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Inflation Reduction Act Provides Billions in Funding for Climate Initiatives and Clean Energy Development
Inflation Reduction Act Provides Billions in Funding for Climate Initiatives and Clean Energy Development

President Biden has signed the Inflation Reduction Act, a major spending bill that attempts to tackle climate change, the cost of prescription drugs, and lower the national deficit. While the Act does not include any requirements to reduce emissions, it does provide for new oil and gas leases, tax credits for carbon capture and sequestration, and funding for both traditional renewables like wind and solar, and emerging technologies such as clean hydrogen, sustainable aviation fuel and advanced nuclear power.

As to climate issues, the Inflation Reduction Act specifically provides for $369 billion in new climate spending and includes rebate programs, tax credits and incentives. This includes:

  1. Lowering consumer energy costs with $9 billion for home energy rebate programs and 10 years of tax credits
  2. Offering tax credits for the purchase of new ($7,500) or used ($4,000) electric vehicles comprised of parts made in North America or free trade countries
  3. Offering decarbonization incentives, including:
    1. $6 billion for a new Advanced Industrial Facilities Deployment Program for chemical, steel and cement plants
    2. $9 billion for American-made clean technologies
    3. $27 billion for clean energy technology accelerator
    4. A methane reduction program, including a fee of up to $1,500 a ton for methane emissions
  4. Offering incentives and credits for United States “clean manufacturing,” including:
    1. $60 billion for on-shore clean energy manufacturing
    2. $30 billion in production tax credits for U.S. manufacturing of wind turbines, batteries and critical materials 
    3. $10 billion in investment tax credits for clean technology manufacturing facilities for electric vehicles, wind turbines and solar
    4. $500 million for heat pumps and critical mineral processing under the Defense Production Act
    5. $2 billion in grants to retool existing vehicle production facilities
  5. Providing for funds supporting farmers, forestland, and resilient rural communities, including:
    1. $20 billion for climate-smart agriculture
    2. $5 billion for forest conservation and resilience
    3. $2.6 billion for restoration of coastal habitats

The Act also provides for $60 billion in funding for environmental justice priorities and initiatives, including funding for clean vehicles, reduction of air pollution at ports, and projects supporting neighborhood safety, equity and affordable transportation.

The funding provided by the Act could allow the United States to cut emissions 40% of 2005 levels by the end of the decade. Emissions in 2021, for example, were 17% below 2005 levels, so the United States would need to cut its carbon output by roughly 3% per year to hit the 40% threshold by the end of the decade.

However, restrictions and conditions associated with this funding may stall the issuance or use of such funds. For example, the Act includes requirements that tie offshore wind development to mandates that the federal government hold a lease sale beforehand of at least 60 million acres of federal waters for oil and gas production. Additionally, the domestic content requirements for electric vehicles may make the $7,500 new car credit unreachable for any electric vehicle currently on the market.

Moreover, additional infrastructure and technology will be needed to meet such goals, including the construction of new transmission lines to connect renewable energy projects, the installation of batteries to back up these projects, and the installation of emerging technologies to ensure the grid can run without interruption and without the reliance on supporting greenhouse gases.

Connell Foley is continuing to monitor developments regarding the issuance of these funds and, in particular, available opportunities for industries and individuals in New Jersey and New York.

  • Christina Sartorio Ku
    Partner

    Christina Ku practices in Connell Foley’s Environmental Law group, where she applies a background in biological sciences and environmental regulation to a wide range of complex environmental matters. In particular, Christina ...

  • Agnes  Antonian
    Partner

    As Chair of Connell Foley's Environmental Law practice group, Agnes Antonian draws on her engineering background to address a broad range of complex environmental litigation and land use matters. Her environmental litigation ...

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