The Inflation Reduction Act of 2022 (IRA) provides $369 billion in energy and climate spending over the next 10 years. By a large margin, the IRA is the single largest federal government program aimed at energy and the environment. For comparison, the second largest program was the American Recovery and Reinvestment Act of 2009 (ARRA) which provided more than $90 billion. Both focus on government investment and tax incentives to lower the cost of clean energy and reduce pollution.
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The IRA breaks new ground along multiple dimensions including a focus on the entire energy supply chain and promoting domestic industrial capacity.1 But the Act’s signature feature is its laser focus on climate change via the decarbonization of electricity, industry, and transportation; carbon capture and storage; improved land management; climate resilience; and other provisions.
In April 2021, President Biden announced a new target for the United States to achieve a 50 to 52% reduction from 2005 levels in net greenhouse gas emissions by 2030. How far will the IRA take the country towards that goal? One study suggests that its provisions could cut greenhouse gas emissions 37 to 43 percent below 2005 levels, prevent up to 4,500 premature deaths from air pollution in 2030, and create up to 1.3 million jobs in 2030.2 Another analysis projects that the retail costs of electricity could decline up to 7 percent over the next decade, saving electricity consumers as much as $278 billion.3
Critics claimed that the IRA included too many compromises that support oil and gas infrastructure, and that it fell short on action to improve energy, environmental, and climate justice. Those shortcomings aside, there can be no doubt that the IRA is the most impactful federal government action related to energy in the nation’s history.
1 Madden, Scott, A real page-turner: How the Inflation Reduction Act changes everything, Utility Dive, October 3, 2022,Link
2 Mahajan, Megan, Olivia Ashmoore, Jeffrey Rissman, Robbie Orvis, and Anand Gopal, Updated Inflation Reduction Act Modeling Using The Energy Policy Simulator, Energy Innovation Policy & Technology LLC, August, 2022 Link
3 Roy, Nicholas, Dallas Burtraw, and Kevin Rennert, Retail Electricity Rates under the Inflation Reduction Act of 2022, Issue Brief 22-07, Resources for the Future, August 2022.Link