Backed by centrist Sen. Joe Manchin, its authors say the package will help drive sharp cuts in greenhouse gases — the deal also addresses healthcare, tax rises for high earners and cutting federal debt.
Biden hails Senate deal ‘most significant’ ever
President Joe Biden has hailed a congressional deal that represents the biggest single climate investment in US history – and hands him a badly needed political victory.
In a stunning reversal, Senate Democrats on Wednesday announced an expansive $739bn package that had eluded them for months addressing healthcare and the climate crisis, raising taxes on high earners and corporations and reducing federal debt.
The president said on Thursday: “This bill would be the most signification legislation in history to tackle the climate crisis and improve our energy security right away.”
Biden, who has faced soaring gas prices that have helped drive inflation to 40-year highs, said experts agreed that the bill would help address the problem and urged Congress to pass it.
“With this legislation, we’re facing up to some of our biggest problems and we’re taking a giant step forward as a nation … This bill is far from perfect, it’s a compromise, but that’s often how progress is made: by compromises.” — The Guardian
Senate energy deal could be a climate breakthrough
Senate Majority Leader Chuck Schumer and Sen. Joe Manchin announced Wednesday (27 July 2022) they have reached agreement on the Inflation Reduction Act—a new bill that includes historic energy and climate legislation that could pass Congress in a matter of weeks. The package represents a remarkable breakthrough that could deliver billions of dollars in tax incentives and other investments in green buildings and sustainable communities over the next decade.
The legislation uses a mix of revenue raisers, including increased corporate minimum tax and prescription drug pricing reform, to reduce the deficit by more than $300 billion while also paying for new health care, energy and climate provisions. View the full legislation document.
If passed and signed into law by President Biden, it would significantly expand tax incentives for energy efficiency, renewable energy, storage, electric vehicles and other clean energy technologies, with additional funding for green affordable housing, federal buildings, sustainable community investments and other priorities supported by USGBC. Many of the tax incentives would be implemented for 10 years, giving investors, consumers, businesses and others the kind of long-term certainty that has long been missing from clean energy markets.
Highlights of the bill include:
Commercial buildings: The bill significantly expands Sec. 179D tax deduction for commercial buildings. The 179D deduction would be increased from the current $1.80 per square foot to a sliding scale of $2.50 to $5 per square foot. For new construction, buildings would need to achieve 25% better performance than the latest ASHRAE 90.1 standard for $2.50 per square foot, with a gradually increasing deduction up to $5 for achieving 50% better performance than ASHRAE 90.1.
Existing buildings five years or older—a critical priority to achieve scale—would have a more accessible pathway to demonstrate compliance, with a similar sliding scale deduction of $2.50 to $5 per square foot by demonstrating improvement over their existing energy use intensity by 25% to 50%.
New home construction: The bill significantly expands Sec. 45L tax credit for new home construction, including multifamily. Whereas the current credit provides $2,000 for new homes meeting an outdated version of the International Energy Conservation Code (IECC), the updated credit in the new bill would offer $2,500 for homes meeting Energy Star standards and $5,000 for homes meeting zero energy–ready criteria. Multi-family projects meeting prevailing wage requirements would receive the same incentives—a $2,500 or $5,000 credit per unit.
Affordable housing: The bill provides $1 billion in new funding to improve the sustainability of affordable housing through the Department of Housing and Urban Development. The funding would go to loans and grants for projects that “that improve energy or water efficiency, indoor air quality or sustainability, implement the use of low-emission technologies, materials, or processes, including zero-emission electricity generation, energy storage, or building electrification, or address climate resilience.” A small portion of the funding would go to data collection, energy performance benchmarking and risk assessments.
Federal buildings: The bill provides $225 million for the General Services Administration (GSA) Federal Buildings Fund to convert federal facilities to high-performance green buildings, along with $2.15 billion for installing low-embodied-carbon materials and products in federal facilities. This $2.15 billion procurement initiative is intended to help kick-start markets for sustainable construction materials. Finally, the Federal Buildings Fund would also receive $975 million for emerging and sustainable technologies.
Building energy codes: The bill provides $1 billion for building energy code adoption, with an emphasis on stretch codes. This includes $330 million in grants to help state and local governments adopt the 2021 IECC and 2019 ASHRAE 90.1 standard and $670 million for adoption of the zero energy provisions in the 2021 IECC or equivalent stretch code.
Renewables/EV/storage: The bill provides for long-term extensions and expansions of the Investment Tax Credit and Production Tax Credit supporting renewable energy generation, the EV tax credit —including $7,500 for new EVs and $4,500 for used EVs—and expansions of credits for other technologies, such as distributed energy storage, rooftop solar and geothermal.
Existing home efficiency improvements: The bill provides a significantly expanded Sec. 25C tax incentive for homeowners to make efficiency improvements, which were previously capped at $500 for a lifetime. Homeowners can now receive up to $1,200 per year for insulation projects, $600 per year for HVAC and windows, and $2,000 for installing heat pumps, among other investments.
Additionally, two new programs funded at $9 billion will be administered by state energy offices for direct rebates to homeowners for energy efficiency and electrification projects. The rebate program also includes $200 million for workforce training.
Sustainable and resilient communities: The bill includes a variety of broad, community-based investments to improve sustainability and resilience, including
- $7 billion in grants and other funding to enable low-income and disadvantaged communities to benefit from zero-emissions technologies such as distributed energy resources and to implement other greenhouse gas (GHG) reduction activities.
- $50 million to address indoor air quality and GHG emissions at schools in low-income and disadvantaged communities.
- $5 billion for GHG reduction planning and implementation grants from the U.S. EPA.
- $3 billion for environmental and climate justice block grants.
- $3 billion for a neighborhood access and equity grant program at the Department of Transportation to help states and local governments improve walkability, safety and affordable transportation access, including by removing existing transportation infrastructure that adversely impacts communities.
- $2.6 billion to help coastal communities, including preparation for extreme storms and other changing climate conditions.
- $27 billion for a clean energy technology accelerator program to stimulate emissions-reducing technologies.
ESG, EPD and low-embodied-carbon materials: The bill provides $250 million for the EPA to support the development, standardization and transparency of environmental product declarations, along with $5 million for similar efforts around corporate climate commitments. Additionally, there is $100 million for the EPA to work with the Department of Transportation and GSA to develop a program to identify and label low-embodied-carbon construction materials and products
While this is an exciting breakthrough after months of frustrating negotiations, it remains an agreement in principle that needs to pass Congress, which requires all 50 Democrats in the Senate and a similarly narrow margin for error in the House of Representatives. If all goes well, that process is now expected to play out over the next couple of weeks, with the potential for President Biden signing it into law in August.
What they say
“Holy sh*t,” said Tiernan Sittenfeld, senior vice president of government affairs with the League of Conservation Voters. “This deal is coming not a moment too soon.”
Lawmakers and climate advocates — who had been hammering Manchin in recent days for rejecting the climate measures because of inflation concerns — were ecstatic at the surprise announcement.
“There’s been a ton of work done over the last two weeks to make the case to Sen. Manchin that this package is not inflationary and address his concerns in a serious way,” said Jason Walsh, executive director of the BlueGreen Alliance, a coalition of labour and environmental groups. “And we’re just thrilled that we’re at this moment,” he added.
People familiar with the effort to bring Manchin back to the table on climate said there had been an intensive effort to convince him of the merits of supporting the new technologies — including from company executives who came forward with new plans to build manufacturing in West Virginia.
Labour leaders and experts from universities were also part of the effort, as was former Treasury Secretary and inflation hawk Larry Summers, who met with Manchin in recent days, said Walsh.
The bill, if passed, would be a major victory for President Joe Biden’s climate agenda that had suffered a serious setback at the hands of the Supreme Court in June, and could help generate new enthusiasm from Democratic voters who had grown frustrated with the administration’s lack of success.
“We will improve our energy security and tackle the climate crisis — by providing tax credits and investments for energy projects. This will create thousands of new jobs and help lower energy costs in the future,” Summers said in a statement.
Sens. Tina Smith of Minnesota, John Hickenlooper of Colorado, and Chris Coons of Delaware were among a small group of Democrats who, along with their staffs, kept up discussions with Manchin and his aides in recent weeks.
“[We] came together on how to address Sen. Manchin’s very important concerns on inflation and pulled together good sources of information on that and reminded everybody it’s not over till it’s over, and never say never,” Smith said in an interview.
The result of those talks, she said, “is the most significant action on climate and clean energy we’ve ever taken.”
Rep. Ro Khanna of California, a progressive who is close with Manchin, also stayed in touch with him in recent weeks and said he spoke with him Wednesday night after the agreement with Schumer was announced.
“Sen. Manchin always expressed a willingness to invest in solar, wind and the next generation of innovation. Every conversation I have had with him, he was very consistent on that point,” Khanna told POLITICO.
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