Washington has reached a far-reaching deal on clean energy and climate policy that dramatically improves the outlook for global efforts to prevent dangerous planetary warming. With $369 billion in tax tweaks and new spending, the deal would be historic, the largest and most ambitious clean energy investment in US history.
Known officially as the Inflation Reduction Act, the wave of investment promises to help secure a climate-resilient future by spurring a broad mix of clean technologies — including electric vehicles and related infrastructure, super-efficient heat pumps, green hydrogen, and fast-growing renewables — all while lowering day-to-day costs of energy and transportation.
For everyday consumers and companies alike, these moves will help position the United States to thrive in the clean industries of the future. The overall measure is poised to deliver major progress on these fronts:
1. It saves Americans on energy costs
As several RMI analyses show, the investments proposed in this legislation will fight inflation, since 41 percent of overall inflation is directly attributable to fossil fuel prices and over half of today’s inflation is due to supply-side factors like underinvestment.
RMI found credits for clean electricity sources — ramping up use of more wind and solar over the next ten years — would save American households up to $5 billion within two years. Additionally, tax credits and rebates for building electrification and efficiency as well as tax credits for electric vehicles will lower energy costs for Americans in a major way. This will also help shield against volatility, since oil and gas increased in price four to eight times in the past year.
2. It helps us tackle climate change
The Inflation Reduction Act is set to slash US emissions by 40 percent, which is four-fifths of our Paris Agreement target. These investments will also accelerate the climate work already happening at federal agencies, in states, cities, and localities — ensuring we have a fighting chance to meet our 50–52 percent Paris Agreement target. RMI’s state scorecards show US states have a major role to play in filling the gap.
The bill makes strong investments to monitor and reduce potent methane leaks and commercialize clean hydrogen, and provides a suite of incentives to clean up our power, buildings, industrial, and transportation sectors.
3. It bolsters US innovation and manufacturing
This legislation takes desperately needed steps to bolster US supply chains through investments in advanced manufacturing, critical minerals mining, and new technological solutions. This is key to ensuring the United States can build more EVs, renewable energy resources, heat pumps, batteries, and storage, which will create millions of new jobs and help revitalize American regions. RMI research shows that these solutions are critical if we are to compete on the global scale, catch up to China and other countries in the clean energy race, and make ourselves less dependent on foreign imports.
4. It invests in American communities
This bill offers loans for communities on the frontlines of the energy transition — like former coal miners in Appalachia — that will boost revitalization opportunities and increase the opportunity for good-paying jobs. RMI analysis shows that energy transition programs like the one in this bill will lower costs for both the communities themselves and electricity ratepayers.
RMI’s Utility Transition Hub shows energy expenditures for low-income households is nearly 10 times higher than for moderate to high-income households. This package includes $60 billion of environmental justice investments and financing and nearly all tax credits include a bonus for economic development in low-income or disadvantaged communities.
5. It strengthens our energy security — leaving us less susceptible to fossil fuel price volatility
This legislation makes strides in moving us toward a stronger, more secure energy mix — not overly relying on one technology that has led to price spikes historically and even more so today.
As so much RMI research shows, renewable energy costs are falling and will continue to fall as they are deployed. These sources are key to lowering costs in the long-run and ushering in a future of clean, cheap, and abundant energy.
It’s clear this historic climate and clean energy bill will have ripple effects across the country — creating a wave of new incentives, jobs, and revenue when and where it’s needed. This deal shows the United States is taking a bet on its future by recognizing we can not only compete but also lead on the vision of a zero-carbon, resilient economy of the future. It shows our government believes in our people, companies, cities, towns, and states to innovate, tackle climate change, and deliver on a better, prosperous future — just as it should.
By Sarah Ladislaw, John Coequyt
© 2021 Rocky Mountain Institute. Published with permission. Originally posted on RMI Outlet.
Related: We Still Need A Climate Emergency Proclamation, Manchin Or Not
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