New legislation, the Cut Inflation Act of 2022, contains $369 billion in climate and clean energy funding, proving that a name change can go a long way in getting what you want . This dollar amount is lower than what was on the table in various iterations of the Build Back Better Act, but it Is spread the money that exists around multiple facets of the cleantech industry in a way that Build Back Better never has.
There are tax credits for clean energy and utility-scale storage deployment. That’s a huge boon, given that a recent US clean energy report found that renewable energy installations fell 55% in the second quarter compared to the same period last year. One of the main reasons for the decline was Manchin’s opposition to Build Back Better, which created regulatory uncertainty.
Putting in place a framework for new tax credits, courtesy of the Curbing Inflation Act, could allay some concerns and get the industry back on track. Indeed, Trade Group CEO Heather Zichal said in a statement that “the entire clean energy industry just breathed a huge sigh of relief” when the new deal was announced.
There are also tax credits for individuals for the installation of solar panels and heat pumps as well as for the purchase of new and used electric vehicles. The bill also gives tax credits to non-EVs that burn cleaner fuels such as hydrogen, but given that Manchin called the extension of EV tax credits “ridiculous” it just a few months ago, this is still a major win in climate technology.
Where things get more interesting, however, is the $60 billion the bill sets aside for manufacturing clean technologies on American soil, from processing minerals to building batteries, solar panels, wind turbines and electric cars. Oh, and there’s $500 million for heat pumps under the Defense Production Act.
“It’s much harder to build an industry through regulation than investment,” said Leah Stokes, a political scientist at the University of California, Santa Barbara. “If we really want to develop these technologies here in the United States, we must invest in these manufacturing industries. This is something very new in this agreement.
That, coupled with $60 billion in funding for environmental justice initiatives that will allow everyone to reap the benefits of cleaner air, save money and more, led Stokes to call the legislation of “transformer”.
The tech industry could benefit if the bill passes. And not just the cleantech industry, mind you. Tech companies have made some pretty ambitious promises in their climate plans, and the law will make it easier to deliver. More renewables on the grid will make it easier for businesses to power their operations without harming the climate. More importantly, it will help companies control Scope 3 emissions, i.e. emissions related to the use of their products.
Scope 3 emissions represent the vast majority of a company’s carbon footprint. Microsoft, for example, has a fairly progressive climate plan. But his shows went at the top 21% last year, partly due to people playing games on their Xbox, watching movies on their Surface, etc. This isn’t necessarily a knock on Microsoft; this is an indication that more than 60% of US electricity comes from fossil fuels. Change the mix to add more renewables, and tech companies could see their scope 3 emissions drop.
All of this comes with caveats, of course. For one thing, the recently released full text is 725 pages, so it will take some time to digest it in its entirety. It will also take researchers a minute to independently verify whether the promised 40% reduction in emissions is real or a sleight of hand. This 40% reduction in emissions also falls short of Biden’s commitment to the Paris Agreement to reduce emissions by at least 50% below 2005 levels by 2030. In other words, he there’s still a lot of work to be done on that front, including the president possibly declaring a climate emergency.
There are also freebies for fossil fuels, including tied leasing or rights of way for renewables on federal lands to fossil fuel leasing as well.
“This virtually guarantees growth in carbon emissions and is likely to exacerbate existing political tensions between frontline and energy communities in the southern Gulf and wealthier communities along the rest of the U.S. coast,” he said. Billy Fleming, director of Penn’s McHarg Center. , while noting that much of climate policy has focused on supply-side adjustments rather than reducing demand for fossil fuels.
This means that the Cut Inflation Act of 2022 is by no means a pure climate bill focused on clean technologies. But it’s better than what was on the table at this time yesterday.