The Cut Inflation Act Is Now Law: What Does It Mean for the Clean Energy Sector? | Mintz – Viewpoints on Energy and Sustainability
A year and a half into the Biden administration and with the 2022 midterm elections looming, Democrats scored a major legislative victory with the eventual passage of the Inflation Reduction Act of 2022 (IRA) — a landmark climate and health care bill that delivers at least some of the party’s campaign promises and long-standing policy goals.
When President Biden’s signature Building back better failed last year even after being reduced from a cost of $3.5 trillion to $2.2 trillion, many considered the effort a failure. However, negotiations — mostly quiet and behind the scenes, and sometimes awkwardly public — continued between Senate Majority Leader Chuck Schumer (D-NY) and Sen. Joe Manchin (D-WV). In late July, the two announced they had agreed to a $740 billion package focused on inflation and deficit reduction, health care, energy security and climate change.
The IRA generates $737 billion in revenue through a new 15% minimum tax on corporate books, prescription drug pricing reform, IRS tax enforcement, a excise duty of 1% on share buybacks and a two-year extension of the excess trading loss limitation rules. The bill calls for investments of $437 billion, including $369 billion for energy security and climate change, $64 billion for Affordable Care Act extending grants and $4 billion for Western drought resilience. Congressional Democrats and the White House say the bill will reduce the federal deficit by more than $300 billion.
The IRA was approved by the Senate 51-50 on August 7 under budget reconciliation rules allowing a bill to pass with a majority vote and waiving the usual 60-vote threshold to end debate. All Democratic senators supported the IRA and all Republicans opposed the bill, with Vice President Kamala Harris voting in a tie. In the House of Representatives, where progressives had long advocated for a more robust bill, the bill was approved on August 12 in a vote of 220 to 207 with all Democrats in favor and all Republicans against. .
Energy and climate related tax incentives in the IRA focus on energy generation, energy manufacturing, clean fuels, clean vehicles, carbon sequestration and energy efficiency. A detailed analysis of the main IRA energy and climate tax incentives by our Mintz colleague Anne Levin-Nussbaum can be found by clicking on HERE.
The new law includes many direct funding opportunities in the form of grants, loans and rebates focused on climate, energy and energy efficiency. 16 federal agencies and offices are receiving direct appropriations totaling nearly $148 billion for climate, energy and energy efficiency investments. The vast majority of this funding goes to the United States Department of Agriculture (USDA) at nearly $47 million, the Environmental Protection Agency (EPA) at $41.5 billion, and the United States Department of energy (DOE) to just over $35 billion.
Just to highlight a few of the many opportunities found in the IRA:
DOE funding includes grants for manufacturing low- and zero-emission vehicles; the purchase and installation of advanced industrial technologies that promote emission reductions in energy-intensive industries; loans for new high-capacity power transmission lines; financing interregional and offshore wind power planning, modeling and analysis; funding state energy offices to develop and implement rebates for energy-efficient whole-home retrofits; funding state and local governments to update building codes; funds for national laboratories; and loan guarantees to support the financing of reinvestment in energy infrastructure.
APE funding includes programs focused on decarbonization and emissions reduction, including a new greenhouse gas emissions reduction fund that can be used to create a national climate bank to partner with the private sector and community lenders to invest in clean energy technologies and energy efficiency improvements; grants and rebates for state and local governments to replace heavy-duty vehicles with zero-emission vehicles; subsidies and rebates for ports for the purchase of zero-emission equipment and technologies; grants, loans, contracts and rebates for private industry to monitor and reduce methane emissions from systems using natural gas or petroleum; grants under the Diesel Emissions Reduction Act program of projects in airports, marshalling yards and distribution centers; grants to monitor and reduce air pollution in low-income and disadvantaged schools and communities; funding for the administration of the Renewable Fuels Standard; and funding for the implementation of the American Innovation and Manufacturing (AIM) Act.
USDA opportunities are focused on conservation programs, including investments in agricultural conservation efforts such as competitive grants for infrastructure projects related to the blending, storage, supply or distribution of biofuels; assistance to underserved farmers, ranchers and foresters; reforestation of the national forest system; grants to forest owners seeking to mitigate the impact of climate change or build forest resilience; reduce or otherwise address GHG emissions, including methane, carbon dioxide and nitrous oxide; the financing of electricity loans for renewable energies; and loans and grants to electricity cooperatives for the purchase of renewable energy, renewable energy systems, zero-emission systems, and carbon capture and storage systems.
Although at significantly lower funding levels, many other federal agencies will receive ERI funding for energy and climate efforts.
The IRA funds the General Services Administration (GSA) convert GSA facilities to high-performance green buildings, purchase low-carbon materials for new construction, and upgrade GSA facilities; and to support emerging and sustainable building technologies. United States Postal Service (USPS) the funding will be used to purchase zero-emission delivery vehicles and to design and install the required charging infrastructure. The US Department of Housing and Urban Development (HUD) use IRA funding for loans and grants supporting energy and water efficiency improvements in affordable housing; better indoor air quality; and zero-emission electricity, among other uses. The US Department of the Interior (DOI) will grant leases, easements and rights of way for offshore wind on the Atlantic Coast, Gulf Coast and US territorial continental shelves. The US Department of Transportation (DOT)which had previously received significant funding in the Infrastructure Investment and Employment Act (the bipartisan Infrastructure Act which came into force in November 2021), is receiving additional funding in the IRA for a competitive grants program to develop and demonstrate low-emission aviation technologies and produce, transport, blend or store sustainable aviation fuels.
President Biden signed the IRA into law on August 16, and the hard work of implementing the new law will now begin.