Climate winners and losers as the Inflation Reduction Act hits 1-year anniversary

By Rachel Koning Beals

Incentives for EVs, solar, carbon capture and clean-energy jobs feature in the largest U.S. effort on climate change to date. Republicans lament its cost, while some green groups discount the IRA's potency as long as oil is drilled.

This week marks one year since the Biden White House and congressional Democrats maneuvered the Inflation Reduction Act into law in a narrowly divided Washington.

The IRA is a broad federal spending initiative with a name that gives little clue to what's inside -- pages loaded with climate-minded energy incentives and tax savings for businesses and individuals. Still, its passage, following an infrastructure bill that sent money to widening the electric-vehicle charging network, earned President Biden a reputation as a "climate president" on the global stage, vital for a global issue like climate change.

Even one year in, the IRA's ongoing tweaks and stretched out implementation leave some Americans wondering just how tax sweeteners for electric vehicles, solar, heat pumps and more, actually work.

Republicans, for their part, see the anniversary as an opportunity to promote a different plan. Namely, greater U.S. energy independence, replete with domestic oil and natural gas production alongside private-sector growth for wind, solar, nuclear and hydrogen. The GOP is primed to slash the IRA's green spending should they win a 2024 majority.

Proponents of the IRA cheer the roughly $360 billion --$121 billion in direct spending and $235 billion in tax credits -- in government initiatives meant to speed the energy transition away from oil, including from gas vehicles to EVs(RIVN), as well as federal money meant keep fossil-fuel companies (XOM)(CVX) in business during the transition to more renewables by pumping investment into carbon-capture technology. Carbon capture includes approaches that can grab Earth-warming carbon dioxide and other emissions at the point of fossil-fuel combustion, before they reach the atmosphere, and another, direct-capture, solution that sucks existing CO2 from the sky.

Related:Climate change and carbon capture: Texas, Louisiana score federal money for largest-ever U.S. direct-air effort

"I just visited some of the electric vehicle, solar panel and battery factories popping up throughout the country, and I can tell you definitively we're in the middle of an American economic revolution like we haven't seen in generations, thanks to the Inflation Reduction Act and other policies," said Bob Keefe, executive director of E2, which bills itself as a nonpartisan business group that sees environmental and economic benefits from an energy transition.

"With the economic costs of climate change rising like a thermometer in July, this made-in-America clean energy boom couldn't come at a better time," Keefe said.

Research by E2 has tracked 210 IRA-linked clean energy and clean vehicle projects that would invest a cumulative $86 billion into the communities that host them, creating 74,000 new jobs across 39 states.

Read:Biden points to Arizona's extreme heat, majestic Grand Canyon as he promotes climate-focused 2022 law

Most IRA backers are perhaps loudest about its long life -- many of the tax incentives are written to last for years.

"What's really important about the IRA is it's not a limited-time-only offer that people have to hurry up and go out and get. It's available for the next 10 years," said Ari Matusiak, CEO of Rewiring America, which continues to expand a calculator built to tell renters and homeowners how much energy savings and climate impact they can have by tapping IRA incentives.

The calculator takes into account the U.S.'s some 125 million households and 550,000 building types. Plus, the nonprofit will roll out training courses to empower consumers as new energy-economy experts who might convince their neighbors to join the transition. The Internal Revenue Service has its own guidance for taxpayers on all credits and deductions from the IRA.

"People don't really need to explicitly understand how all of the incentives work and how they're built into the law," Matusiak said. "They just need to know how to access them."

Here's a look at some of the consumer energy incentives and economic sectors that most observers consider IRA "winners." And, the parts of the law singled out by critics as the "losers," such as features still evolving or that some groups believe missed the mark.

IRA money put to work

Private-sector assessment says the IRA's government spending is mosly pro-growth.

Moody's published a report on its expectation for the IRA's roughly $400 billion in climate provisions, coupled with related provisions in the $280 billion CHIPS Act and the $1 trillion Infrastructure Investment and Jobs Act, to "stimulate significant investment in U.S. clean energy technologies and manufacturing over the next decade, with positive ramifications for growth, productivity and innovation."

And the growth is already tangible.

"There have been signs that the legislation is contributing to a surge in clean energy manufacturing and related industries such as semiconductors, and factoring into companies' investment decisions, including in the auto, utilitiesXLU and oil and gas sectors," Moody's authors say in the report.

"It goes to show why smart companies and investors long sought this kind of federal climate investment: not only will it lower the risk of dangerous pollution and climate disasters that present immense risk to our economy, but it provides a robust foundation to grow the U.S. economy for decades to come," said Anne Kelly, vice president of government relations at sustainable-investing advocate Ceres.

Companies are meant to leverage federal incentives to attract their own capital.

That's true for Boston Metal, which will build a plant in West Virginia that will manufacture essential components for the company's green steel production platform called Molten Oxide Electrolysis (MOE). The plant will produce low-emissions refractory metal alloys and high-purity chromium alloys, of which the U.S. currently has zero production capacity. More than two-thirds of global supply is from China and Russia.

"The IRA has created tailwinds for Boston Metal's efforts to decarbonize the steel industry," said Boston Metal CEO Tadeu Carneiro. "Not only will the IRA help secure access to reliable and affordable clean electricity that our MOE technology requires, it will incentivize steel producers to deploy decarbonization technologies and create more market demand for green steel across industries."

Tax-focused consumer savings

As for consumers, the IRA offers rebates that cover a substantial portion, if not the entire cost, of purchasing and installing energy-efficient appliances. Electric heat pumps, water heaters, clothes dryers and ovens are just a few examples. For instance, a taxpayer may be eligible for rebates of up to $2,000 to replace a furnace or air conditioner with an electric heat pump, providing more efficient heating and cooling.

Check out the 25C tax credit for steps from upgrading your HVAC or insulation. Click here to see if your home qualifies

But the entirety of the IRA tax incentives has been slow to roll out, in part because the federal law empowers each state to control some of the rebates. In some cases, that requires building out point-of-purchase screening to make sure only qualifying taxpayers receive the breaks.

Rewiring America, which says more than 800,000 households have visited its energy-efficiency calculator and education site, tells consumers to watch for more details on rebates come fall into winter.

Certainly, advocates see room for the IRA to expand, they've said, including refundability of tax credits within the 25C for those whose low income means they don't pay taxes.

An uptick in EV purchases

For some interested buyers, the IRA presents a prime opportunity for substantial savings when purchasing or leasing electric vehicles (EVs).

Qualified buyers can save up to $7,500 on select new EVs or $4,000 on a used one, with pre-owned inclusion new in the IRA. Vehicle price, buyer income and percentage of U.S. manufacturing by model all matter. Check eligibility here.

There are widening long-term benefits of EV ownership, especially when coupled with IRA-sweetened renewable energy sources like solar power. Charging your vehicle at home using clean energy can further reduce your carbon footprint and increase cost savings.

A Bank of America report says, gas-engine vehicle "dominance is over," with electric cars expected to account for a larger portion of new model launches from 2024 to 2027 -- 46% EV vs. 35% internal-combustion engine and another 18% hybrid.

The Biden administration has also used climate-linked incentives to push Tesla(TSLA) and the broader auto sector to open up the EV charging network as a stipulation of earning federal dollars.

Read: Tesla unlocks EV network. What's next in push to make chargers 'as easy as filling with gas'

And:GM, Hyundai and other car manufacturers to build 30,000 fast EV chargers in challenge to Tesla

Solar's time to shine?

The law includes a solar Investment Tax Credit (ITC) that enables American taxpayers to receive a credit worth 30% of the cost of their solar system until 2032.

It also includes a new ITC worth 30% of the cost of a home battery storage system, making solar-powered battery storage for non-sunny use more affordable too. Finally, the IRA solar ITC is available to both single-family and multifamily homes, which means benefits accessible to both homeowners, and if property owners participate, to renters.

"Not only were solar incentives expanded, but they were extended for a long time," said Suzanne Leta, head of policy and strategy with solar-panel installer and financing provider SunPower.

"And now the single most important thing, in my opinion, is to just make sure more people know about the IRA," Leta said, referencing a SunPower survey of consumers.

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