We hope the companies keep this in mind as well - ethics isn’t just about what’s best for the environment, we also have to think about our employees and stakeholders. 

The last really exciting point to this section is that $2 billion will be awarded to National Labs to accelerate breakthrough energy research. National Labs is a sub-section of the Department of Energy, but I’m hoping that some of this money will be used to partner with Universities. Wouldn’t it be rad if students could help us find energy solutions?! Maybe this is a case of wishful thinking, but a girl can dream.

At the start of this section, I mentioned that there could be pitfalls that come with on-shoring. When we analyze our supply chains, we always have to remember the people who are a part of them. On-shoring, while great for the American workforce, ultimately means work will be taken away from people in other parts of the world. Typically, these are the people living in developing countries who aren’t paid a living wage. This transition is tricky because there is no clear answer to ensure that everyone, domestic and international, will have a job and the ability to make money for their families. 

What are your thoughts on on-shoring? Let us know over in the LinkedIn Group, I hope to hear your ideas on this tricky subject. 

Ready to get into the really juicy part of the IRA? Let’s talk about emissions reduction.

3. Decarbonize the Economy 

 The IRA will be spreading investments across a number of sectors, including electricity production, industrial manufacturing, and agriculture. Sadly, the textile industry isn’t mentioned in this section, but we’re hoping this is just the start. 

To address emissions in industrial manufacturing, the bill will use $6 billion to create the Advanced Industrial Facilities Deployment Program to reduce emissions from groups like the chemicals, steel, and cement industries. There are no details as to how this will be accomplished and we would love more information on how the program will combat emissions across these three different sectors. Will it address emissions across the entire supply chain? Is it only measuring emissions on U.S. soil? Some things to chew on…

Speaking of programs, the IRA will also create the Methane Emissions Reduction Program which aims to reduce leaks from the production and distribution of natural gas. Once again, I have some questions. This may seem like a silly question to ask, but will the program only address methane emissions or will it address all greenhouse gases (GHGs)? Methane is one of the strongest GHGs, but Carbon Dioxide is our biggest culprit in the warming of the planet. If it is only addressing Methane, will the program also look at the agriculture industry? Cattle provide a hearty amount of the Methane supply globally, so it would seem natural that this program would also find a way to reduce Methane emissions cross-sectoral. 

All in all, this section leaves me with more questions than I started with. Arguably the most important part of the climate crisis, reducing our emissions needs radical action globally and I’m eager to read more on how the U.S. government plans on decarbonizing the economy. Keep your eyes peeled, we’ll do another blog post on this when we get our hands on more information!

Remember how I mentioned the people who are most impacted by climate change? Typically, people of color and lower-income families are disproportionately affected by the climate crisis compared to white and wealthy communities - the IRA plans to combat that.

4. Invest in Communities and Environmental Justice

 Environmental Justice (EJ) is a large topic in and of itself, even when we don’t factor in climate change. The IRA is doing its part to try to address some of the issues that face different communities around the country, so let’s get into the details.

Note: If you want to learn more about EJ, consider joining our Academy. We have a ton of resources that address this topic, and we’re working on something big too. Email us at [email protected] for the details and any questions you may have.

First on the list, the bill will create the Environmental and Climate Justice Block Grants which will allocate $3 billion towards community-led projects that will address environmental and public health harms from pollution and climate change. 

The IRA also plans to put $3 billion towards air pollution reduction at ports through zero-emissions technology and equipment and another $3 billion towards mitigating the negative impacts of construction projects on underserved communities. This additional $3 billion will also support neighborhood equity and safety. 

There is nothing mentioned throughout this section on how industry will be held accountable for their impacts on disadvantaged communities. We’re eager to see how businesses will change their practices to limit their impacts on those who are most vulnerable, but we also encourage you to keep a watchful eye on how companies conduct their business. 

On to our last section - it’s been a journey but I appreciate you guys sticking with me! This is the section that I personally find most interesting and I’m excited to hear what you guys think too.

5. Farmers, Forestland Owners, and Resilient Rural Communities

 Living in California, I worry about our forests constantly. Every year wildfires tear through our state and it’s heartbreaking to see the destruction left in their wake. The IRA plans to tackle this, and many other conservation issues that face the nation.

Agriculture is first on the list with $20 billion being directed to support, as they call it, “climate-smart” agriculture practices. Does this mean organic and regenerative practices will become the norm? You bet I’m keeping my fingers crossed.

$5 billion is also being allocated to support healthy and fire-resistant forests, forest conservation, and urban tree planting. I also hope that some of this money will go towards giving our firefighters a much-needed raise and potentially helping displaced families rebuild their homes, but I digress.

There will also be $2.6 billion in grants to conserve our coastal habitats, while also protecting coastal communities. We can expect that sea level rise and hurricanes will continue to get worse until we address climate change on a global scale, so coastal communities will need stronger infrastructure to protect their homes from destruction. Moving away from the fatalistic perspective, conserving our coastal and forest habitats could help move us closer to achieving our 30x30 goals. Either way, conserving and protecting our land will help bring back biodiversity, create healthy habitats for us to enjoy, and create a sustainable future for all.

There we have it, our summary of the Inflation Reduction Act’s environmental initiatives. We covered a lot, but you made it to the end! While we have an idea of how the Inflation Reduction Act will combat climate change, there’s still more work to be done. 

We’ll keep you guys updated with any new developments regarding the IRA, but for now, remember to ask the hard questions, look at new perspectives, and #keeplearning!

Thanks for joining us and I hope to see you guys next time,

McKenzie

P.S. - We're going to be having a virtual open house on Wednesday, August 17th at 11:30 AM PT, we'd love to see you there! Click here to RSVP 😁

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