Inflation Reduction Act: What Occurred?
TL/DR –
In 2022, President Biden signed the Inflation Reduction Act into law, which was the largest investment in climate and clean energy in U.S. history. The Act allocated hundreds of billions of dollars for projects addressing climate change and also introduced tax incentives to stimulate investment in clean energy. It is estimated that the Act’s tax credits have led to nearly $500 billion in clean energy technology investments, a 70% rise compared to two years prior to the Act, and are predicted to reduce U.S. emissions by at least 30% by 2030.
Megan Hall introduces Possibly’s discussion on the Inflation Reduction Act
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In 2022, President Biden enacted into law the Inflation Reduction Act, the US’s most significant climate and clean energy investment to date, despite its unassuming name.
Let’s unpack the outcomes since its signing and its fate under new administration with our reporters Juliana Merullo and Nat Hardy.
Decoding the Inflation Reduction Act
The Inflation Reduction Act, or IRA, allocated sizeable funding for climate change projects. To understand its impact, we interviewed Seth Hanlon, Deputy Assistant Secretary for Tax and Climate Policy in the Department of the Treasury.
Surprising as it may be, the Treasury has been pivotal in executing the IRA. Hanlon divulged that the IRA is the most significant clean energy investment in U.S. history, primarily through tax incentives, similar to the tax credit for electric vehicles.
Unveiling new tax incentives
The IRA has introduced or updated 20 different tax incentives, one of the largest being the technology neutral tax credits.
These credits enable businesses and utilities to choose the best credit for their clean energy source, removing prior restrictions on specific technologies. Hannah Kolus, a senior analyst at Rhodium Group, stressed the importance of these tax credits for decarbonization.
The effect of the IRA tax credits
According to estimates by Rhodium, these credits have spurred almost $500 billion clean energy technology investments. That’s a 70% increase pre-IRA, getting us closer to our emissions reduction goals and potentially slashing US emissions by at least 30% by 2030.
Role of the Treasury Department
While the credits are law-bound, the Treasury department’s role is to generate rules and guidelines for eligibility. It is an ongoing process, even two years later, with thousands of public comments to sift through.
Future under a new administration
Although tax credits are law and can be altered only by Congress, future administrations could revise these regulations. This process, including a public notice and comment period, can take a few more years. However, these tax credits enjoy bipartisan support, possibly due to most new clean energy investments being in Republican districts.
As the Biden administration winds down, Treasury officials are finalizing as much guidance as possible. Stay updated on this topic at askpossibly.org, or follow us on Instagram, Facebook, LinkedIn, or Twitter at “askpossibly”.
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