The Secret Weapon of the New Climate Bill? Tax Credits

On Wednesday, Democrats in the United States Senate announced they’d finally come to an agreement on major climate legislation, tucked inside the Inflation Reduction Act of 2022. It would allocate $369 billion toward energy security and climate action, juice domestic manufacturing of clean energy technologies like wind and solar power, steel communities against climate change, and prepare American agriculture for extreme heat, among many other campaigns. Consumers, too, could benefit if this bill passes: It includes 10 years of tax credits to install all kinds of clean residential technologies, from rooftop solar to heat pumps.

(Climate nerds love electric heat pumps , which extract heat from outdoor air, then reverse in the summer to cool like an air conditioner. ) The bill would provide $9 billion in rebates for low-income Americans to switch to electric appliances and retrofit their homes to be more energy efficient, and give people a $7,500 tax credit for buying a new electric vehicle. “The tax credits are incredibly important for creating the market for the transition to clean energy,” says Matt Casale, environment campaigns director at the US Public Interest Research Group.

“People want to have cleaner appliances, people want to save money and not have to be beholden to volatile fossil fuel prices. But one of the initial barriers is that upfront cost. So having these consumer tax credits available for people is going to be extremely helpful.

” At the same time, the bill would set aside over $60 billion to boost manufacturing for clean energy technologies, like solar panels and EVs. An additional $500 million would go toward heat pump manufacturing and minerals processing. All that new manufacturing will feed the new demand from the consumer tax credits, which will encourage prices to continue plummeting as the technologies develop.

(The price of solar, for example, has dropped 99 percent in four decades. ) This should allow more Americans to join the clean energy revolution. All told, this bill would put the country on track to reduce its emissions by 40 percent by the year 2030.

(Though that comes up short of the 50 percent reduction the government committed to last year. ) “We will improve our energy security and tackle the climate crisis, by providing tax credits and investments for energy projects,” said President Joe Biden in a statement announcing the bill. “This will create thousands of new jobs and help lower energy costs in the future.

” Targeting homes for climate-proofing with tax credits and rebates actually does both—and then some. The ultimate goal for clean energy advocates is the fully electric home (no gas for stoves or furnaces allowed), which can run on renewable power like rooftop solar. An energy-efficient home will also require consumers to invest in a very unsexy but very important wildcard in urban climate adaptation: insulation.

(If your house is leaky, you have to use more energy to heat or cool it. ) Tax credits for better insulation and more efficient appliances will save people money in the end. This bill, then, is a stealthy way to drive Americans as a society toward a cleaner future.

It’s turning small individual action—you being better able to afford a heat pump or solar panels—into collective action. But how much individual change matters in the face of systemic problems has been a thorny debate for years. For example, does it really matter if you decide to fly less to reduce your carbon footprint ? After all, air travel is a small fraction of global emissions, and there’s a whole international economic system in place that runs almost entirely on fossil fuels.

Wouldn’t it be more impactful to change the behavior of, say, the airline or petroleum industries? “There’s this debate in the climate community about individual action versus systemic action,” says Jamie Alexander, director of Drawdown Labs at Project Drawdown, a nonprofit that advocates for climate action. “I think this deal helps show how those are not actually really two entirely distinct things. They are very much related, and demand even at a household level can help massively shift the system.

” One idea among clean energy advocates is that in the power grid of the future, residents won’t be consumers so much as participants . If more people have their own solar panels and store energy in large home batteries, like Tesla’s Powerwall , they can give up some of their extra power when they don’t need it. And if more people park electric cars at home and plug them into a local microgrid, utility operators could tap into those extra at-home batteries when there’s a shortage .

That would mean people work together instead of depending on fossil fuel–powered utilities to keep the heat on or the air conditioners running. “I feel like it’s really empowering, equipping individuals to address climate change and be better equipped for the world that we’re going to be living in as it continues to change,” says Alexander. “Making homes more energy efficient also will help address resilience in the face of changing weather and these heat waves that we’ve been seeing around the world.

” This month, for example, Texas’ precarious power grid faced yet another test during a punishing heat wave, as people cranked up their AC units. But desperately trying to cool poorly insulated homes with inefficient appliances strains the power grid—and that problem will get even worse as temperatures rise. The alternative is to put these sorts of tax credits to work before the heat gets any worse, installing better insulation, thicker windows, and ultra-efficient heat pumps, especially in low-income communities.

The grid—and public health in general—will thank us for it. The tricky bit may be finding the labor to do all this work. Last year, the Biden administration proposed creating a Civilian Climate Corps , which would put Americans to work retrofitting homes and cultivating green spaces, which cool urban areas .

But that didn’t make it into this new bill. So as the clean tech revolution accelerates in the US, it might not be the demand and the devices that hold us back, but a shortage of trained labor to deploy it all . This new bill isn’t perfect, says Casale.

For one, it actually mandates more offshore drilling . It also doesn’t punish utilities for not adopting more renewable energy. And it still has to pass the Senate, where it likely heads for a vote in the next few weeks.

But the tax credits have the potential to prepare American homes for a green energy future and for ever-more-extreme weather. “The tax credits piece is really critical, really exciting,” says Casale. “This is a huge step forward, if we can get this over the finish line—despite some of the pieces of it that are definitely not perfect.

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