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The USA’s Inflation Reduction Act of 2022

The USA’s Inflation Reduction Act of 2022: The Environmental Gains and Concessions


Written by: Kaylene Leong

October 31, 2022



The Inflation Reduction Act (IRA) of 2022 was recently signed into law by President Joe Biden in August 2022. This landmark legislation contains provisions regarding healthcare energy, inflation and climate, however this blog will focus on the environmental provisions, both good and bad, that will invest $369 billion into energy and climate change (1).


One of the main aims of the IRA is to invest in clean energy and transportation and reduce emissions. Some ways the IRA aims to provide :

  • $10 billion investment tax credit to build clean technology manufacturing facilities;

  • $2 billion in grant for auto manufacturing facilities to manufacture clean vehicles;

  • $20 billion in loans to build new clean vehicles manufacturing facilities;

  • And tax credits for clean sources of electricity, energy storage, clean fuels and clean commercial vehicles (2).


Another issue which the IRA tackles is the rising energy costs. Energy costs have not only been rising in the UK but also in the USA. According to data, the US energy prices are the highest they’ve ever been since August 1981 (3). The legislation does this by providing rebate programs and tax credits to consumers:

  • $9 billion in home energy rebate programs to electrify home appliances and energy-efficient retrofits;

  • 10 years of consumer tax credits to make homes energy-efficient and run on? clean energy to make heat pumps, solar rooftops, electric heating, ventilation, air conditioning and water heating more affordable;

  • $7,500 tax credit for purchasing new electric vehicles and $4,000 tax credit towards the buying used electric vehicles (for lower/middle income individuals);

  • $1 billion grant program to make affordable housing more energy efficient (4).


The IRA also advocates for environmental justice. Environmental justice is defined as the fair treatment and meaningful involvement of all people regardless of race, colour, national origin or income with respect to the development, implementation and enforcement of environmental laws, regulations and policies (5). The IRA would focus on aiding low-income communities and communities of colour which have been disportionately affected by pollution and climate change. The IRA will be investing $60 billion which will fund projects such as:

  • $3 billion for Environmental and Climate Justice Block Grants which invests in projects in disadvantaged communities to combat environmental and public health harms;

  • $3 billion for Grants to reduce Air Pollution at Ports to support buying and installing zero-emission equipment and technology at ports (6).

There are many other issues which the IRA tackles, including the use of fossil fuels, forest conservation, endangered species recovery plans, etc. The Inflation Reduction Act undoubtedly does a lot of good for climate change. However, despite the advancements the legislation makes, the IRA has also made some negative concessions. As previously stated, one of the key causes of climate change is undoubtedly the fossil fuel industry yet the IRA makes many concessions for the investment into fossil fuels.


The new legislation allows for the building of new pipelines, new leasing for oil and gas drilling and investments into carbon capture technology. One such example of the concessions making the legislation less effective is that there are provisions in the IRA which would provide funds for air pollution monitoring however with investments in the fossil fuel industry, there will be an increase in air pollution regardless and it invalidates the progress which could have been made (7). Another example would be that for renewable energy projects to be approved, oil and gas leasing must also be approved (8). These concessions given to the fossil fuel industry makes the rest of the legislation less effective and allows the fossil fuel industry to grow and simultaneously the carbon emissions poisoning our planet (9).


In conclusion, the USA’s Inflation Reduction Act creates a lot of positive impact, however it remains debatable whether the concessions made to the fossil fuel industry slightly overshadow the rest of the legislation. Regardless, the Inflation Reduction Act has been successfully signed into law and now the important thing is for the USA to properly enforce the legislation to protect the environment and mitigate climate change.






References

  1. https://www.progressivecaucuscenter.org/climate-and-energy-provisions-in-the-inflation-reduction-act

  2. https://www.democrats.senate.gov/imo/media/doc/summary_of_the_energy_security_and_climate_change_investments_in_the_inflation_reduction_act_of_2022.pdf

  3. https://www.bloomberg.com/news/articles/2022-09-13/us-electricity-prices-rise-most-in-41-years-as-inflation-endures

  4. https://www.democrats.senate.gov/imo/media/doc/summary_of_the_energy_security_and_climate_change_investments_in_the_inflation_reduction_act_of_2022.pdf

  5. https://www.clientearth.org/latest/latest-updates/stories/what-is-environmental-justice/#:~:text=Environmental%20justice%20is%20the%20fair,laws%2C%20regulations%2C%20and%20policies.

  6. https://www.democrats.senate.gov/imo/media/doc/summary_of_the_energy_security_and_climate_change_investments_in_the_inflation_reduction_act_of_2022.pdf

  7. https://www.npr.org/2022/08/17/1117725655/the-spending-bill-will-cut-emissions-but-marginalized-groups-feel-they-were-sold

  8. https://earthjustice.org/brief/2022/what-the-inflation-reduction-act-means-for-climate

  9. https://www.forbes.com/sites/rrapier/2022/08/14/energy-provisions-in-the-inflation-reduction-act/?sh=540d92613422



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