The Inflation Reduction Act signed into law in mid-August is the most comprehensive U.S. legislation addressing climate change ever enacted. It contains $369 billion in funding for clean energy and electric vehicle tax breaks, domestic manufacturing of batteries and solar panels, and pollution reduction.
The legislation for the most part makes use of carrots rather than sticks to coax American consumers and industry away from reliance on fossil fuels. Rather than establishing more carbon taxes, mandates, and penalties, the law largely makes use of tax credits to provide incentives for the use of clean energy.
The law provides a large mix of tax breaks intended to bring down the costs of solar, wind, batteries, electric cars, heat pumps, and other clean technology. For example, consumers will get a $7,500 credit for purchasing many new electric car models and about $4,000 for buying a used vehicle.
On the stick side of the ledger, oil and gas companies that emit methane above certain threshold levels will incur fees that escalate over time. The law also increases the cost to the oil industry for extracting fossil fuels from public lands.
The act provides $60 billion for overall environmental justice priorities, including $15 billion targeted specifically for low-income and disadvantaged communities. There are many other provisions in the law addressing multiple climate-related issues.
According to three separate analyses by economic modelers, the investments from the Inflation Reduction Act are likely to cut pollution by about 40% below 2005 levels by the year 2030.
Photo, posted December 15, 2021, courtesy of Mario Duran-Ortiz via Flickr.