Carving Out Funds for Clean Energy

The Infla­tion Reduc­tion Act (IRA) was signed into law on August 16, 2022. The Act is designed to push mon­ey towards clean ener­gy and clean trans­porta­tion and to super­charge these issues at the state and local lev­el. Here is a break­down of some of its major goals along with the cur­rent sta­tus.

Elec­tric vehi­cles (and fly­ing broom­sticks) should become more afford­able. Car pur­chasers can get tax cred­its for new, used, and leased elec­tric vehi­cles, under sec­tions 13401 and 13402. To be eli­gi­ble for the cred­it, the vehicle’s bat­tery com­po­nents have to be pro­duced in the Unit­ed States. Start­ing in Jan­u­ary 2023, the min­er­als used to make the vehi­cle have to be from either the U.S. or a coun­try that has a free trade agree­ment with the U.S. The cred­it will be avail­able at the point of sale in 2024, and there is an income lim­it. Plug In Amer­i­ca has an explain­er with all the details, includ­ing an FAQ. The IRS will be issu­ing fur­ther guid­ance about the pro­gram soon. The NY Times and EDF both pub­lished explain­ers for oth­er sav­ings peo­ple can get for upgrades in their homes.

Charg­ing sta­tions will become much more plen­ti­ful. The Act pro­vides tax cred­its for busi­ness­es installing elec­tric vehi­cle charg­ing sta­tions in low-income or non-urban areas under sec­tion 13404. Resources pro­vid­ed through the Infra­struc­ture Invest­ment and Jobs Act, passed last year, will sup­port states installing EV charg­ing sta­tions on their high­ways as well, as explained in a recent release from the Depart­ment of Trans­porta­tion. The oppo­site of dou­ble dou­ble, toil and trou­ble.

Green financ­ing will bub­ble over.
Fed­er­al fund­ing is going towards projects that reduce green­house gas emis­sions. Sec­tion 134 gave EPA $27 bil­lion to award in com­pet­i­tive grants for projects to reduce green­house gasses, with $7 bil­lion ear­marked specif­i­cal­ly for grants towards projects in low-income and dis­ad­van­taged com­mu­ni­ties. EPA just announced a process for sub­mit­ting com­ments on imple­men­ta­tion of this new fund. It will hold two lis­ten­ing ses­sions on Novem­ber 1st and 9th. At a meet­ing ear­li­er this month, the agency gave its Envi­ron­men­tal Finan­cial Advi­so­ry Board a set of ques­tions to answer as part of that process. (The ques­tions and agen­da for EPA’s meet­ing are avail­able here.) EPA must begin mak­ing grants soon: Feb­ru­ary 2023.

Methane emis­sions should go down. Say what you want! Just don’t breathe [methane] on me!” Com­pa­nies will have an incen­tive to cut emis­sions because they’ll have to either pay a fee or com­ply with EPA reg­u­la­tions requir­ing cuts. Sec­tion 136© of the law requires oil and gas facil­i­ties that emit a cer­tain amount of methane per year to pay a fee on those emis­sions. Fig­ure 2 in this Con­gres­sion­al Research Ser­vice report pro­vides a handy image of which facil­i­ties are cov­ered. Facil­i­ties that are sub­ject to and in com­pli­ance” with EPA reg­u­la­tions restrict­ing those emis­sions are exempt from the fee.

Clean ener­gy invest­ments will surge. Renew­ables this way come! There are tax cred­its, deduc­tions, bonus cred­its, and increased cred­its avail­able to help fund a slew of clean ener­gy invest­ments and improve work­er pro­tec­tions. Projects that com­ply with pre­vail­ing wage and appren­tice­ment require­ments receive addi­tion­al cred­its. And there are oth­er bonus­es for com­ply­ing with domes­tic con­tent require­ments and for invest­ing in an ener­gy com­mu­ni­ty,” defined gen­er­al­ly as a com­mu­ni­ty that has relied on fos­sil fuel pro­duc­tion. There are no upper lim­its on these cred­its, as John Ker­ry recent­ly explained, mean­ing the more projects are built the more cred­its will be avail­able. There are penal­ties for non­com­pli­ance. For exam­ple, sec­tion 13101, which pro­vides cred­its for renew­able resources, lays out a penal­ty for fail­ure to com­ply with the pre­vail­ing wage and appren­tice­ship require­ments under sub-sec­tion (f). The IRS is seek­ing com­ment right now on sev­er­al ques­tions relat­ed to those cred­its, includ­ing the doc­u­men­ta­tion that should be required to prove com­pli­ance with pre­vail­ing wage require­ments and how to cor­rect a defi­cien­cy.

There are pro­vi­sions in the bill, includ­ing ones that pro­mote new oil and gas leas­es, that have caused sig­nif­i­cant con­cern among envi­ron­men­tal jus­tice activists, as John Beard, founder, pres­i­dent, and exec­u­tive direc­tor of the Port Arthur Com­mu­ni­ty Action Net­work, sum­ma­rized in an op-ed. The Depart­ment of Inte­ri­or recent­ly pro­posed leas­es under those pro­vi­sions and a ten-AG coali­tion weighed in on the plan explain­ing that new oil and gas leas­ing will get in the way of their state cli­mate goals and should be avoid­ed like hocus pocus.

Imple­ment­ing the Act’s cred­its is hap­pen­ing now. This is the time to engage.