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One year later: How the Inflation Reduction Act is making an impact

August 16, 2023

Last August, President Biden made history by signing into law the Inflation Reduction Act (IRA) that would alter the United States’ ability to address climate change by accelerating the development and deployment of a wide range of climate and clean energy technologies through the $369 billion investment in the bill.  

When passed, IRA was estimated to drive emissions reductions to 42% below 2005 levels by 2030. Here’s a quick refresher on the climate and clean energy provisions – many of them with roots in bipartisanship from previous legislation – that were included in the bill to support those reductions: 

  • Provisions to cut methane emissions through the Methane Emissions Reduction Program (MERP) that establishes a charge on natural gas that is wastefully polluted, creating an incentive for operators to reduce methane emissions 
  • Technology-neutral tax credits for electricity generation projects with zero greenhouse gas emissions, including a production tax credit (PTC) and investment tax credit (ITC) that levels the playing field for zero-emissions technologies, allowing the best technology to be deployed 
  • Expanded and enhanced 45Q tax credit for carbon capture, removal transport, and storage that puts a high value on controlling carbon pollution and incentivizes direct air capture (DAC) technologies to remove carbon dioxide from the atmosphere  
  • Hydrogen production tax credit that incentives deployment of low-emission hydrogen and supports a U.S.-based hydrogen market  
  • Nuclear energy-specific tax credits that support nuclear energy deployment and support U.S. energy security 
  • Investments in the next generation of geothermal technologies, like superhot rock energy, including provisions for geothermal and production tax credits 

A year after passage: Where are we now?    

The Inflation Reduction Act overhauls and expands federal clean energy tax credits and establishes programs to incentivize businesses and consumers to deploy a variety of clean energy technologies. That means federal agencies, like the Department of Treasury (Treasury), Internal Revenue Service (IRS), Department of Energy (DOE), and Environmental Protection Agency (EPA) have a lot of work to do to ensure federal investments are accessible, fair, and honor the intent of IRA.  

One year later, we’ve already started seeing the benefits of this historic funding. Federal dollars are making their way into communities, and federal agencies are developing guidance and seeking input to implement tax incentives and create programs that will make deploying the technologies more cost-effective. You can find a list of project announcements as a result of IRA funding (and more) at CATF’s new resource hub here

Status update: What’s happening at federal agencies? 

Federal agencies are embracing a new mission to support the clean energy transition, with funding programs designed to create transformational investments and deep emissions reductions in keeping with IRA. New resources including the DOE liftoff reports to support the commercialization of clean energy technologies, the U.S. National Blueprint for Transportation Decarbonization, the USDA IRA Pocket Guides to support access to federal resources, and EPA roundtables to increase stakeholder input into IRA implementation are just some examples to demonstrate the commitment of federal agencies to this new decarbonization goal.  

It’s important that the economic, environmental, and public health benefits of the law are distributed equitably and efficiently. Federal agencies are requiring community benefits plans as part of grant application processes, offering resources for technical assistance to underserved communities, and issuing new equity action plans. New resources also help to identify and support energy communities, rural communities, and tribes. The IRA tax credits, by design, promote equity by enabling more groups to have access to tax credits than ever before with direct pay, and by providing greater incentives for fair wages and apprenticeships and construction in energy communities. Treasury has already released guidance this year to support these goals.  

In Washington, CATF is working with federal agencies to deploy resources effectively, and with policymakers to defend funding and make sure the law is carried out as enacted. We’re also in states working with state and local officials, industry, communities, and stakeholders to access federal resources and maximize emissions reductions. A few highlights of our work over the last year include: 

  • Advising federal agencies on preferred methods for application processes, stakeholder engagement, and maximizing emissions reductions through tax credits and funding programs (see CATF’s guidance on tax credits here and MERP implementation here
  • Engaging with states and developing resources for states, local officials, and the private sector to access IRA resources (see CATF’s state resource for advanced clean trucks implementation here)   
  • Collaborating with the private sector on ways to use IRA resources to advance clean energy and low-carbon technologies (see CATF’s work here on hydrogen hubs and clean transportation corridors)   

Where we go from here: Federal and state opportunities for continued bipartisan policymaking 

While passage of the Inflation Reduction Act undoubtably changed the trajectory of U.S. climate progress, there is still more work to be done to meet our climate goals. Through additional policy at the state and federal level coupled with federal regulations to reduce greenhouse gas emissions and improve public health, there are a variety of opportunities to keep up the momentum.  

Federal opportunities 

On the heels of a productive few years following the passage of the Energy Act of 2020, the Infrastructure Investment and Jobs Act, the CHIPS and Science Act, and the Inflation Reduction Act, there has been continued progress to reduce emissions and help the U.S. achieve its climate goals in Congress.  

This year, a bipartisan group of senators introduced the ADVANCE Act (Accelerating Deployment of Versatile, Advanced Nuclear for Clean Energy), which would make important improvements to the regulation of nuclear energy in the U.S. and support the deployment of the always-available, carbon-free energy. Spearheaded by Senators Shelley Moore Capito (R-W.Va.), Tom Carper (D-Del.), and Sheldon Whitehouse (D-R.I.), the ADVANCE Act would bolster American nuclear energy leadership and be an important complement to IRA and IIJA. The bill has currently passed through the Senate and the House of Representatives has signaled its interest in passing a similar package. 

Outside of congressional action, there are also important opportunities to strengthen federal regulations across power, industry, oil and gas, and transportation sectors that can help put the U.S. on track to hitting its Nationally Determined Contribution (NDC) under the Paris Agreement. In a recent study, CATF found that swift action from the Biden administration – including through regulatory authority under the Clean Air Act and existing authority to prioritize carbon sequestration and mitigation from agriculture and forestry investments – the U.S. can hit its NDC target.  

Read more from Evan Chapman, CATF’s U.S. federal policy director on additional action Congress can take to bolster climate progress through industrial decarbonization commitments, appropriations, and more here

State opportunities 

States are critically important in getting projects on the ground, so attention must also be focused on states and localities to ensure they are equipped with the resources needed to unlock federal dollars.  

This work is already well underway. Currently, 46 states plan to accept $3 million each through the Climate Pollution Reduction Grant (CPRG) that was included in IRA. These grants support states and municipalities with planning emissions reductions strategies that are best for their unique set of political, economic, and social considerations.   

CATF is engaged at the state level to provide resources and guidance to officials to help unlock funding opportunities and understand how they can leverage federal funding for clean energy projects and policies.  

For additional resources and to track projects, announcements, and awards in your state and region, visit the Implementation Resource Hub: Unlocking Funding for Climate Action here

Keeping up the momentum 

The Inflation Reduction Act will continue to drive economic, public health, and environmental benefits for communities. Unlocking historic levels of funding to get projects on the ground and benefits in communities is going to take a lot of work, but we have already seen tremendous progress just one year later.  

We can’t let up now. We need to continue creating new policies and strengthening regulations that will benefit our climate and our communities.  

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