MEMO: Sierra Club Analysis of Inflation Reduction Act of 2022

A deal to advance historic investments in climate, care, jobs, and justice was reached on July 27, 2022, as Senate Majority Leader Chuck Schumer announced the Inflation Reduction Act of 2022. It lays out $369 billion directed to over 100 programs that will bring down everyday costs for families, drive job creation, and reduce pollution in our communities.

Below is a breakdown of a number of crucial investments in the bill as well as investments that do not appear. Sierra Club policy staff and leadership are available to discuss both, as well as the pathway forward to ensuring this bill becomes law.

Cross-cutting Environmental, Equity, and Labor Standards

Key provisions included move us toward incorporating cross-cutting environmental, equity and labor standards into public investments and ensuring accountability, including:

• $25 million to the Office of Management and Budget

• $25 million to the Government Accountability Office

Electric Sector 

This bill contains clean energy tax credits and other investments to deploy solar, wind, offshore wind, geothermal energy, and batteries across the country, including:

• Residential solar, geothermal heat pumps, small wind, battery storage credit of 30% extended through 2033

• Solar investment tax credit of 30% extended through 2033

• Wind production tax credit extended through 2033

• Offshore wind tax credit extended through 2033

• Allocates roughly $30 billion in grant and loan programs for states and electric utilities to decarbonize the grid through investing in renewable power and clean technologies

Clean Energy Manufacturing and Industrial Sector

The package includes billions of dollars of production-based clean energy manufacturing tax credits, including:

• Up to $20 billion in loans to build new clean vehicle manufacturing facilities

• $10 billion investments tax credit to build clean technology manufacturing facilities

• Over $9 billion for federal procurement of American-made clean technologies

• Almost $6 billion for a new Advanced Industrial Facilities Deployment Program to reduce emissions from the largest industrial emitters like chemical, steel and cement plants

Transportation

Investments in EVs and clean transportation benefits consumers and cuts costs, including:

• $4,000 consumer tax credit for lower/middle-income individuals to buy used EVs

• Up to $7,500 tax credit to buy new EVs

• $3 billion to the U.S. Postal Service for the purchase of zero-emission delivery vehicles

• $3 billion in grants to reduce toxic air pollution at ports by purchasing zero-emission trucks and equipment

• $1 billion for zero-emission heavy-duty vehicles, which will help transition the dirtiest diesel vehicles to clean trucks, school buses, and transit buses

• Nearly $2 billion in grants for the Federal Highway Administration

Building Decarbonization and Efficiency

The bill invests billions of dollars to make household electrification and clean energy upgrades significantly more affordable for consumers, including:

• The High Efficiency Electric Home Rebate Program allocates $4.5 billion in rebates for low- and moderate-income electrification

• $4 billion to boost Department of Housing and Urban Development programs to improve affordable housing

Cleaning Up Legacy Pollution and Creating Healthy, Toxic-Free Communities

This reconciliation bill includes about $60 billion in investments to support programs that will clean up pollution and create healthy, toxic-free communities, including:

• Environmental and climate justice block grants, funded at $3 billion, to invest in community-led projects in disadvantaged communities

• Neighborhood Access and Equity Grants, funded at $3 billion, to support neighborhood equity, safety, and affordable transportation access

• Greenhouse Gas Reduction Fund, a clean energy and sustainability accelerator funded at $27 billion, with at least 60% of those funds focused on disadvantaged communities 

• Reinstates the Hazardous Substance Superfund financing rate tax on oil production and import, raising over $11 billion and ensuring that Superfund cleanups will have a guaranteed stream of funding for years to come

• Improving energy efficiency or water efficiency or climate resilience of affordable housing, funded at $1 billion

Public Lands and Waters

The bill includes critical reforms that update federal oil and gas bonding standards, updating minimum bids, rents, and royalty rates, and ending non-competitive leasing. However, the Sierra Club is concerned with the provisions related to the mandated lease sales and tying federal wind and solar development to required federal oil and gas leasing. Continuing to prop up the fossil fuel companies that are responsible for the dual crises of inflation and climate change is the last thing we should be doing in the name of addressing these crises.

• Mandated Lease sales:

  • Reinstates an offshore oil and gas lease sale conducted in the Gulf of Mexico 

  • Conducts two more lease sales in the Gulf and another in Alaska’s Cook Inlet

  • Mandates new offshore (60 M acres) and onshore (2 M acres) leasing

• Forests:

  • $1.8 billion for hazardous fuels reduction projects on National Forest System land within the wildland-urban interface (WUI); there are no provisions for hazardous fuel reduction projects in the backcountry or outside the WUI

  • $50 million for mature and old-growth protection and a nationwide inventory

  • Includes restrictions on funding any new temporary or permanent roads, or motorized trails, in wilderness areas or WSAs

• $250 million for the Fish & Wildlife Service: $125 million for Endangered Species Act recovery; $125 million for National Wildlife Refuges and state wildlife management areas

Methane Emissions Reduction Program

Methane, the primary component of gas, is responsible for nearly 30% of the impacts of climate change we are experiencing today. The Methane Emissions Reduction Program includes more than $1.5 billion to support efforts to reduce methane emissions, improve methane monitoring, fund environmental restoration, and help communities reduce the health effects of pollution. It also includes a fine on wasteful methane pollution that will begin in 2024 to incentivize oil and gas companies to avoid unnecessary emissions. 

National Environmental Policy Act

The National Environmental Policy Act is our bedrock environmental law that gives communities with environmental concerns a voice in the process during permitting and construction of federally funded infrastructure projects. The bill includes funding for NEPA standards that will ensure effective review and community engagement, including the following:

• Department of Energy: $225 million 

• Department of Interior: $150 million

• Forest Service: $100 million

• Department of Transportation: $100 million

• Federal Permitting Improvement Steering Council Environmental Review Improvement Fund: $70 million 

• Council on Environmental Quality: $62 million

• National Oceanic Atmospheric Administration: $20 million

• Environmental Protection Agency: $40 million 

Agriculture, Forest Restoration, and Land Conservation

The reconciliation bill includes key investments in agriculture, rural economic development, and forest restoration, including: 

• More than $20 billion to support climate-smart agriculture practices 

• $5 billion in grants to support fire resilient forests, forest conservation, and tree planting

• Tax credits and grants to support the domestic production of biofuels and to build the infrastructure needed for sustainable aviation fuel and other biofuels

• $2 billion for the Rural Energy for America Program (REAP), with hundreds of millions of dollars directed for underutilized renewable energy technologies

• $2.6 billion in grants to conserve and restore coastal habitats and protect communities that depend on those habitats

Black Lung Disability Trust Fund

Permanent extension to the tax ensuring that coal miners suffering from black lung disease have access to medical care. 

Omissions from the Bill

• The bill includes no language buying back the active leases on the coastal plain of the Arctic National Wildlife Refuge, or undoing the Arctic drilling language passed as part of the 2017 Tax Act. 

• No international fossil fuel subsidy repeals are included.

• The package offers no additional funding for lead service line replacement.

• No dedicated funding for a Civilian Climate Corps is included in this package.