The Inflation Reduction Act: Sus or Susty?
We’ve recently passed the mid-point of Joe Biden’s presidency (or current term – who knows the future?), which is as good a time as any to reflect on his climate-related progress. President Biden returned to the Paris Agreement on his first day in office, he blocked the Keystone XL oil pipeline in the summer of 2021, and recently, the Inflation Reduction Act made headlines, with the executive office alleging it to be
The Inflation Reduction Act (IRA), heralded as a breakthrough in combating climate change, was signed into law by President Biden in August of 2022. The law includes three main policy areas: Healthcare, Energy and Climate, and Revenue. We wanted to know what climate measures in the IRA would affect our readers directly as consumers. The law is a dry 274 pages. So, we’re only exploring the sections that can aid individuals in more sustainable living. Here’s what we learned:
The White House’s website claims, “because of the Inflation Reduction Act’s investments, America is on track to decrease greenhouse gas emissions by about 40 percent below 2005 levels in 2030.” Misleading as f*ck. According to the EPA, in 2020, we were already 20 percent below 2005 levels. We think it’s sus to insinuate that all 40% of emissions reduction will be because of this bill. Not off to a great start.
In terms of climate benefits to consumers, the White House’s website also claims “the law will provide direct consumer rebates and tax credits to purchase more efficient appliances, provide up to $7,500 in tax credits for Americans to purchase electric vehicles, and create millions of good-paying jobs making and deploying clean energy in America.” We investigated these claims further to determine their accuracy.
President Biden signing the Inflation Reduction Act. Source: ABC
Electric Vehicles
There was already a $7,500 tax credit for new electric vehicles ($4,000 for used vehicles) that the IRA tweaked, adding additional rules to specify which cars qualify. Now, the vehicle must be assembled in North America, likely to meet President Biden’s promise of creating more jobs in the clean energy sector. Ultimately, the IRA doesn’t create more cash for consumers when they buy an electric vehicle. The law has instead narrowed the definition of which cars earn the purchaser a tax credit. Silver lining: in 2024, you should be able to get your rebate at point-of-purchase instead of when you file taxes.
Nonbusiness Energy Property Credit and Residential Clean Energy Credit
The Inflation Reduction Act also extends, with changes, a couple of home improvement credits which were about to expire. Both the Nonbusiness Energy Property Credit and the Residential Clean Energy Credit offer 30% back as a tax credit.
The former applies to energy efficient home improvements like insulation, windows, and doors, with a cap of $1,200 (or $2,000 for heat pumps). The latter applies to the installation of renewable energy units such as solar panels.
Home Owner Managing Energy Savings (HOMES) and High-Efficiency Electric Home Rebate Program (HEEHRA)
Source: Tom Brenner for The New York Times
Again, these programs already existed (we’re noticing a pattern here). The IRA just alters their criteria and extends their expiration date. The HOMES rebate applies to improvements that cut energy use, and saves consumers up to $8,000 as a tax credit. With this program,
“the amount you can get back depends on how much energy you’ve saved, how you prove those energy savings (through either modeling, which requires computer software, or measured energy savings), and your household income.”
HEEHRA is our favorite (if we can have a favorite rebate program), and not just because its acronym looks like some sort of scream-laugh. This rebate is set to benefit low-income consumers; it “covers 100 percent of electrification project costs (up to $14,000) for low-income households and 50 percent of costs (up to $14,000) for moderate-income households.” This includes updating vents and wiring as well as purchasing new appliances.
You can only get 1 rebate per project, so it’s up to the consumer to determine which program best suits their needs. The rollout of many of these programs is left up to the states.
In sum, there’s nothing wholly new for consumers. The individuals set to benefit the most in the short term are homeowners, namely homeowners who already have cash upfront to make home improvements, and who have the time and knowledge to go through the necessary procedures to claim their rebates and tax credits.
What will the Inflation Reduction Act do for your sustainability journey? In short, not much. The Inflation Reduction Act, while it may lead to an overall reduction in emissions in the long term, is hardly the radical move needed to combat climate change. If you or anyone you know may qualify for any of the programs, definitely take advantage of the benefits! We don’t want to undermine the fact that there are some climate wins in the IRA. However, those of us who don’t own a home or don’t have the means to purchase an electric vehicle will remain generally unaffected, watching the slow-moving politicians pat themselves on the back.