Nearly two weeks after it was officially signed by President Joe Biden, many Americans have heard of the Inflation Reduction Act. Carefully thought out in over 700 pages, this massive $750 billion law focuses on health care, taxes, and climate. This is, without a doubt, the most significant piece of climate legislation in United States history. The United States is one of the world’s leading carbon emitters, and ambitious goals have been established in an attempt to keep our climate from exceeding the 1.5C-degree temperature increase that the IPCC has benchmarked as the “breaking point” for life on earth. The Inflation Reduction Act, while not a complete solution, particularly when analyzed from a justice angle, equips the United States with the funding and incentives to make achieving the necessarily ambitious goals possible.
So, what does this mean for you? How do over 700 pages of legislation manifest for our country and the individual American? I hope the next few paragraphs provide some insight.
Benefits to America
- Economic Growth
The Inflation Reduction Act contains a collection of provisions that should result in widespread benefits for the United States. The bill will diversify economic opportunities with investments in the power, agriculture and forestry, infrastructure, and transportation sectors, directly supporting nearly 537,000 jobs annually for 10 years. This economic activity is predicted to generate taxes at the local, state, and federal levels resulting in $50.9 billion in value added to the economy every year, for 10 years, and a potential GDP increase of 0.84 to 0.88 percent in 2030.
- Clean Energy Expansion and Cost Reduction, and Increased Energy Security
An analysis, commissioned by the Nature Conservancy, estimates that provisions in the Inflation Reduction Act will result in a return of $1.42 for every federal dollar that is invested. A significant portion of these investments are allocated to clean energy and the diversification of the US energy portfolio. Such investments will create novel growth in wind and solar capacity, reduce the cost of electricity by 5.2 to 6.7 percent over the next decade, and improve US energy security by reducing energy imports and exposure to volatile energy price spikes and supply disruptions.
- Significant Reduction in Emissions for a Habitable Planet
Such significant changes to US energy production, along with investments into other sectors, could reduce cumulative greenhouse gas emissions by around 6.3 billion tons by 2032. This is approximately 40% below 2005 levels, which puts the US within reach of achieving its climate goals and international commitments.
Benefits to Individuals
There are many predicted benefits to come from the Inflation Reduction Act provisions, but how will this bill directly impact the individual?
- Reduction in Harmful Health Impacts, Particularly in Communities of Color
Because climate and health are so deeply connected, investing in climate resiliency will also result in health benefits. It is predicted that the Inflation Reduction Act could avoid up to 60,000 fewer incidences of dementia, 100,000 asthma attacks, and anywhere from 3,900 to 180,000 premature deaths. It is important to note that many of these avoided health incidences will be concentrated in communities of color since these communities are often the most environmentally overburdened. Finally, the Inflation Reduction Act accounts for $60 billion in environmental justice priorities which will be significant for historically disadvantaged communities.
- Up to $1,200 in Tax Credits for Home Energy Upgrades Per Year
One direct benefit will be the availability of $10 billion in tax credits for home energy upgrades. These credits can be used for the purchase of heat pumps, electric stoves, upgraded windows and insulation, and more. Individuals will be able to claim up to $1,200 a year or 30% of the total cost at tax time. Specific provisions in the bill also bolster existing tax credits for residential solar panels and energy storage systems, allowing homeowners to claim 30% of these costs at tax time.
- $4,000 – $7,500 in Tax Credits for Electric Vehicles
An additional direct benefit will be the availability of tax credits for electric vehicles in an effort to reduce the transportation sector’s reliance on petroleum. These tax credits range from $4,000 to $7,500 and vary depending on individual earnings, vehicle types, and vehicle costs.
- $170 – $220 in Annual Household Savings
Because of the Inflation Reduction Act’s significant investments into renewable energy and energy diversification, the average American consumer will experience a decrease in energy prices. The provisions will create downward pressure resulting in a decrease in oil and natural gas consumption, which is estimated to reduce crude oil prices by approximately 5% and reduce US natural gas prices by approximately 10-20% in the medium term (2030-2035). More directly, this means that home heating expenses and costs of goods and services could become cheaper, resulting in households experiencing between $170 and $220 in annual savings over the next decade.
- Key Provisions for Communities Hurt First and Worst
Because of the specific language requiring investments into disadvantaged communities, there may be direct funding to areas that are burdened by the worst air pollution. Such funding is meant to result in more equitable access to renewable energy, increased energy efficiency opportunities, improved public health, and climate resiliency.
This blog is in no way an exhaustive review of the Inflation Reduction Act, but rather a palatable way to understand its most significant impacts. There are historic and transformative provisions laid out in this law. There are also provisions that have been criticized for working against goals, or for their meager efforts to address climate justice and support front-line communities. Regardless, the Inflation Reduction Act is the most substantive effort the United States has ever put forward to mitigate the looming climate crisis. In a way, this piece of legislation can be viewed as a down-payment for the future of our planet. Sustained effort for climate solutions is necessary, but the glimmer of hope now shines a bit brighter.
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Thanks for this summary- it really helps explain this complicated Bill and how it will help us all.