The tax and spending deal agreed to by Senate Majority Leader Chuck Schumer (D-NY) and Sen. Joe Manchin (D-WV) would devote more than $300 billion in incentives and investment for green energy, setting Democrats up to secure a climate policy victory that has eluded them since President Joe Biden took office.
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The Inflation Reduction Act of 2022 is significantly leaner than its progenitor, the Build Back Better Act, but many proponents of the agreement, from Democratic lawmakers to green energy trade associations and environmental groups, are praising the deal as the most substantial attempt yet to reduce greenhouse gas emissions and mitigate climate change. A bill summary estimated that the bill would help enable a roughly 40% emissions reduction by 2030.
THE DEMOCRATIC CONCESSIONS ON OIL AND GAS LEASING MADE TO GET MANCHIN’S VOTE
Here’s what made the cut:
Tax incentives and grants
The deal would provide billions in tax incentives for green energy, including some $30 billion for production tax credits to encourage domestic manufacturing of solar panels, wind turbines, batteries, and critical minerals processing, as well as investment tax credits valued at $10 billion to build clean technology manufacturing facilities.
Another $500 million would be appropriated for use under the Defense Production Act for heat pumps and critical minerals processing. Biden has invoked the DPA to spur more production of both minerals and heat pumps, as well as solar panel components and tranformers, but DPA funds are subject to annual appropriations from Congress and are therefore limited.
The bill would also provide $3 billion in grant funding to reduce greenhouse gas emissions at the nation’s ports through the purchase and installation of zero-emission equipment, while another $1 billion would go toward funding emissions-free heavy-duty vehicles.
Some $30 billion in grants and loans would be made available to encourage states and electric utilities to deploy more clean sources of electricity generation.
For carbon capture and direct air capture technologies, the bill would extend eligibility for the 45Q tax credit and raise the credit’s values per ton of carbon captured and utilized.
Environmental justice
The bill would also devote more than $60 billion to environmental justice-related projects, or those allotted for regions determined to be most exposed to pollution.
Those dollars include $3 billion block grants meant to address “disproportionate” environmental and public health harms related to pollution and climate change, according to a summary released alongside the bill.
The summary isn’t entirely clear as to the total amount of spending, which is categorized as environmental justice, though it considers the spending for ports and heavy-duty vehicles as environmental Justice initiatives.
Spending for technology
The agreement would also authorize $250 billion in loan authority to the Department of Energy, which oversees various grant and loan programs that extend federal dollars to the development and deployment of new energy technologies.
Another $2 billion would be made available for DOE National Labs to “accelerate breakthrough energy research.”
Vehicles
The bill would authorize $4,000 consumer tax credits for purchasers of used emissions-free vehicles.
A tax credit of up to $7,500 would be available to those purchasing new vehicles. The credits would be available for low- and middle-income households.
The bill would also make the credit more widely available by eliminating the vehicles-per-manufacturer cap on the existing EV tax credit.
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A plan for methane
The bill would also target un-captured methane by assessing royalties on methane produced on federal lands and waters, with some exceptions, in an attempt to limit methane emissions. Royalties would apply all gas consumed or lost due to “venting, flaring, or negligent releases through any equipment during upstream operations.”
Venting is the release of raw gas into the atmosphere, and flaring is the burning off of excess gas.
