Friday, August 12, was a monumental day in the fight against climate change. The House passed the Inflation Reduction Act, sending it to Biden’s desk for signature. This bill represents the biggest step the U.S. government has ever taken to advance clean energy and decarbonization. It will invest $370 billion into climate and energy programs, alongside other policy changes including tax reform and healthcare subsidies. As Vox puts it, “Arguably, it’s one of the single biggest investments ever made on climate in the world.”
What’s in the bill?
The IRA features an extensive array of investments that are nicely summarized by the New York Times. Some highlights include:
- Incentives and financing to boost U.S. manufacturing of clean energy technologies
- Funding for climate and environmental justice priorities
- Focus on green transportation, including incentives, loans, and grants
- Tax credits for wind, solar, storage, and other emissions-free energy generation
- Investments in building decarbonization and electrification
- The establishment of a national green bank that can help fund state and local green banks
What effect will it have on emissions?
The IRA is expected to drive a massive reduction in greenhouse gas emissions from the U.S. economy. According to analysis by Princeton University, it will enable the U.S. to reduce its emissions 42% below 2005 levels by 2030—just shy of the Biden Administration’s goal of a 50% reduction by 2030. Compare this to currently adopted policies, which would only achieve a 27% reduction in the same timeframe. The bill falls a little short of the Paris agreement and the net zero pathway that climate scientists agree is necessary to avoid the worst effects of climate change. It is also important to acknowledge that the bill contains some compromises related to fossil fuels and environmental protection that will impact frontline communities. The fight of climate advocates and activists will continue, but make no mistake—this is a sea change that RE Tech leadership believes will bend the arc of U.S. policy toward a prosperous and equitable clean energy future.
What does this mean for our business?
This is a nuanced (read: huge) piece of legislation, and it will take time for its various programs to roll out. But some of the positive impacts on RE Tech, Legence, and our clients are already clear. We expect that the IRA will:
- Unlock renewables: Further decrease the already-plummeting cost of renewable energy and green power, making them more accessible than ever to our clients.
- Enable building decarbonization: Provide funding specifically for residential and commercial building decarbonization—including heat pumps, electrification, renewable energy, and tax incentives for efficient commercial buildings—that our clients may be able to leverage.
- Support green transportation: Incentivize deployment of EVs and low-carbon fuels for our clients who have fleets, while paving the way for next-gen technologies such as hydrogen.
- Deploy financing: Establish a variety of financing programs which our clients may be able to access to support sustainability improvements including funds for affordable housing.
- Increase DOE funding: Fund several Department of Energy initiatives including research at the national labs and funding for the Loan Programs Office, which may impact the DOE programs we support.
- Climate change, sustainability, social justice, and clean energy will continue to be a top priority for our clients in the years to come—and this will be bolstered by both the investment and clear federal leadership represented by the IRA.
RE Tech is the best in the business when it comes to helping our clients lead on ESG, and there’s no better time for us to be part of the growing Legence family. Legence was founded specifically to rise to this occasion: to serve as an Energy Transition Accelerator and a one-stop-shop to move our clients toward net zero.
a moment to reflect
We want to acknowledge the work that brought us to this point. Some of us have been working on climate and sustainability for a long time—long enough to have experienced many cycles of hope and disappointment as the U.S. flirted with true federal leadership on climate. The IRA’s prompt passage surprised many. But this important moment on climate would not have happened without decades of hard work from activists and individuals—many of them from younger generations and underrepresented communities you won’t see in NYT or WSJ headlines. We’d like to take a moment to celebrate this leadership.