United States President Joe Biden finally got a much-needed win when he finally signed the Inflation Reduction Act on Tuesday, August 16. Only time will tell how much of a victory that would be for the president.
The irony surrounding the bill is that Biden and his supporters on the left and in the media spent weeks saying there was zero inflation in the country, only for Democrats to pass the Inflation Reduction Act that does not address inflation. As Economist Jeffrey Sachs puts it, naming the bill the Inflation Reduction Act is just a “completely marketing tool.”
“That was a title that seemed to work better than Build Back Better.. But the inflation we are experiencing now is not addressed at all in this legislation,” Sachs said on MSNBC News. “… basically this isn’t about inflation reduction. That’s marketing.”
Further solidifying Sachs’ claim is the fact that prominent media outlets such as AP News, C-SPAN, and Axios all put articles where they titled the legislation “tax, health and climate bill” as soon as it passed in Congress.
“This is very much climate legislation,” said Brian Murray, interim director of the Nicholas Institute for Energy, Environment & Sustainability at Duke University.
Abigail Dillen, president of Earthjustice, a nonprofit that litigates environmental issues, agreed with Murray in the assessment of the bill while noting that the legislation provides “a whole new set of tools to counter the entrenched influence of fossil fuels.”
Far from reducing inflation, the bill is actually targeted toward the climate spending agenda that Biden and the Democrats tried to push with the Build Back Better bill, which failed when Senator Joe Manchin announced in December 2021 that he would not vote for the bill.
As a matter of fact, the goal of the new legislation is to speed up the U.S.’s transition to green energy technology and reduce greenhouse gasses by 40 percent below 2005 levels by 2030.
Impact of The Inflation Reduction Act on Green Energy Technology
The inflation bill that does not reduce inflation is not without its merit. The biggest line item in this bill is the green tax incentive that seeks to subsidize green energy for low and middle-income Americans. The bill promises to expand, extend and increase federal clean energy investment tax credit to new clean technology, fuels, and energy users by putting nearly $370 billion in federal funding behind the energy transition from fossil fuels to green energy.
Benefits for Green energy Consumers
The transition from fossil fuels to green energy has proved too expensive, especially for low and middle-income earners in America. The average electric car price in the United States hit $66,000 last month as of July – a more than 13% increase year over year, according to ELECTREC. That figure stood at $56,000 as of November 2021, which, according to Kelley Blue Book, is the equivalent of an entry-level luxury car.
The high price of electric vehicles has put them almost beyond the reach of low and middle income earners in the U.S. The Inflation Reduction Act creates rebates for lower and middle income earners by providing up to $4,000 in consumer tax credits for them when they buy used electric vehicles and up to $7,500 tax credits for new Electric Vehicles. The credit will, however, not apply to sedans over $55,000 or SUVs and trucks over $80,000. Those whose income exceeds $150,000 (for single filers) or $300,000 (for joint filers) will also not be eligible for the credits.
According to a summary of the legislation released by Senate Democrats, other benefits of the bill for green energy consumers include:
- $9 billion fund set aside for home energy rebate programs focused on low-income consumers, to electrify home appliances and for energy efficient retrofits.
- $1 billion grant set aside to make affordable housing more energy efficient.
- Ten years of consumer tax credits to make rooftop solar panels, pumps, and water heaters less expensive and more affordable for middle or low-income Americans.
- $3 billion set aside for the U.S. Postal Service to transition its more than 217,000 vehicles from fossil fuels to green energy.
- $1 billion for school buses, garbage trucks, transit buses and other heavy-duty vehicles to transit to new energy.
Benefits for Green Energy Manufacturers
With consumers’ purchasing power in relation to green energy technology boosted by the bill, manufacturers are sure to see increased demand for clean energy products, both old and new. However, only time will tell the extent of this increase and how long it will last.
Aside from increased demands for renewable energy technology, there are other provisions of the bill that are aimed at boosting the production and invention of clean energy.
The Inflation Reduction Act will provide tax credits that would help manufacturers increase the production of green energy products such as solar panels, wind turbines, and batteries, and process key minerals. Another $10 billion in federal investment tax credit has been set aside for manufacturing facilities that make, invent and produce green energy technology such as electric vehicles and solar panels.
Capstone Green Energy Corporation, a green energy manufacturer, hailed the bill saying it extends, expands and increases federal Investment Tax Credit (ITC) and Production Tax Credit (PTC) for clean energy technologies. Capstone believes these provisions in the bill will benefit it and its consumers.
Other incentives for green energy manufacturers include
- $500 million to use the Defense Production Act to increase the production of green energy technology.
- $2 billion in grant money to help car manufacturers’ facilities transition to green energy technology.
- $20 billion in loans to build new manufacturing facilities for electric vehicles.
- $2 billion for National Labs to accelerate breakthrough energy research.
- Over $9 billion for Federal procurement of American-made clean technologies to create a stable market for clean products, including $3 billion for the U.S. Postal Service to purchase zero-emission vehicles
The Inflation Reduction Act intends to accelerate the private sector’s transition toward developing existing and advancing future green technologies through grants, tax credits and other incentives.
“The path they went down is 100% the ‘sweeten the deal path,’” said Karen Karniol-Tambour, chief investment officer for sustainability at Bridgewater. “Let’s just give lots of incentives to make the green stuff really competitive.”