What a difference two weeks and a name change makes: Sen. Joe Manchin left the Build Back Better Act for dead (twice). But late Wednesday, the West Virginia senator and Sen. Majority Leader Chuck Schumer said they reached an agreement to spend $369 billion to turn the climate tide. It's nowhere near enough funding to save the planet, but it will help get clean energy tech deployed more rapidly and inch the U.S. closer to meeting President Joe Biden's climate goals.
The new legislation, the Inflation Reduction Act of 2022, contains $369 billion in climate and clean energy funding — proving a name change can go a long way toward getting what you want. That dollar amount is less than what was on the table in various iterations of the Build Back Better Act, but it does spread the money that is there around to multiple facets of the clean tech industry in ways that Build Back Better never did.
There are tax credits for clean energy and storage deployment at the utility scale. That's a huge boon, given that a recent American Clean Power report found renewable installations plunged 55% in the second quarter compared to the same period last year. A big reason for the dip was Manchin's opposition to Build Back Better, which created regulatory uncertainty.
Having a framework in place for new tax credits, courtesy of the Inflation Reduction Act, could alleviate some concerns and get the industry back on track. Indeed, Heather Zichal, CEO of the trade group, said in a statement the "entire clean energy industry just breathed an enormous sigh of relief" when the new deal was announced.
There are also tax credits for individuals to install solar panels and heat pumps as well as to buy new and used electric vehicles. The bill also gives tax credits to non-EVs that burn cleaner fuel such as hydrogen, but given that Manchin called extending EV tax credits "ludicrous" just a few months ago, this is still a major climate tech win.
Where things get more interesting, though, is the $60 billion the bill sets aside for manufacturing clean tech on U.S. soil from processing minerals to building batteries, solar panels, wind turbines and electric cars. Oh, and there’s $500 million for heat pumps as part of the Defense Production Act.
“It’s much harder to build an industry through regulations rather than investments,” Leah Stokes, a political scientist at the University of California, Santa Barbara, said. “If we really want to build those technologies here in the U.S., we have to invest in those manufacturing industries. That’s a very new thing about this deal.”
That, coupled with $60 billion in funding for environmental justice initiatives that will ensure everyone can enjoy the benefits of cleaner air, save money and more, led Stokes to call the legislation "transformative."
The tech industry could benefit if the bill passes. And not just the clean tech industry, mind you. Tech companies have made some pretty ambitious promises in their climate plans, and the act will make it that much easier to deliver on them. More renewables on the grid will make it easier for companies to power their operations without damaging the climate. More importantly, it will help companies get a handle on Scope 3 emissions — that is, emissions tied to the use of their products.
Scope 3 emissions account for the vast majority of companies' carbon footprints. Microsoft, for example, has a fairly progressive climate plan. But its emissions went up by 21% last year, in part due to people playing games on their Xboxes, watching movies on their Surfaces and so on. That's not a knock on Microsoft necessarily; it's an indication that more than 60% of U.S. electricity comes from fossil fuels. Change the mix to add more renewables, and tech companies could see their Scope 3 emissions drop.
All this comes with caveats, of course. For one, the recently released full text is 725 pages, so it will take a while to digest in full. It will also take a minute for researchers to independently vet whether the promised 40% in emissions reductions is for real or sleight of hand. That 40% emissions reduction is also below Biden's commitment to the Paris Agreement to slash emissions at least 50% below 2005 levels by 2030. In other words, there's still a lot of work to be done on that front, including the president possibly declaring a climate emergency.
There are also fossil fuel giveaways, notably tying leasing or right-of-ways for renewables on federal lands to fossil fuel leasing as well.
"This all but ensures a growth in carbon emissions and is likely to exacerbate existing political tensions between frontline and energy communities in the Gulf South and wealthier communities along the rest of the American coast,” Billy Fleming, the director of Penn's McHarg Center, said, while noting much of the climate policies were focused on supply-side tweaks rather than reducing demand for fossil fuels.
That means the Inflation Reduction Act of 2022 is by no means a pure climate bill that's all in on clean tech. But it's better than what was on the table at this time yesterday.