US President Joe Biden holds out his pen to US Senator Joe Manchin (D-WV) as Senate Majority Leader Chuck Schumer (D-NY) and US House Majority Representative James Clyburn (D-SC) look on , after Biden signed the Inflation Reduction Act of 2022 into law during a ceremony in the State Dining Room of the White House in Washington, on August 16, 2022.
Leah Millis | Reuters
This year, the Biden administration signed a historic climate and tax deal that will channel billions of dollars into programs designed to accelerate the country’s transition to clean energy and combat climate change.
As the US this year grappled with climate-related disasters from Hurricane Ian in Florida to the Mosquito Fire in California, the Inflation Reduction Act, which contains $369 billion in climate provisions, was a monumental development in mitigating the effects of climate change In the whole country .
The bill, which President Joe Biden signed into law in August, is the most aggressive climate investment ever undertaken by Congress and is expected to cut the nation’s planet-warming carbon emissions by about 40 percent this decade and move the country toward a net-zero economy by 2050
The IRA provisions have major implications for clean energy and manufacturing businesses, climate start-ups and consumers in the coming years. As 2022 draws to a close, here’s a look back at the key pieces of legislation climate and clean energy advocates will be watching in 2023.
Incentives for electric vehicles
The deal offers a federal tax credit worth up to $7,500 for households buying new electric vehicles, as well as a used EV credit worth up to $4,000 for vehicles that are at least two years old. Starting Jan. 1, people making $150,000 a year or less, or $300,000 for joint filers, are eligible for a new car loan, while people making $75,000 or less, or $150,000 for joint filers, qualify for a used car loan.
Despite the rise in sales of electric vehicles in recent years, the transport sector is still the country’s biggest source of greenhouse gas emissions, with a lack of convenient charging stations one of the barriers to expansion. The Biden administration has set a goal of 50% electric vehicle sales by 2030.
The IRA limits EV tax credits to vehicles assembled in North America and aims to deprive the US of battery materials from China, which accounts for 70% of the global supply of vehicle battery cells. An additional $1 billion in the deal will provide funding for zero-emission school buses, heavy-duty trucks and public transit buses.
US President Joe Biden gestures after driving a Hummer EV during a tour of General Motors’ Factory ZERO electric vehicle assembly plant in Detroit, Michigan on November 17, 2021.
Jonathan Ernst | Reuters
Stephanie Searle, program director at the nonprofit International Clean Transportation Council, said the combination of IRA tax credits and government policies will boost EV sales. The agency predicts that roughly 50% or more of cars, SUVs and pickup trucks sold in 2030 will be electric. For electric trucks and buses, the number will be 40 percent or more, the group said.
Over the next year, Searle said the agency is monitoring the Environmental Protection Agency’s plans to propose new greenhouse gas emissions standards for heavy-duty vehicles starting in the 2027 model year.
“With the IRA already promoting electric vehicles, the EPA can and should be bold in setting ambitious standards for cars and trucks,” Searle said. “This is one of the Biden administration’s last chances for strong climate action this term, and they should make good use of it.”
Taking aim at methane emissions
Some pumpers are operating while others are sitting idle at the Belridge oil field near McKittrick, California. Oil prices rose in early Asian trade on the prospect that a stalled nuclear deal with Iran and Moscow’s new mobilization campaign will limit global supplies.
Mario Tama | Getty Images
The package imposes a tax on energy producers that exceed a certain level of methane emissions. Polluters pay a fine of $900 per metric ton of methane emissions released in 2024 that exceed federal limits, rising to $1,500 per metric ton in 2026.
This is the first time the federal government has imposed a tax on greenhouse gas emissions. Global methane emissions are the second largest contributor to climate change after carbon dioxide and come mainly from oil and gas extraction, landfills and wastewater, and livestock.
Methane is a key component of natural gas and is 84 times more potent than carbon dioxide, but it doesn’t last as long in the atmosphere. Scientists say curbing methane is needed to avoid the worst effects of climate change.
The Harris Cattle Ranch, located along Interstate 5, is California’s largest beef producer and can produce 150 million pounds of beef annually, as seen on May 31, 2021, near Harris Ranch, California .
George Rose | Getty Images
Robert Kleinberg, a researcher at Columbia University’s Center for Global Energy Policy, said the methane emitted by the oil and gas industry each year would be worth about $2 billion if it were instead used to generate electricity or heat homes.
“Reducing methane emissions is the fastest way to mitigate climate change. Congress recognized that by passing the IRA,” Kleinberg said. “The methane tax is a draconian methane tax separated from the oil and gas industry in 2024 and beyond.”
In addition to the IRA’s methane provision, Biden’s Interior Department this year proposed rules to curb methane leaks from drilling, which he said would generate $39.8 million a year in royalties for the U.S. and prevent the loss of billions of cubic feet gas ventilation, combustion and leaks.
Stimulating the production of clean energy
The bill provides $60 billion for clean energy production, including $30 billion in manufacturing tax credits to accelerate domestic production of solar panels, wind turbines, batteries and processing of critical minerals, as well as a $10 billion investment tax credit for manufacturing facilities , who build electric cars and clean energy technologies.
There’s also $27 billion going to a green bank called the Greenhouse Gas Reduction Fund, which will provide funding for clean energy deployments across the country, but especially in overburdened communities. And there’s a hydrogen production tax credit in the bill, which gives hydrogen producers a credit based on the climate performance of their production methods.
Solar panels are installed at the Solar Farm at the University of California, Merced, in Merced, California, on August 17, 2022.
Nathan Frandino | Reuters
Emily Kent, U.S. director of zero-carbon fuels at the Clean Air Task Force, a global climate nonprofit, said support for the low-emissions hydrogen bill is particularly notable because it can address sectors such as heavy transport and heavy industry, which are difficult to decarbonize.
“U.S. climate policy took a big step forward on zero-carbon fuels in the U.S. and globally this year,” Kent said. “We look forward to seeing the impact of these policies come to fruition as the Hydrogen Tax Credit, along with the Hydrogen Hubs Program, accelerates progress toward creating a global zero-carbon fuel market.”
The clean energy provisions in the IRA will also have major implications for climate startups and the large venture capital firms that back them. Carmichael Roberts, head of investments at Breakthrough Energy Ventures, said climate initiatives within the IRA would give private investors more confidence in the climate space and could even lead to the creation of up to 1,000 companies.
“Everybody wants to be a part of this,” Roberts told CNBC after the bill passed in August. Even before the measure passed, “there was already a lot of excitement around climate,” he said.
Investing in communities burdened by pollution
The legislation invests more than $60 billion to address the uneven effects of pollution and climate change on low-income communities and communities of color. The funding includes grants for zero-emission technology and vehicles and will help clean up Superfund sites, improve air quality monitoring capacity and provide money for community-led initiatives through area equity block grants of the environment and climate.
Smoke hangs over the Oakland-San Francisco Bay Bridge in San Francisco, California, U.S., Wednesday, Sept. 9, 2020. Strong, dry winds lashed Northern California for a third day, increasing the risk of wildfires in the region that has been battered by heat waves. freak thunderstorms and dangerously poor air quality from wildfires.
Bloomberg | Bloomberg | Getty Images
A study published in the journal Environmental Science and Technology Letters found that communities of color are systematically exposed to higher levels of air pollution than white communities due to redlining, a federal housing discriminatory practice. In addition, black Americans are 75 percent more likely than white Americans to live near hazardous waste facilities and are three times more likely to die from exposure to pollutants, according to the Clean Air Task Force.
Biden signed an executive order after taking office aimed at prioritizing environmental justice and helping to mitigate pollution in marginalized communities. The administration created the Justice40 initiative to deliver 40 percent of the benefits of federal investments in climate change and clean energy to disadvantaged communities.
Most recently, the EPA in September launched an office focused on supporting and providing IRA grants to these communities.
Reduction of harmful emissions
The deal includes $20 billion in programs to reduce emissions from the agricultural sector, which accounts for more than 10 percent of U.S. emissions, according to EPA estimates.
The president has pledged to cut emissions from the agriculture industry in half by 2030. The IRA funds grants for agricultural conservation practices that directly improve soil carbon, as well as projects that help protect forests prone to wildfires.
Farmer Roger Hadley harvests corn from his fields in his John Deere combine in this aerial photo taken over Woodburn, Indiana.
Bing Guan | Reuters