A Big Win for American Consumers and Manufacturing

The Inflation Reduction Act Delivers Savings for Consumers and Keeps American Manufacturing Strong

This weekend the US Senate passed the largest climate legislation in our history.

I’ve long said that policy can no longer hinder the energy transition, the train left the station long ago. However, policy can accelerate the deployment of clean energy infrastructure and manufacturing as this legislation will do.

The combined investments in the FY2022 Budget Reconciliation bill would put the U.S. on a path to roughly 40% emissions reduction by 2030, and would represent the single biggest climate investment in U.S. history, by far.

1. Lower Consumer Energy Costs

This bill will provide a range of incentives to consumers to relieve the high costs of energy and decrease utility bills. For the first time in a decade, US consumers are facing a sustained rise in electricity rates driven primarily by the cost of natural gas as operators are hesitant to invest in new wells and production.

This includes direct consumer incentives to buy energy-efficient and electric appliances, clean vehicles, and rooftop-solar, and invest in home energy efficiency:

• $9 billion in energy rebate programs, focused on low-income consumers, to electrify home appliances and for energy-efficient retrofits.

• 10 years of consumer tax credits to make homes energy efficient including heat pumps, rooftop solar, electric HVAC, and water heaters

• $4,000 consumer tax credit for lower/middle income individuals to buy used-clean vehicles, and up to $7,500 tax credit to buy new clean vehicles.

• $1 billion grant program to make affordable housing more energy efficient.

2. American Energy Security and Domestic Manufacturing

This bill will support energy reliability and cleaner energy production coupled with historic investments in American clean energy manufacturing. It includes over $60 billion to on-shore clean energy manufacturing in the U.S. across the full supply chain of clean energy and transportation technologies.

Source: IEA

These manufacturing incentives will help reduce the risk of future price shocks by bringing down the cost of clean energy and clean vehicles, relieving supply chain bottlenecks, and create independence from geopolitical advisories.

• Production tax credits to accelerate U.S. manufacturing of solar panels, wind turbines, batteries, and critical minerals processing

• $10 billion investment tax credit to build clean technology manufacturing facilities that make electric vehicles, wind turbines, and solar panels

• $500 million in the Defense Production Act for heat pumps and critical minerals processing

• $2 billion in grants to retool existing auto manufacturing facilities to manufacture clean vehicles, keeping more jobs in the cities that need them

• Up to $20 billion in loans to build new clean vehicle manufacturing facilities across the country.

• $2 billion for National Labs to accelerate breakthrough energy research.

3. Decarbonize the Economy

The investments in this bill will reduce emissions in every sector of the economy, substantially reducing emissions from electricity production, transportation, industrial manufacturing, buildings, and agriculture.

• Tax credits for clean sources of electricity and energy storage and roughly $30 billion in targeted grant and loan programs for states and electric utilities to accelerate the transition to clean electricity.

• Tax credits and grants for clean fuels and clean commercial vehicles to reduce emissions from all parts of the transportation sector.

• Grants and tax credits to reduce emissions from industrial manufacturing processes, including almost $6 billion for a new Advanced Industrial Facilities Deployment Program to reduce emissions from the largest industrial emitters like chemical, steel, and cement plants.

• Over $9 billion for Federal procurement of American-made clean technologies to create a stable market for clean products, including $3 billion for the U.S. Postal Service to purchase zero-emission vehicles.

• $27 billion clean energy technology accelerator to support the deployment of technologies to reduce emissions, especially in disadvantaged communities.

• A Methane Emissions Reduction Program to reduce the leaks from the production and distribution of natural gas.

Now, the bill heads to the House where it’s expected to pass before being signed into law. Between this bill and the Chips Act, American infrastructure and manufacturing took big steps forward over the last several weeks.