Insights

A Cautiously Optimistic Hot Take on the Inflation Reduction Act’s Policies and Funding

Barbara Weber
October 12, 2022
Residential rooftop solar installers hard at work in Riverside County, California. (Photo: David Ganske of DG+Design)

It’s no secret that the US government has left a lot to be desired on the climate action front, despite the country being one of the largest contributors of greenhouse gas (GHG) emissions in the world. Any sort of meaningful policy to reduce emissions seemed destined to remain gridlocked in partisan politics and a longstanding stronghold the fossil fuel industry has had on lawmakers. As a result, I’ve adopted a healthy dose of skepticism in the government's ability to lead on the issue over the years.

It’s been one month since the (surprise) signing of the Inflation Reduction Act (IRA) and if I’m being honest, I’ve been trying to write this article every day since then. The more I’ve tried to wrap my head around what the IRA really means for climate change and the industries trying to tackle it, the more overwhelmed I become by all of the articles about the IRA I have open on my browser. But any insecurities I may have had around my difficulties dissecting the IRA have been tamed by the realization that even the most seasoned of policy experts are having a hard time piecing it all together too. 

Climate change is a remarkably nuanced issue devoid of one silver bullet solution. That said, after several years working in climate change advocacy, which involved multiple lobby trips to Capitol Hill to engage politicians on both sides of the aisle, I joined DG+ because I wholeheartedly believe in the massive role that clean energy plays in addressing the climate crisis. Which is why, regardless of where the IRA falls short, it’s still a BFD (as Barack Obama so eloquently expressed). 

What the IRA Gets Right

There is no doubt the IRA is an ambitious bill. Among many other things, the IRA seeks to address the fact that the transportation, electric power, and industry sectors currently account for 76% of our national emissions (as of 2020). The IRA plans to tackle this by making clean energy more accessible to more people. Furthermore, tax credits for solar and wind energy that had previously been limited to one to three years can now be locked in for the next decade.

Funding from the IRA includes a wealth of dollars going to energy and domestic manufacturing. Categories include investment in on-shore clean energy manufacturing, investment and production tax credits for solar and wind, and programs that support domestic manufacturing facilities for electric vehicles and other activities. The graphic below highlights some of this funding.

Beyond the big dollar amounts, there are specific key measures that will have a tremendous impact. These include an extension of the 30% solar investment tax credits (ITC) through 2032 as well as "adders" that apply to community solar projects that meet certain development criteria. Plus, the 30% investment tax credit now applies to standalone battery energy storage and solar now has a production tax credit (PTC) option. The graphic below highlights some of the key measures from the new law.

These big investments are just the jumpstart (no pun intended) the clean energy sector needed and will ultimately lower the barrier of entry for middle-class and low-income households to access clean energy while also saving them money. For instance, according to The White House, 7.5 million more families will be able to install solar on their roofs with a 30% tax credit, saving families at least $300 per year (or $9,000 over the life of the system). Additionally, as the Solar Energy Industries Association (SEIA) notes in its comprehensive summary of the bill, “$7 billion will be available for state, local and nonprofit programs to directly install zero-emission distributed technologies in low-income and disadvantaged communities.”

Aside from a lack of access to clean energy in the past, low-income and underserved communities have historically gotten the short end of the stick (to say the least) when it comes to climate change. Not only do they live closest to the pollution emitted from petrochemical plants and other contributors of greenhouse gasses, but they often experience the worst impacts of our warming planet. With that in mind, I was encouraged to see $3 billion in funding through the Environmental and Climate Justice Block Grants in the IRA for community-led projects in the areas experiencing the disproportionate impacts of pollution and climate change, as EarthJustice outlined

The IRA also reinstates the Superfund Tax so that the industries responsible for pollution are actually held accountable for cleaning it up (something that always should have been the case). Additionally, $315.5 million is set aside for air monitoring so that communities, especially those living near polluting industries, know exactly what’s in the air they breathe. And this is where my skepticism starts to creep in a bit.

Where the IRA Falls Short

If I’ve learned anything when it comes to addressing climate change, particularly in the halls of our nation's Capitol, it’s that compromise is often necessary, even as painful as it can be. In that vein, there are some things in the IRA that leave me, and many others, less than thrilled.

  • There are components of the IRA that could potentially extend the life of dirty coal plants, leaving some marginalized communities left out to dry. So while these communities now have the funds to actually know that what they’re breathing is harmful to their health, they still might not have the government's help in stopping these polluters.
  • The IRA offers up parts of the Gulf of Mexico and Alaska’s Cook Inlet for oil and gas development and has stipulations that would require additional oil and gas leasing in order for new wind and solar projects to be approved. 
  • The IRA left a door open for Senator Joe Manchin”s “permitting reform” side deal that would have loosened oil and gas restrictions. That said, on September 27, both progressives and Republicans shot down Manchin’s bill (for very different reasons) when it went to a vote. Phew.

The reality is that a lot remains to be seen in how everything in the IRA will be implemented, so I remain cautiously optimistic. Admittedly, I rolled my eyes when I first read how this is “the largest federal clean energy investment in US history.” Given how low the bar was to begin with, that’s not exactly saying a lot. But as ashamed as I felt as an American attending COP25 in 2019, where the US delegation was largely absent, my hope is that the IRA will help restore credibility for the US’ ability to lead on climate change action on the global stage, with ripple effects around the world.

Ultimately, I believe that progress is more important (and more realistic) than perfection. That doesn’t mean we can’t continue to hold our own government to the highest of standards, but it does mean we can celebrate the wins when we get them. Which is why at DG+, we’re celebrating the IRA alongside our clients and looking forward to amplifying their important work to a broader audience in an industry that’s just getting started. BFD, indeed.

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