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The Inflation Reduction Act – Focus on Climate Change

On August 16^th, 2022, President Biden signed the Inflation Reduction Act, which includes historic investments (nearly $370 billion) in America’s future and the most aggressive action taken to confront the climate crisis, create clean energy solutions, and reduce emissions by roughly 40% by 2030. This law is aimed at advancing environmental justice, lowering energy costs, reducing greenhouse gas emissions, and creating thousands of jobs, while building a cleaner future. Addressing climate change has been a major ambition for the President starting his administration term with the return of the U.S. to the Paris agreement.

5 Key Goals of the Inflation Reduction Act

1. Lower energy costs for Americans
2. Increase energy security
3. Decarbonize all sectors of the economy
4. Focus investments into disadvantaged communities
5. Support resilient rural communities

Incentives to American Consumers

This bill will provide a range of incentives to consumers to relieve the high costs of energy and decrease utility bills. This includes direct consumer incentives to buy energy efficient and electric appliances, clean vehicles, and rooftop-solar, and invest in home energy efficiency, with a significant portion of the funding going to lower income households and disadvantaged communities.

• $9 billion in consumer home energy rebate programs, focused on low-income consumers, to electrify home appliances and for energy efficient retrofits
• 10 years of consumer tax credits to make homes energy efficient and run on clean energy, making heat pumps, rooftop solar, electric HVAC and water heaters more affordable
• $4,000 consumer tax credit for lower/middle income individuals to buy used clean vehicles, and up to $7,500 tax credit to buy new clean vehicles
• $1 billion grant program to make affordable housing more energy efficient

Incentives to American Manufacturing Companies

This bill will include over $60 billion to onshore clean energy manufacturing in the U.S. across the full supply chain of clean energy and transportation technologies. These manufacturing incentives will help alleviate inflation and reduce the risk of future price shocks by bringing down the cost of clean energy and clean vehicles and relieving supply chain bottlenecks.

• Production tax credits to accelerate U.S. manufacturing of solar panels, wind turbines, batteries, and critical minerals processing, estimated to invest $30 billion
• $10 billion investment tax credit to build clean technology manufacturing facilities, like facilities that make electric vehicles, wind turbines and solar panels
• $500 million in the Defense Production Act for heat pumps and critical minerals processing
• $2 billion in grants to retool existing auto manufacturing facilities to manufacture clean vehicles, ensuring that auto manufacturing jobs stay in the communities that depend on them
• Up to $20 billion in loans to build new clean vehicle manufacturing facilities across the country
• $2 billion for National Labs to accelerate breakthrough energy research

Decarbonization Incentives for Different Sectors and Communities

The investments in this bill will reduce emissions in every sector of the economy, substantially reducing emissions from electricity production, transportation, industrial manufacturing, buildings, and agriculture. This includes various tax credits for clean sources of electricity, energy storage, and roughly $30 billion in targeted plant and loan programs for states to accelerate the transition to clean electricity. It also includes tax credits for clean fuels and commercial vehicles to reduce emissions from the transportation sector. The bill also includes a $27 billion clean energy technology accelerator to support deployment of technologies to reduce emissions, especially in disadvantaged communities. The package also includes over $60 billion for “environmental justice priorities,” aimed at driving investments into disadvantaged communities. Additionally, the bill targets billions in climate solutions-focused investments targeting farmers and forestland owners, including over $20 billion for climate-smart agriculture practices, in addition to tax credits to support biofuels production and to develop sustainable aviation fuel infrastructure.

What Does this Bill Mean for an Organizations’ ESG Goals?

It will be important to see how the passage of this bill will help organizations put ESG at the forefront of their business goals. Additionally, with the current SEC proposals around climate risk disclosures revolving the regulatory landscape, ESG is becoming more and more important for investors, banks, and consumers.

• Is the Board asking the right questions of Management?
• Do the company’s core values align with the ESG principles?
• How does a company define their goals, scope, and priority of various ESG factors?
• Are the goals aligned to meet the stakeholder and investor needs?
• What is the company’s role in contributing towards a cleaner and better future for the planet?
• Which framework to choose? What metrics are important to track and report?
• What are competitors doing with publishing their sustainability reporting?

How Centri Can Help

Whether your business has an ESG program in place or is in the process of developing an ESG strategy, or if you are a Board Member, Head of Sustainability, or Finance personnel in charge of ESG initiatives at your company, our team will provide you the guidance to confidently move forward with your ESG journey. Contact us to learn how our experts can help you.