The IRA in 2023: Building Up for Action

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For the nation’s buildings, successful implementation of the IRA is more critical than ever. 

This Blog is part of NRDC’s Year-End Series Reviewing 2023 Climate & Clean Energy Developments. 

As 2023 comes to a close, it’s a great time to reflect on the progress made to date on the Inflation Reduction Act (IRA). While many buildings-related programs are still under development and not yet available for consumers, there has been significant work happening to ensure that, once they’re up and running, these programs deliver significant, lasting benefits to the communities that need them most. Given that countries around the world, including the U.S., recently signed a pledge to double their progress on energy efficiency by 2030, successful implementation of the IRA is more critical than ever.

Tax Incentives

One notable program that consumers can currently access is a suite of improved tax incentives for both homeowners and businesses. Starting for purchases made as of January 1, 2023, tax credits are available for various efficiency and decarbonization building upgrades. While rebates offset the purchase price of efficiency products, tax credits take a different approach, by returning the funds when a homeowner or business files their federal taxes. While there is a maximum dollar amount a building owner can receive per year, there is no lifetime cap and no overall cap on the amount of incentive the government will provide. Credits are available through the end of 2032.

Eligible upgrades to promote decarbonized buildings include the following equipment, with specific energy efficiency requirements for each:

  • Heat pumps for home heating and cooling, including air-source and geothermal
  • Heat pump water heaters
  • Central air conditioners
  • Biomass stoves and boilers
  • Home energy audits
  • Air sealing and insulation

There is also a tax credit for new homes, which is provided directly to the builder for constructing homes that meet the most recent ENERGY STAR specifications.

Over the course of 2023, the Department of Treasury issued guidance to help ensure that tax credits are as clear, useable, and effective as possible. There remains much work to be done by contractors, retailers, and builders to raise consumer awareness and help drive decision-making. Even so, the credits are available for purchases made now, and could make a big difference on the year’s tax bill.

Consumer Rebates

Homeowners will have access to sizeable rebates to offset the cost of energy efficiency and electrification upgrades in their homes — but these rebates are not yet available. The Department of Energy (DOE) has gathered information from interested stakeholders about how the program should be designed to be the most successful, particularly when it comes to serving low- and moderate-income homeowners. DOE recently issued program guidance and funding announcements for the nearly $9 billion in funds, which will be administered directly through state energy offices. NRDC is working directly with states throughout the country to help with the design and planning of these programs, especially how to prioritize incentives for the communities that have historically been most underserved.

Greenhouse Gas Reduction Fund

EPA closed the application period for all three of its Greenhouse Gas Reduction Fund (GGRF) programs — totaling $27 billion in available funding — on October 12, 2023. EPA is currently reviewing applications and will notify applicants on their selections for all three programs by spring 2024, with awards being finalized in summer 2024. The GGRF is a first-of-its-kind program focused on rapidly deploying clean energy projects to areas of our country that have thus far been overlooked in the clean energy transition. It will provide catalytic financial support to nonprofit lenders, states, municipalities, and Tribal Governments for projects that reduce or avoid greenhouse gas emissions and other air pollution. And it will deliver benefits like energy savings, job and business growth, and health improvements. Almost 70% of funds will flow to low-income and disadvantaged communities, and the $27 billion is estimated to mobilize hundreds of billions of additional capital — both critical components in meeting our country’s 2050 net zero target more equitably.

Improved Energy Codes

There are two tranches of funding available for jurisdictions to improve the codes that govern the energy use of newly constructed buildings. The first $90 million in codes-related funding from the Infrastructure Investment and Jobs Act (IIJA) was recently awarded for 27 projects across 26 states, all of which will support the efficiency and decarbonization of new construction. In addition, DOE began accepting applications for the first $400 million of the $1 billion in Inflation Reduction Act technical assistance funds to support jurisdictions adopting the most recent energy codes (or better!) We’re hoping to see the benefits of these first rounds of funds start to flow in 2024.

Climate Pollution Reduction Grants

This program, administered by the Environmental Protection Agency, provides funding for both states and the largest metro areas to make robust, community-informed plans for tackling climate change. In the first phase, jurisdictions will use their funding to develop their plans. Once plans are approved by EPA, this “unlocks” jurisdictions’ access to EPA’s $4.3 billion fund of competitive grants that may exceed $100 million, for projects supporting those plans. This program has already triggered 24 states to create first time climate targets in plans due in March 2024. Keep an eye on Climate Pollution Reduction grants to signal key state and local priorities for major climate investments in the coming decade. Applications for the competitive grants are due April 1st, 2024 for cities, regions and states.

Green and Resilient Retrofit Program

The Green and Resilient Retrofit Program (GRRP), administered by the Department of Housing and Urban Development (HUD), is one of the few in the Inflation Reduction Act that specifically targets improvements to affordable housing. HUD-assisted properties are eligible for grants and loans for upgrades related to energy efficiency, emissions reduction, clean energy generation, health and safety, and climate resilience. Review periods for applications are open now, with multiple future opportunities for applications. NRDC helped spread the word about the GRRP throughout 2023, by hosting a series of briefings for affordable housing partners to provide education, resources, and connection with HUD officials.

IRA implementation started in earnest in 2023 and will really kick into high gear in 2024. NRDC will be working to make sure the results are as effective and equitable as possible at every step along the way.

Originally published on blog.

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