The Inflation Reduction Act is a New Lease on U.S. Climate Policy: Let’s Not Screw It Up

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The Inflation Reduction Act is a New Lease on U.S. Climate Policy: Let’s Not Screw It Up

Joel Stronberg, Esq.
By Joel Stronberg, Esq. and 09/12/22
dont-sink-west-virginia
  • The Inflation Reduction Act (IRA or Act) is the most comprehensive climate-related legislation in U.S. history.
  • The Act invests $369 billion dollars for climate and clean energy measures. It also provides billions of dollars to expand low-income health care subsidies and limits drug costs for seniors.
  • The bill rises to the challenge of climate change by encouraging the adoption of clean energy alternatives through positive reinforcement of climate-wise choices, e.g., tax credits, investment incentives, and consumer rebates.
  • The law subsidizes the building of new pipelines, provides new oil and gas leasing opportunities, and incentives for carbon capture technologies, and methane reduction.
  • The Act provides $47 to $60 billion for environmental justice initiatives[i].
  • The legislation reduces federal deficit spending through corporate tax hikes.
  • The bill is not without its detractors—both in and out of the climate activist community.
  • The IRA should be considered in conjunction with the bipartisan Infrastructure Investment and Jobs Act (IIJA)and the CHIPS and Science Act.
  • Implementation of the Act’s various parts requires extensive regulatory reforms across federal agencies.
  • Implementation of the IRA will take five or more years to accomplish—depending upon the 2022 and 2024 elections and the number and character of legal challenges.
  • The climate activist community must interact with governments at all levels to ensure the Act is being implemented as intended and to make any needed changes in language and provisions.
  • The community’s vigilance should as well be directed at the implementation of the infrastructure and CHIPS policies and programs.
  • Climate change is culture change and it requires a broad coalition of Democrats and Republicans to accomplish.
  • Although no Republican voted for the IRA, it would be wrong to assume that all GOP lawmakers and their constituents are unalterably opposed to any climate-related legislation.
  • The IRA’s policies and programs will never be safe without bipartisan support.
  • Young Republicans like their Democratic counterparts are more concerned about the impact of Earth’s warming than their elders.

The Inflation Reduction Act is a New Lease on U.S. Climate Policy: Let’s Not Screw It Up

Greek and Roman tragedy writers relied on a device known as Deus ex Machina to resolve seemingly unresolvable predicaments. The Latin phrase is translated as “god from the machine.” At the point in the production when all seems lost, the hero-god or goddess would be lowered to the stage by a crane to make all things well. Sound familiar?

The device has been used throughout the ages in plays, modern graphic novels, and movies. Diana, princess of the Amazon and daughter of Zeus, arrives on the battlefield just in the nick of time to save the world from inevitable disaster.

Politics, too, is theater. Not long ago, it appeared that the Democrats would fail to parlay their slim Senate and House majorities into the broad federal energy and environmental legislation President Biden had promised. The need for legislation had been made all the more critical by the Supreme Court decision in West Virginia v. EPA.

True to the theatrical genre, a seemingly unresolvable political tragedy was resolved when Senator Joe Manchin (D-WV) announced his introduction of the oddly named Inflation Reduction Act (IRA). The bill is the most comprehensive climate-related legislation in US history—investing $369 billion in climate-related programs. (Figure 1). The IRA was mainly the work of Manchin and Senate Majority Leader Schumer (D-NY), who kept a well-hidden dialogue going after the defeat of the Build Back Better Act.

I don’t believe anyone in the climate community anticipated the miracle on Pennsylvania Avenue, that is the Inflation Reduction Act (IRA). Might we call it a Deux ex Manchin moment? We may NOT!

Just weeks before the introduction of the Act, it was being reported that the coal-state Senator was up to his old tricks of luring White House and Senate colleagues into negotiations on a reconciliation[ii] package, only to say never mind.

There’s both wonder and suspicion about Manchin’s motivation. Did the messages of the climate activists circling his yacht in support of the Build Back Better Act (BBBA) finally take hold? Could it have been the intervention of Bill Gates, as reported in Bloomberg Green? Was the bill just a ruse by Manchin to get approval for fossil fuel-related projects like the Mountain Valley Pipeline?

Whatever it was, Mother Nature thanks him for it. Not everyone shares Mother’s opinion, however.

The West Virginia Coal Association was none too kind to Mr. Manchin.

This legislation is so egregious [that] it leaves those of us that call Senator Manchin a friend, shocked and disheartened.

Climate Hawks Vote was quick to say that Manchin sold out frontline communities, claiming he’s used them as a bargaining chip to build more fossil fuel projects.

Admittedly, the Inflation Reduction Act (IRA) is a less than perfect piece of legislation—and Manchin an even less than perfect saving grace. Still...you can’t argue with the extension of critically important clean energy tax credits, e.g., the Production Tax Credit (PTC) and Investment Tax Credit (ITC) for wind and solar projects, not to mention geothermal and hydropower[iii].

But the people being sold out by Manchin’s dirty deal are rising up and the resistance is coming to DC!

Before getting too carried away over the Senator’s saving the day, it would be wise to remember that he was the one who’s been causing all the drama around US climate policy, including having scuttled President Biden’s BBBA. In truth, then, Manchin is saving us from himself. Hardly heroic, I must say.

It was Manchin’s intransigence that dictated the need to disassemble the BBBA and pass what could be passed as a stand-alone bill. The result was the bipartisan Infrastructure Investment and Jobs Act (IIJA) passed in the summer of 2021.

Until the announcement of the IRA, the infrastructure bill (IIJA) and portions of the recently enacted CHIPS and Science Act were going to be it for any major climate-related legislation through the end of the current Congress and likely the next. The CHIPS bill looks to lessen the nation’s dependence on China for the semiconductor chips needed by clean energy technologies like solar and wind, as well as by the auto industry for electric vehicles and the defense industry.  

Ana Swanson writing for the New York Times explains that China’s increasing dominance of key global supply chains, like those for rare earth metals, solar panels and certain pharmaceuticals, has generated new support among both Republicans and Democrats for the government to nurture strategic industries

CHIPS is an authorizing bill, which means it won’t come into its own until funds are appropriated for the covered activities. It’s anticipated that monies will become available as part of the FY2023 federal budgeting process once that passes Congress. In the meantime, the White House has indicated that the legislation has already triggered billions of dollars in private corporate investments.

The IIJA contains multiple climate-related provisions, e.g., public transportation and building out electric vehicle charging stations, that once implemented, are expected to reduce greenhouse gas emissions and help make communities more resilient to the consequences of Earth’s warming.

As critically important as these laws are, CHIPS and IIJA are hardly enough to reduce greenhouse gas emissions by 40 percent by 2030—a figure and time period consistent with the US’s commitment under the Paris climate accord.

Think of the IRA as a win-winnowed proposition in relation to the BBBA. Total funding for climate matters in the BBBA was $555 billion, while the IRA funding line is $369 billion.

The difference between the bills is not simply budgetary. There are differences in programs and priorities as well. For example, the IRA’s $7,500 tax credit for new electric vehicles is 40 percent lower than the $12,500 credit in the BBBA. The IRA also offers a $4,500 used electric vehicle credit, while the BBBA is mum on the matter.

Not all of the differences between the BBBA and the IRA are financial. The IRA’s provision of a decade of funded tax credits is as important for the time available as it is for the credit amount.

Manchin referred to many of the BBBA’s provisions as gimmickry. The senior West Virginia senator believes establishing unfunded or partially funded programs is disingenuous

Why go to the trouble of passing an under-funded program? The idea is that once a program begins and constituents become vested in its continuation, lawmakers are hard pressed to keep them going. The pass now, pay later approach to things is a tried-and-true concept that Washington policymakers—Republicans and Democrats alike-have used to advantage for decades.

Fortunately, the IRA doesn’t suffer the same cash deficiencies as the BBBA. As a consequence, investors will be much more willing to put their dollars down even in advance of a federal appropriation.

Before the IRA was announced, there was chatter that Manchin and Senate Majority Leader Schumer (D-NY) were in talks on a possible successor to the BBBA. However, the vibe was the talks were just that—talk. Then, seemingly out of nowhere, Manchin was lowered onto the political stage announcing the IRA.

Render unto Manchin, what is Manchin’s? No quid, no quo

During those negotiations, Manchin demanded a side deal to speed up the approval of fossil fuel projects, including a new natural gas pipeline running through West Virginia. Quid pro quos are hardly new in political circles. Ex-president Trump isn’t the only one who’s looked to trade one favor for another.

I loathe the side deal. Third Act Virginia stands solidly with the frontline communities in Appalachia. Bill Muth, Third Act Virginia

The IRA has a number of other fossil friendly fuel provisions. Carbon capture and sequestration is tax credit eligible under the bill. According to the Congressional Research Service, the fees charged oil and gas companies for their methane releases exempt 60 percent of industry emissions.

Notwithstanding the commitments made by Schumer and other Democratic senators concerning the side deal, it’s not clear that they can make good on them—nor want to. In comments to The American Prospect, Representative Rashida Tlaib (D-MI) has made her position quite clear.

Handshake deals made by others in closed rooms do not dictate how I vote, and we sure as hell don’t owe Joe Manchin anything now. He and his fossil fuel donors already got far too much in the IRA.

Tlaib went on to say: “We will be united in defeating the separate Manchin’ permitting reforms’ that will accelerate climate change and pollute Black, brown, Indigenous, and low-income communities.”

Despite the squeamishness of those on the left to yield to Manchin, what is Manchin’s there’s the reality of the situation to consider. No tradeoff, no deal.

Three of the models[iv] -most commonly referred to by analysts -project a reduction of greenhouse gas emissions of 900 million tons by 2030. It’s enough to meet Biden’s commitment under the Paris climate agreement. (See Figure 2)

The unpopularity of Manchin’s side deal means it can’t sustain approval as a stand-alone piece of legislation. Senate Majority Leader Schumer is attempting to make good on his promise by including the regulatory reforms Manchin wants in a stopgap funding bill that will soon be needed to keep the federal government open.

The Deal is putting Democrats in a politically awkward—if not vulnerable—position. Any blame for the failure of Congress to pass a federal budget is going be laid at the feet of Democrats. This is a circumstance that could help Republicans regain some of the lost momentum they’re experiencing after the Supreme Court overturned Roe v Wade and sided with the plaintiffs in the West Virginia case.

Senator Sanders (I-VT) opposes Manchin’s provisions and has announced he’ll vote against them. How much difference that will make is unclear. Republicans and Democrats are both anxious to get to the hustings with just a few weeks to go before the midterms.

Removing Manchin’s side deal from any must-pass legislation will pose a problem going into the next Congress. Democrats have a serious chance to keep control of the Senate. Any unsettled arguments between Sanders and Manchin will be taken up again. Sanders heads the Senate Budget committee, while Manchin is chair of the Senate Energy and Natural Resources.

It’s not only about the money

Drafted following the Supreme Court’s decision in West Virginia, the IRA explicitly adds carbon dioxide to the list of greenhouse gas pollutants to be regulated under the Clean Air Act. It’s meant to provide the specificity the textualist justices want to see in legislation.

It’s hoped that the language in the legislation will immunize it from future Supreme Court decisions. However, it won’t prevent challenges by Republican state attorneys general and fossil fuel interests.

West Virginia’s Attorney General, Patrick Morrisey, has already threatened legal challenges. According to Morrisey, “You can’t have unelected bureaucrats stepping in, reaching down, trying to seize power and take some ambiguous phrase and twist it around and reorder the nation’s power grid or put many other onerous provisions in place.” (Emphasis added)

The IRA’s policies and programs will never be safe without bipartisan support.

An imperfect bill

As extraordinary and historic as the IRA is, it is far from perfect. The Act includes $60 billion in grants, tax credits, and other assistance measures. However, it is far from Biden’s promised Justice40 Initiative that’s intended to provide 40 percent of the overall benefits of certain Federal investments flow to disadvantaged communities that are marginalized, underserved, and overburdened by pollution. Biden made the commitment official through Executive Order 14008.

A provision struck from the final version of the IRA would have provided $4 billion in loan forgiveness for Black farmers. The section of the IRA was thought to be an alternative way to fund the Emergency Relief for Farmers of Color Act. The law is facing multiple lawsuits claiming, among other things, reverse discrimination against White farmers.

Other problems with the Act include the electric vehicle tax credit language. As reported by ABC News and other media outlets, the IRA requires eligible vehicles to be manufactured largely in the US and with batteries whose critical components are sourced in North America.

John Bozzella, president and CEO of Alliance for Automotive Innovation, attributes the problem to a change in the purpose of the credit. According to Bozzella, the EV credits focus on “reducing our dependence on China for raw materials and battery components.” He estimates that 70 percent of the current EV line-ups may not be eligible for IRA credits.

These and other imperfections can be cleared up, but it will take the efforts of the climate action community at multiple decision points along the way.

It’s critical for climate champions to follow and participate in the many stages of implementation of the Inflation Reduction Act.

Implementation of the IRA won’t be quick but it can be quickened.

Implementation of the IRA in ways that achieve the desired ends of the legislation will require a much greater effort on the part of the climate action community than was put into play for the passage of the IRA. For starters, the number of decision points has risen well above Congress and the White House.

Multiple federal agencies and departments now have the task of writing and defending any required regulations. Each of the agencies’ efforts will need to be followed.

In the case of federal programs, a similar dispersal of decision points will be created. It’s critically important for the climate action community to participate in the rulemaking process.

Then there are state and local governments to consider. As Sophie Kahler at National Caucus of Environmental Legislators points out states and local governments are responsible for at least $27 billion in grants and expenditures for everything from grid connection to community resilience and adaptation programs, tailpipe emissions, and building codes.

State and local governments can also leverage federal investments with policies and programs of their own. They could add to the EV credits or establish a grant program for those whose incomes can’t benefit from a tax credit.

Add these decision points to the federal to-do list. Also, to be accounted for are the politics that will be encountered along the way at all levels.

The great partisan divide means some states and communities will be less willing than others to participate in the programs. What if half of the planned solar developments are opposed by the communities in which they would be sited?

What if a state regulatory commission fails to deal with the grid issues in a timely manner? What if, the major city is prohibited by its state from banning natural gas hook-ups in new constructions—requiring green generated power?

The problem with the models is just that—they’re models based on the numbers but not on the politics that inevitably -happen along the way. The models tell us what needs to be done to meet the targets—if this, then that. But it’s going to be up to climate advocates to help move the process along.

Implementation of the Inflation Reduction Act in its various forms is a gargantuan task. It should not have to rely on a some just-in-the- nick of time god or goddess being lowered from the rafters.

Climate change is culture change

In the final analysis, the nation’s continuing down the path to a low-carbon economy is dependent upon unifying support for needed measures across the current toxic political divide. Something that in principle may not be as difficult as it might appear.

Although no Republican voted for the IRA, it would be wrong to assume that all GOP lawmakers and their constituents are unalterably opposed to any climate-related legislation. Twenty-four House Republicans broke with their party to vote in favor of the CHIPS bill.

Nineteen Republican senators broke ranks and voiced yay in favor of the infrastructure bill. As time goes on and congressional districts are increasingly faced with the catastrophic consequences of Earth’s warming, these number will rise along with air and water temperatures.

When facts don't matter – messengers do

Change—lasting change—in U.S. climate policy is only going to occur when moderate and progressive Democratic and Independent voters pair their strength with their moderate and populist Republican counterparts. Not an easy task, I know.

However, it is not as unlikely or as impossible a proposition as you might imagine. The answers are to be found within the ranks of younger Republican, Democratic and independent voters. (See Figure 3)

Younger Republicans, like their Democratic counterparts, are more likely to see Earth’s warming as a crisis happening today that will plague them for decades to come. Moreover, the age cohort has shown a much greater disposition towards doing something about the climate crisis than their elders.  

Younger voters on the right and the left are more willing to embrace science-based solutions than their elders. (See Figure 3)

I view the responses of at least two young, conservative groups as leading indicators. Tori Goebel and Lindsay Garcia at the Young Evangelicals for Climate Action thanked the members of Congress for the IRA’s passage and wrote:

 YECA is thrilled that this momentous piece of legislation finally crossed the finish line. With the IRA, our elected officials have finally taken significant action to begin addressing climate change.

Tomorrow holds more work, but today we celebrate this historic moment alongside countless advocates who have worked tirelessly for the sake of our common home. (Emphasis added)

According to its website, YECA reached nearly 200,000 young people with a positive climate action message during the 2020 election cycle.

The American Conservation Coalition works at both the national and state levels. Several of its state projects are in capitals where Democrats are increasingly unwelcome, including Texas, Tennessee and Florida.

Benji Backer, President and Founder of the American Conservation Coalition writes:

Despite the rhetoric that the act represents a Green New Deal “socialist wish list,” there are many common sense — and shockingly conservative — measures related to fighting climate change that will boost our nation’s economy, help to revitalize rural communities, lower energy prices and protect the landscapes we love.  (Emphasis added)

What provisions of the IRA does Backer see as shockingly conservative? He favors increasing domestic production of the various components of clean energy systems, e.g., photovoltaic panels, inverters and steel, now being manufactured in China, along with utilizing domestic resources of the minerals needed by those products, e.g., lithium. Other contributing solutions with a high degree of agreement across the board includes nature-based approaches, e.g., better management of ecosystems and planting millions of trees.

It’s taken over 50 years for the nation’s policymakers to put together anything approximating an integrated energy and environment policy.

Weeks ago, in the wake of the West Virginia case and amidst reports that Senate Democrats were falling out amongst themselves on climate policy. It was feared that US climate policy would again be mainly a matter for presidential orders that are as easily erased as written.

Now that the IRA is on the books, climate champions—progressives, moderates, conservatives and populists—must ask themselves whether they can rise above today’s hyperpartisanship? Or, in the alternative, whether they’re content to wait for the next just-in-the-nick of time hero to be lowered from the rafters.

There has never been a more opportune time for transitioning the US to a low-carbon economy.

Can we not find common ground?

To read in more details about the Inflation Reduction Act of 2022

Click here

[i] The White House lists the amount as $60 billion, while Just Solutions Collective estimates the amount closer to $47 billion.

[ii] Budget reconciliation is a complex and arcane procedure that protects legislation from the filibuster allowing proposals to be passed by majority vote rather than with a supermajority of 60 votes. The contents of a reconciliation bill are subject to the control of the Senate parliamentarian.

[iii] This represents a three-year extension for PTCs and a one-year extension for ITCs. In addition, solar projects may now also take the PTC in lieu of the ITC. The PTCs and ITCs as amended will apply to facilities placed in service after December 31, 2021. Click here for more information on the credits.

[iv] Princeton REPEAT, Energy Innovation, and the Rhodium Group.

 

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