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The new inflation reduce act: 4 things you may not know about it

The new law that helps businesses transition to a cleaner, more sustainable economy is more than just tax credits.



Today, President Joe Biden signed the Inflation Reduction Act into law, officially committing the US to spending an unprecedented $370 billion to combat climate change over the following ten years. The additional funding for clean energy, electric cars, efficient manufacturing, and pollution remediation will go a long way toward bringing the US closer to sustainable climate targets.

The new law’s billions in renewable energy tax credits and electric vehicle subsidies, which will benefit a mix of consumers, utilities, and manufacturers, have received the most of the attention. The IRA’s emissions reductions will be most effective when zero-carbon electricity is increased from its current 20% share of the grid. Longer-term returns are possible from additional investments in electric transportation and industry energy efficiency.

The law, however, also covers a wide range of topics, including several measures and initiatives that, while fascinating in and of itself, are sometimes grouped together under the law’s general “climate” heading. Here are four events that you shouldn’t miss.

1) $3 billion for community cleanup and motorway removal

The manner that highways were constructed to pass through Latino and Black communities is one of the most detrimental effects of the interaction between racism and fossil fuels. According to the Department of Transportation, the Federal-Aid Highway Act of 1956 alone caused the displacement of more than 1 million people. Communities of color that remained close to these roadways were more exposed to fine particulate matter coming from the tailpipes of cars and trucks. Even now, that legacy endures. Numerous studies have revealed that Black individuals in the country are more likely than White people to be exposed to harmful pollution from roadways, power plants, and industry.

The Inflation Reduction Act provides a federal funding boost for neighborhood initiatives intended to mitigate some of these projects’ negative consequences. In addition to the $1 billion previously authorized under the bipartisan infrastructure agreement last autumn, there is an additional $3 billion set aside for Neighborhood Access and Equity Grants.

The funds can be used for a variety of purposes, such as enhancing walkability, capping wells, putting up noise barriers, and lessening the impact of the urban heat island. But removing a road, highway, or other harmful infrastructure is one way communities could use the funds. Other methods, such as “multi-use trails, regional greenways, or active transportation networks and spines,” can be used to reunite towns split by roads.

In some areas of the nation, highway removal is already under way, and finance is typically the largest obstacle. With assistance from New York state, Rochester, New York, is already eliminating a portion of its Inner Loop freeway to reconnect communities to a street grid. The nation’s attention is being brought to bear on Seattle’s and New Orleans’ impassable roadways by grassroots activists.

There will undoubtedly be a greater need for program funding than what Congress has allocated. The Biden administration’s (or a future administration’s) implementation plan will have a significant impact on how far the $4 billion total for communities will go. Additionally, the US continues to place a high priority on adding lanes because the infrastructure law includes an additional $350 billion for highway construction.

2) Under Manchin’s nose, direct payments to retire coal

Even while it required Sen. Joe Manchin’s (D-WV) approval, one unexpected measure to aid in the transition was included in the final bill: $10 billion in direct payments to rural electric co-ops that cover the costs of a clean energy transition. These cooperatives’ direct payments to retire coal-fired power plants will be managed by the USDA.

Many of the remaining coal-fired power facilities supply rural areas. According to E&E News, coal accounted for 32% of the electricity used by co-ops countrywide in 2019. In comparison, investor-owned utilities used coal to produce 19% of their electricity in 2020.

These rural co-ops have gradually shifted away from coal more for economic reasons than political ones. They are cooperatively owned and governed by the people they serve. Since the communities these coal plants serve must bear the direct expense of the transition, they may be less willing to take the risk of switching to renewable energy sources. These coal facilities tend to be more recent.

But closing coal facilities must come first in rural areas before they can even consider switching to solar and wind energy. And since it entails paying off any debts, it may be costly. (The law includes a second $5 billion Department of Energy program that provides loans to private utilities to help them switch to renewable energy while also lowering their debt and costs.)

3) Significant input into states to reduce emissions anyway they see fit

The phrase “Climate Pollution Reduction Grants” doesn’t sound like a very exciting initiative. Sam Ricketts, co-director of Evergreen Action, a group that provided advice to Democrats on the bill, contends that the $5 billion in block grants ought to receive its just compensation.

Each state is eligible to compete for a single award provided by the EPA to reduce carbon emissions. Additionally, the governor need not submit an application. Despite party divides, this can have a significant impact. For instance, even if the governor objected, Georgia’s autonomous public utility commissions might wind up requesting this financing.

The grant could assist blue states in achieving their objectives of using only sustainable energy. One of the greatest ways to use this money in blue states may be to simply strengthen state environmental agencies in charge of enforcement (Texas has an abysmal record of enforcing its own environmental rules against natural gas leaks).

Its flexibility is one of its beauties, but much will depend on how EPA allocates financing.

The plan, according to Ricketts, “includes a number of really critical carrots to move forward decarbonization with investments.” We will also require sticks. The federal government and the Clean Air Act will be some of those sticks. Some will be decided by individual states’ legislatures and public utility commissions.

4) Combating climate change naturally by protecting soils and forests

The money provided by the bill for carbon capture for industrial, coal, and energy-producing sites is its more contentious aspect. Instead of addressing the climate catastrophe, these technologies have typically been employed to simply pump CO2 back into the ground for additional drilling. However, current climate research indicates that some of this technology is probably required to solve the economically difficult to decarbonize sectors. Therefore, long-term federal investment for scaling breakthrough technology may be able to do much. In a ten-year period, it may account for nearly a quarter of the bill’s overall impact on emissions, according to Princeton University’s REPEAT modeling.

However, there is a more organic method of removing carbon from the atmosphere that is right in front of us: trees and soil. The act includes $20 billion for “climate-smart” agriculture, which might assist farmers in storing more carbon in their soil and plants, as Benji Jones noted. For instance, a portion of that money will support the Conservation Stewardship Program, which essentially compensates farmers for improving the environmental quality of their land through the use of cover crops. One method to improve a farm’s capacity to store carbon is to plant cover crops when the ground would otherwise be fallow (and can also help avoid emissions).

A further $5 billion of the measure is allocated for the protection of old-growth forests that are abundant in carbon and for averting wildfires. This is crucial because, under business as usual scenarios, it is anticipated that the US would gradually lose more of its natural carbon sinks. According to Jesse Jenkins, director of Princeton’s REPEAT Project, “helping slow and reverse that tendency is a vital aspect of carbon reductions.”

According to Princeton’s modeling, the forest and agricultural land policies in the bill will be able to absorb emissions by 2030 that are equal to the yearly emissions from 19 million cars. Jenkins added that including provisions for agriculture and forestry “substantially broadens the bill’s reach” and that these measures are “essential steps on the route to net-zero emissions.”