After years of failed attempts to pass major legislation to combat climate change, the U.S. Senate’s Inflation Reduction Act is poised to become largest U.S. climate legislation in history.
The bill would divert nearly $370 billion to climate and energy security measures, aimed at slashing greenhouse gas emissions around 40% by 2030 and curbing consumer energy costs at the same time.
Much of the spending would go to new or expanded tax credits to promote clean energy generation, electrification, energy efficiency and wider adoption of electric vehicles.
A good chunk of the bill, however, is also devoted to supporting fossil fuel development by protecting federal drilling auctions and supporting upgrades of coal and gas facilities – concessions required to win over West Virginia’s Democratic Senator Joe Manchin in the party-line vote.
The agreement represents a compromise from the initial sweeping legislative ambitions by President Joe Biden’s administration for combating climate change, though the legislation was praised by environmental advocates as a crucial step forward.
Here are some of the key climate and energy provisions in the deal, which must now pass the House of Representatives before going to Biden to sign into law.
- Credits of several thousand dollars for the purchase of zero-emissions electric vehicles: up to $7,500 for new EVs and $4,000 for used electric cars. Transportation generates around a quarter of U.S. greenhouse gas emissions.
- An extension of investment and production tax credits for wind, solar and other renewable energy sources. Wind and solar are considered crucial to cleaning up the power sector, which is the source of another quarter of U.S. greenhouse gas emissions.
- An extension and expansion of credits for carbon capture and sequestration, including from big emitting power plants. This incentive allows fossil fuel plants to keep running as long as they install equipment that can capture 75% or more of their carbon output.
- Credits for production of nuclear and hydrogen power. The Biden administration considers nuclear and hydrogen energy to be vital to decarbonization.
- Extended credits for biodiesel, and incentives for “sustainable aviation fuel” needed to reduce emissions from the airline industry.
- Allocation of billions of dollars to the U.S. Department of Agriculture for climate-friendly farming practices.
- A fee on emissions of the greenhouse gas methane from the oil and gas industry, alongside more than $1.5 billion in incentives for producers to install new technology helping to cut those emissions. Methane is seen by scientists and climate policy experts as one of the worst climate offenders, but also one of the easiest to tackle in the near term.
- A requirement that the Interior Department conduct oil and gas lease sales offshore and onshore for years to come. Biden had promised during his campaign for the presidency to end federal oil and gas drilling to fight climate change but has faced significant political and legal obstacles.
- A permanent extension of the coal excise tax that will fund the Black Lung Disability Trust Fund, assisting coal miners who are battling black lung disease.
Source: Reuters
