Incentives in the Inflation Reduction Act (IRA) is significant because of its dual goals: to tackle the climate crisis and to enhance economic opportunity to build a clean energy economy that includes everyone. Clean energy incentives contained within the IRA promotes broad-based investment across the country. They were also designed to provide place-based bonuses for investing in low income communities and communities that have historically depended on the fossil fuel industry for jobs or been harmed by pollution.
The Biden-Harris administration has set a goal to achieve 100% clean electricity by 2035 and signed an executive order requiring federal agencies to procure 100% carbon pollution-free electricity by 2030. In its first months, the IRA received a lot of criticism. Some people argued that the programs were too complicated, contained confusing criteria, and had different application processes in each state.
Some things have changed. The IRA now invites state, local, and Tribal governments, as well as non-profit organizations and other tax-exempt entities, to receive the following credits as direct payments:
- the Production Tax Credit (45, 45Y);
- the Investment Tax Credit (48, 48E);
- the Credit for Qualified Commercial Clean Vehicles (45W);
- the Zero-Emission Nuclear Power Production Credit (45U);
- the Alternative Fuel Refueling Property Credit (30C);
- the Advanced Energy Project Credit (48C); and,
- the Clean Fuel Production Credit (45Z).
The tax credits for clean electricity generation included in the IRA will make substantial progress toward the Biden administration’s goals, according to the World Resources Institute, but may not be sufficient to get to a 100% carbon-free electricity system without additional measures — particularly accelerating the construction of additional electricity transmission capacity. As an editorialist for the New York Times quipped, these rebates “will not showcase the nimble, modern government, fighting for working people, that Mr. Biden hopes to sell to voters.”
But what are the differences between tax incentives and rebates within the IRA, anyway?
- A tax credit incentive is a dollar-for-dollar reduction in the amount of income tax a person would owe the IRS. The tax credit is claimed as part of an annual tax return. Someone who makes an approved purchase in 2023 claims the tax credit on the 2023 tax return filed in 2024.
- A rebate incentive is an upfront discount that gives a consumer cash back after making a purchase. A point-of-sale rebate gives the consumer cash back at the actual time of purchase, which appears to make the purchase less than originally posted.
Rewiring America offers a calculator that helps individuals in the US to determine the amount of money they can receive by investing in IRA-approved “household electrification incentives.”
Climate Tech Startups Compete for Pioneer Awards
Earlier this month Bloomberg New Energy Finance (BNEF) celebrated the parameters for this year’s Pioneers awards. It’s an opportunity for early stage climate tech startups, who’ll be “working on reducing buildings’ carbon footprints, easing the bottleneck to getting clean energy on the grid ASAP, and creating fuels that don’t fry the planet.” The fundamental questions the cleantech startups have to answer in the application process are how to get clean power on the grid as fast as possible, use it efficiently, and create alternatives when wind and solar won’t fit the bill.
Here’s an overview of the 3 categories in the 2023 BNEF Pioneers search, which closes on October 27.
- Relieving bottlenecks in the deployment of clean power: The problem facing the huge expansion of renewables is how to get all that power on the grid and how to generate it smoothly. Startups working on software that eases the flow of power on the grid and hardware that helps manage demand, BNEF says, will play a vital role in ensuring the world’s power supply remains clean and stable.
- Decarbonizing the construction and operation of buildings: To reverse the trend is reducing how much CO2 was emitted in creating building materials, a number of startups are looking at ways to recreate steel and concrete so they involve fewer emissions. Other startups are starting fresh with new materials or reimagining previous materials like timber.
- Creating the next generation of net-zero fuels: Startups are approaching production of cleaner fuels or incentivizing their production using different approaches, including turning waste products — frying oil or biomass — into fuels without competing for land and crops that could be used for food. The other option is creating synthetic fuels from other forms of waste, like CO2.
Survey Says: People in the US Aren’t as Aware or In Favor of Climate Incentives as They Should Be
A June 2023 Pew Research Center poll titled “How Americans see Biden’s Climate Policies” tell us a lot about the gap in ongoing consumer awareness of the Biden administration’s climate policy actions.
- Roughly nine-in-ten (89%) favor planting about a trillion trees to absorb carbon emissions. Duh. As Science News explains, there’s too much focus on numbers of seedlings planted, and too little time spent on how to keep the trees alive in the long term, or in working with local communities.
- Large majorities also favor requiring oil and gas companies to seal methane gas leaks from oil wells (85%). Yup. It should be part of the regulatory process for constructing fossil fuel extractions (hopefully, we have few of those moving forward) and for any company that is in the business of selling fossil fuels.
- 76% say providing a tax credit for businesses for developing carbon capture and storage is a good thing. Ick! This should only be endorsed after the world is totally off fossil fuel addiction. Otherwise, it becomes one more of a whole bunch of backroom handshake incentives for fossil fuel companies to continue business-as-is.
- Taxing corporations based on their carbon emissions met with general agreement (70%). Totally! We should’ve been doing this decades ago.
- A somewhat smaller majority of those in the US support requiring power plants to eliminate all carbon emissions by 2040 (61%). While a number of these respondents are climate deniers, many people aren’t knowledgeable enough about carbon emissions to recognize that eliminating them from power plants is possible and commensurate with current price structures.
- Requiring most new buildings to be run on electricity with no gas lines receives the least support of the items included in the survey: 46% favor this idea while 51% oppose it. Read my article on Brewster Woods, and you’ll see how this is not only possible but a very appealing option to future homeowners.
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