The climate and tax deal announced by Senate Democrats on Wednesday would pump hundreds of billions of dollars into programs designed to accelerate the country’s transition from a largely fossil-fuel economy to cleaner energy sources.
The law, dubbed the Inflation Reduction Act of 2022, is a far cry from the ambitious, multitrillion-dollar domestic policy and fiscal proposal that President Biden envisioned and that Congressional Democrats have been working to pass for more than a year.
What remains is a downsized but still significant package that emerged from a compromise between Democratic Sen. Joe Manchin III of West Virginia and Senate Majority Leader Chuck Schumer, the Democrat of New York.
Here’s a quick look at the bill that Democrats hope can defeat Republican opposition in the Senate as soon as next week.
Tax credits for CO2-free power plants
The deal would give billions of dollars in tax credits over 10 years to companies that build new zero-emission power sources such as wind turbines, solar panels, battery storage, geothermal plants or advanced nuclear reactors. Previously, Congress had offered short-term loans for wind and solar energy, which often expired in a year or two. The credits in the new bill cover any zero-carbon technology and would last at least a decade, giving companies more certainty.
Read more about electric vehicles
As the entire car market stagnates, the popularity of battery-powered cars is increasing rapidly around the world.
The bill also expands a tax credit for companies that capture and bury carbon dioxide from natural gas power plants or other industrial plants before the gas escapes into the atmosphere and warms the planet – a technology rarely used today because of the high cost. It would also offer tax breaks to keep existing nuclear power plants running. More than 13 reactors have been shut down across the country since 2013, and emissions often rise as they tend to be replaced by fossil fuels. It would also provide grants and tax credits for states and electric utilities to reduce carbon emissions.
Incentives for electric vehicles
The deal extends a popular excise tax credit of up to $7,500 for new EV purchases and, for the first time, offers a $4,000 credit for used EVs.
Only those earning $150,000 per year or less (or $300,000 for joint applicants) are eligible for the new vehicle loan and those earning a maximum of $75,000 (or $150,000 for joint applicants) on used vehicles. The program would run until the end of 2032. The loans would be available for new cars priced up to $55,000 and new pickups, SUVs and vans priced up to $80,000. Another $1 billion in the bill would enable funding for zero-emission school buses, heavy-duty trucks, transit buses and other commercial vehicles.
Helping people reduce energy bills
The bill aims to reduce energy bills by investing $9 billion in rebates for Americans who buy and retrofit their homes with energy efficient and electrical appliances. It also includes a decade of consumer tax credits that would reduce the cost of heat pumps, rooftop solar panels, water heaters and electric HVAC or electric heating, ventilation and air conditioning technologies.
Investments in domestic manufacturing
The package provides $60 billion for U.S. clean energy manufacturing, including $30 billion in production tax credits for solar panels, wind turbines, batteries and processing of critical minerals, and $10 billion in tax credits for investments to build Production facilities that produce electric vehicles and renewable energy technologies.
These regulations aim to stop and reverse the migration of clean energy production overseas to countries like China. The bill would also invest $500 million through the Defense Production Act for heat pumps and critical mineral processing.
The bill would also allocate $27 billion to a “green bank” aimed at implementing clean energy projects, particularly in disadvantaged communities.
degradation of methane
The bill would also impose a fee on excess methane escaping from oil and gas wells, pipelines and other infrastructure. Methane is a particularly powerful greenhouse gas: although it evaporates faster than carbon dioxide, it is many times more powerful when it comes to heating the atmosphere. Polluters would pay a penalty of $900 per tonne for methane emissions that exceed federal limits in 2024, rising to $1,500 per tonne by 2026.
Investing in low-income communities
The law would invest over $60 billion to support low-income and communities of color who are disproportionately burdened by the environmental and public health impacts of climate change. These include grants for zero-emission technologies and vehicles, funds to mitigate the negative impact of highways, bus depots and other transportation facilities, and construction projects near disadvantaged communities.
agriculture and forests
Another $20 billion would be allocated to programs to reduce emissions from cows and other livestock, agricultural soils and rice production. According to the government, agriculture produces about 11 percent of the greenhouse gases emitted by the United States. The bill would also fund grants to support forest conservation, fireproof forest development and increased tree planting in the city, as well as conservation and restoration of coastal habitats.
Brad Plummer contributed reporting.