The Federal Climate Package: LGCA's Take

By Andra Belknap and John Howe

Date: 08/17/2022

Hey friends, Andra here. I’m blogging today (with significant assistance from Policy Analyst John Howe) because we have something to celebrate.

Twenty four hours ago, President Biden signed the Inflation Reduction Act (IRA) into law. This legislation represents the single largest climate investment in U.S. history!

Is the bill perfect? Absolutely not.

Does this bill represent significant progress? Certainly.

Would this legislation have made it to the president’s desk without the work of climate activists across the country? Never.

Finally, as a communications professional, do I approve of this bill’s title? Not at all.

With my hot takes out of the way, let’s get into the substance of the bill. John and I decided to take a look at the facets of the bills that reflect our Electrify CA! policy priorities, namely, its clean transportation, electrification, and environmental justice investments.

As you know, our team has spent most of this year thinking about and advocating for increased investments in clean infrastructure and clean cars here in California. So first, let’s jump into the clean transportation aspects of the IRA.

Clean Transportation

The transportation sector has proven to be one of the most difficult sectors to decarbonize. In the United States, 27% of our greenhouse gas emissions are attributable to transportation. In California, that number is closer to 50%. That’s why we’ve spent much of the last year attempting to make clean cars accessible to all.

John and I were both excited to see a number of IRA provisions that are quite similar to our clean transportation equity bill SB 1230. IRA includes a total of $36 billion in clean fuel and vehicle tax credits. Under this new law, the existing $7,500 federal rebate for clean car purchases will now be provided at the point of sale (beginning in 2024). That seemingly small change is something we fought hard for in SB 1230, because the truth is that low-income families generally cannot afford to finance a new vehicle and wait months for a rebate.

Additionally, this federal rebate is now tax refundable, meaning that buyers will receive the full amount of the federal credit regardless of their tax liability. This is another major improvement for low and moderate income folks who would not have received the full credit amount if their tax bill was less than their EV credit was worth.

So, what would a clean car purchase look like if SB 1230 becomes law alongside IRA?

Here’s an example: a single parent with three children who earns $75,000 per year would be eligible for $10,250 in state financial incentives to use toward the purchase or lease of a new electric vehicle, such as a Nissan Leaf. With a $7,500 federal refundable tax credit bundled with the state incentives, there is a total of $17,750 in savings toward the cost of a new clean car. A new Nissan Leaf starts at $27,800, meaning the family in this example could get a new vehicle for as little as $10,050 at the dealership!

The bill also includes a price cap on these clean car tax credits to ensure those dollars are going to the folks who need them most, not those in the market for a new luxury vehicle. We were also pleased to see that the bill also includes strong made-in-America provisions for clean cars and mineral sourcing for electric vehicle (EV) batteries.

However, we know that a transition to clean cars requires more than making the vehicles affordable. We need to ensure the availability of public charging infrastructure. Happily, the IRA includes a provision that will build a national network of 500,000 EV charging stations.

Now, there are provisions in this bill that we are not happy about. In terms of clean transportation, we know that we cannot rely on clean cars solely: we have to reduce the amount of time folks spend in cars generally, which makes the argument for massive investments in public transportation infrastructure. The IRA includes no funding for public transit. That means we need to amplify our calls for clean, public transportation here in California.

Electrification and Clean Energy

Thirteen percent of U.S. GHG emissions are attributable to our built environment (both residential and commercial buildings). Thankfully, there’s a lot of great news (and financing!) for the home electrification sector in the IRA. In fact, Rewiring America put together a great tool that can help you calculate which home electrification tax credits and rebates you’re eligible for. In total, the bill includes $9 billion for tax credits that incentivize rooftop solar, electric heating, ventilation, and air conditioning.

We were particularly happy to see that a significant amount of the bill’s home electrification and clean power resources are specifically directed to vulnerable communities — these provisions are key to ensuring environmental justice. For example, the bill includes additional incentives for solar energy projects in affordable housing units and low-income communities.

According to the White House, these home electrification incentives could save 103 million households a total of $37 billion a year on energy bills.

Environmental Justice

We’ve mentioned a few equity provisions in IRA, and want to specifically mention the Justice40 initiative. The Justice40 initiative (established by President Biden via executive order) is pretty simple: it requires that 40% of benefits of large scale public investment go towards vulnerable communities. As you may recall, California Assemblyman Isaac Bryan attempted to enshrine similar provisions in our state law with AB 2419, but the bill recently failed in committee. (You can read our statement here.)

Though we failed to codify this initiative here in California, some provisions in the new IRA law are in line with the federal Justice40 initiative (though the bill as a whole doesn’t come close to achieving the Justice40 promise). In total, the legislation provides more than $60 billion towards environmental justice, including $7 billion for zero-emission technology deployment – including rooftop and community solar in low-income and disadvantaged communities.

However, we must acknowledge that the bill overall has some serious shortcomings, particularly with regard to environmental justice. U.S. Representative Cori Bush gave a nice summation of her objections to IRA, which we share. While she was proud to vote for the bill, she said, “to be crystal clear, there are provisions in this bill that I do not support, such as the dangerous expansion of fossil fuels, insufficient protections of environmental review, and inadequate investments in environmental justice communities.”

Final Thoughts

As with any legislation, the IRA is a mixed bag. However, given that we’ve been awaiting federal climate legislation since 2009 (Who remembers Waxman-Markey?) we’re celebrating this step forward. Though this legislation includes lamentable provisions such as tax credits for carbon capture and sequestration technology, the law overall will reduce carbon emissions by roughly 40% by 2030, save families money on their energy bills, significantly clean up our air, and create millions of new clean manufacturing jobs.

Remember: this federal climate bill never would have passed without the work of people like you. Thank you.

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