The Inflation Reduction Act turns one year old this week. The law is President Joe Biden’s biggest climate achievement to date, with nearly $370 billion available for clean energy and climate programs. But just how much that investment will benefit the average American and the environment remains an open question.
Aspirationally, the IRA is designed to lead to a major reduction in US greenhouse gas emissions. Its programs incentivize technology that would bring clean energy to American homes, transportation networks, and manufacturing. Because most of the IRA’s funding spans the next decade, the Biden administration is still working to develop the rules for dozens of new programs, including a new fee on methane pollution, guidance for hydrogen tax breaks, and pollution grants for communities. But programs that give rebates to consumers for energy-efficient home improvements and home electrification will hit the market next year, offering the first test case of the law’s effectiveness to move Americans on from fossil fuels.
The IRA also comes with some political baggage. Democrats passed the law on a strictly party-line vote, and climate experts have criticized the final version of the IRA for relying more on incentives to entice voluntary adoption rather than penalties to enforce pollution cuts. Meanwhile, Biden is betting that the new law will deliver most of the emissions cuts needed to meet the US’s goal of halving pollution from its peak 2005 levels by 2030. But analysts’ projections, which are based on a number of assumptions and caveats about the next decade, estimate the IRA will only deliver about 40 percent in emissions cuts. Not meeting that goal would undermine the law’s climate ambitions, both harming public support for federal climate efforts and giving Republicans political ammunition for undoing them.
Others argue that the IRA has already made a significant impact on the economy, spurring tens of billions of dollars of planned investment in new factories and plants and kick-starting growth in electric vehicles. The IRA’s generous tax breaks, combined with complementary programs in the bipartisan infrastructure law and the CHIPS and Science Act, have spurred billions of dollars in announcements for new factories and expansions of US manufacturing.
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