Is the Inflation Reduction Act Working?
Enacted a 12 months ago, the climate law is boosting EVs and clean-energy manufacturing. But there’s urgent work to be done on transmission siting and connecting communities with IRA funding.
Blissful birthday to the Inflation Reduction Act. It’s been nearly a 12 months since Democratic lawmakers and the White House celebrated the passage of the largest climate spending laws in American history. But in some ways passage was the simple part. Exactly how the IRA continues to be implemented on the local, state, and federal level will help determine whether the U.S. can meet increasingly urgent climate goals, in addition to profit communities that historically have been left behind.
One thing is of course: the law is growing up fast. On the time, the Inflation Reduction Act was estimated to incorporate $369 Billion in tax credits and other funding for climate and clean energy programs. More moderen estimates put the associated fee at double and even triple that quantity. Even when this mind-boggling amount of funding is there, it’s a fancy process to attach those dollars to communities and projects on the bottom.
I asked among the UCLA Emmett Institute’s resident experts to share their top thoughts on how the IRA is performing, especially in the realm of unpolluted energy and electric vehicles. William Boyd is faculty co-director of the Emmett Institute; Mary Nichols is Distinguished Counsel; and Julia Stein is Deputy Director.
What’s one specific success of the Inflation Reduction Act after one 12 months?
William Boyd: Money is flowing! Reports suggest that the appetite for tax credits and other incentives within the IRA are quite robust and that firms are making the most of these opportunities and investing in clean energy manufacturing and renewable energy projects despite a difficult macroeconomic environment. The IRA has also spawned a really interesting discussion about industrial policy and the role of presidency in strategic sectors. No matter where one comes down on the merits of this debate, the talk itself is essential and reflects the necessity to rethink neoliberal policies of the past.
Mary Nichols: It’s incenting greater private-sector investment in constructing out a strong EV charging network. The IRA included essential support for advanced batteries and the installation of charging infrastructure and we’re seeing that spur private investment from network operators from coast to coast.
Julia Stein: And it’s already doing work to spice up future EV sales—in support of each state- and federal-level goals to significantly increase the share of EVs on the road by the 2030s.
What’s one critical deficiency or policy opportunity on the federal level that should be addressed to remain heading in the right direction?
Boyd: Transmission siting and development. Everyone knows that if we will’t construct high voltage transmission, we won’t achieve the goals of the IRA and climate and clean energy policy generally. The issue here is the Federal Power Act, which leaves transmission siting authority with the states. The infrastructure bill did revive FERC’s so-called backstop siting authority for specific transmission projects which can be deemed to be within the national interest, but we really want to vary the law and federalize transmission siting, which is what we have already got for natural gas pipelines.
Nichols: Failure to allocate or reallocate federal personnel to assist local, state and NGO partners apply for IRA funding. This gap is now being remedied somewhat by philanthropy, but we could see more motion on the federal level.
Stein: Related to that, the federal government should continually assess whether goal groups are literally in a position to access funding easily and effectively to attain the goals of the laws. Access to funds could be constrained in multiple ways; a pair that come to mind are that conditions attached to funding can present hurdles to its deployment and that some goal groups may lack capability to tap into available resources. For instance of the primary issue, the IRA comprises funding that may offset the associated fee of buying zero-emission industrial equipment, but that funding is conditioned on the purchased equipment being American-made. With some equipment, there are supply constraints affecting American-manufactured models, but models manufactured abroad are available. Entities who wish to undertake a costly upgrade with government support may find their hands tied, though zero-emission equipment is obtainable available on the market today.
What’s a state policy that California should pursue to assist fill the gap?
Nichols: Connecting individuals with funding opportunities. California should use existing networks created by the California Air Resources Board, the Office of Planning and Research, and the California Energy Commission to actively encourage applications for the IRA funding. As we see more entities complete the method, these agencies should help to speak success stories.
Stein: Within the vein of supporting environmental justice communities, as IRA funding is deployed, California can even be certain that that it’s providing adequate support to lower-income Californians. The IRA is designed to push decarbonization of our electrical grid, transportation sector, and buildings, but careful attention will should be paid to be certain that that lower-income Californians can reap the benefits of recent technology and aren’t left holding the financial bag as we transition away from fossil fuels. The state also has an enormous role to play in ensuring that environmental justice communities can actually access the funding the law intends for them. California is already beginning to take essential steps on this direction, and doubling down on those efforts so we will achieve an equitable transition can be key.
Boyd: California and other states are limited in what they will do to take care of the transmission siting problem because it pertains to interstate projects, but there are efforts underway to streamline state permitting and siting and to advertise more regional cooperation. All of that is useful. I believe one of the crucial essential things the states can do – and California is already doing this – is to experiment with recent electricity rate designs to make sure access and affordability. Decarbonization through electrification is not going to occur if electricity prices are too high or volatile. So, we should be considering hard about how access and affordability are literally critical tools for electrifying and decarbonizing on a regular basis life.