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President Biden Signs Historic Climate Bill into Law – part 2

Biden Signs Climate Bill 8 16 22With President Biden’s signature, the $437 billion “Inflation Reduction Act,” became law today. The bill focuses on healthcare reforms, energy and climate initiatives, and represents  a smaller version of the president’s “Build Back Better” plan, a centerpiece of his legislative agenda since taking office.

The Inflation Reduction Act further complements hte Presdient’s pervious bi-partisan success having already managed a massive pandemic rescue package focused on infrastructure and rebuilding America’s crumbling roads and bridges, along with needed incentive programs to turbocharge domestic computer chip production. Biden’s new bill is arguably an even bigger deal, with it’s the most significant achievement addressing global heating  through US climate legislation by targeting the reduction of four billion tons of GHG emissions with tax breaks for electric vehicles, and zero emissions solar and wind energy development.

The sweeping legislation is also expected to reduce the deficit by a tax baseline paid targeting corporations which previously paid zero income taxes through legal loopholes in the code – taxes which were slashed by Republicans during the Trump administration. Equally ground breaking, the bill finally allows Medicare to negotiate lower drug prices, a common government practice in Canada and most EU countries.

“This is a historic moment,” Biden proclaimed at the signing ceremony. “Democrats sided with the American people and every single Republican in Congress sided with the special interests.”

The final bill language includes clean electricity incentives that are comparable in size to those in the previous House version, but scales back spending in almost every other category, from transportation to climate resilience.  The one major exception was manufacturing: Compared with previous versions of the bill, the final legislation marks a significant increase in grants, loans and tax credits to manufacture clean energy technology domestically.

Democrats have said the new bill’s deficit reduction, as well as the provisions aimed at lowering energy and prescription drug costs, will help address the rapid inflation over the past year. Most economists agree with this assessment, the bill will likely reduce price pressures, however, the overall effect is likely to be modest in the long term.


What’s in the Inflation Reduction Act

Figures are in billions and over 10 years.

HEALTH CARE

COST IN BILLIONS
Affordable Care Act subsidies
Expanded subsidies for three years
$64.1
Medicare prescription drug benefit
Increased generosity through Part D redesign and a $35 cap on co-payments for insulin
$34.2

CLEAN ENERGY – ELECTRICITY

COST IN BILLIONS
New tax credits for emissions-free electricity sources and storage
Including wind, solar, geothermal, advanced nuclear, etc.
$62.7
Extending existing tax credits for wind and solar power$51.1
Tax credit for existing nuclear reactors
To prevent them from closing
$30.0
Extend energy credit
Through 2024
$14.0
Clean energy rebates and grants for residential buildings
Rebates for installing heat pumps and retrofitting homes
$9.0
Financing for energy infrastructure
Updates and expands lending programs to make energy generation and transmission more efficient
$6.8
Tax credit for carbon capture and storage$3.2

MANUFACTURING MODERNIZATION

COST IN BILLIONS
Clean manufacturing incentives
Incentives for companies to manufacture clean energy technologies in the U.S. rather than abroad, through tax credits and the Defense Production Act
$37.4
Reduce emissions from energy-intensive industries
Such as concrete production
$5.3

INDIVIDUAL CLEAN ENERGY INCENTIVES

COST IN BILLIONS
Green energy credits for individuals
Extends and increases tax credits for energy-efficient properties
$36.9

 ELECTRIC VEHICLES AND CLEAN FUELS

COST IN BILLIONS
Tax credits for new and used electric cars
Incentives for purchasing emissions-free vehicles, with income limits, and for installing alternative fueling equipment.
$14.2
Clean hydrogen production$13.2
Fuel tax credits
Creates new credits for low-carbon car and airplane fuels, and extends credits for biodiesel and other renewable fuels
$8.6
Financing for clean energy vehicles
Loans and grants for the production of hybrid, electric and hydrogen fuel cell cars
$2.9

AIR POLLUTION ABATEMENT

COST IN BILLIONS
“Green bank” for energy investments
For investments in clean energy projects, particularly in poor communities
$20.0
Other air pollution reduction
Includes funding for monitoring and reducing pollution, and grants for disadvantaged neighborhoods
$14.8

CONSERVATION, RURAL DEVELOPMENT AND FORESTRY

COST IN BILLIONS
Agricultural conservation
Funding for agricultural practices that improve soil carbon, reduce nitrogen losses and decrease emissions
$16.7
Rural development
Investments in clean energy technology in rural areas
$13.2
Forest conservation and restoration
Includes funding to reduce risk of wildfires
$4.8

TRANSPORTATION AND INFRASTRUCTURE

COST IN BILLIONS
Improvements to federal buildings and highways$5.2
Electric transmission
Loans and grants to finance electricity transmission, including for offshore wind energy generation
$2.3

CLIMATE-SPECIFIC SPENDING

COST IN BILLIONS
Drought resilience$4.6
Weather and climate resilience
Includes investments in coastal areas and weather forecasting resources
$4.6
Other federal research, projects and oversight
Includes funding for FEMA, D.H.S. and D.O.E.
$4.2
Zero-emissions U.S.P.S. trucks$3.0
National Park Service funding
Includes funds for climate resilience and habitat preservation
$1.0
Data collection and environmental reviews$0.8
Other$0.7
Tribal funding
Clean energy, electrification, drought relief and climate resilience for federally recognized tribes.
$0.5
Wildlife recovery and habitat climate resilience$0.3

Savings and new revenue: $764 billion

TAX CHANGES

REVENUE IN BILLIONS
15% corporate minimum tax$222.2
I.R.S. enforcement
Projected net revenue raised from $80 billion in compliance and enforcement funding.
$124.1
Stock buyback tax$73.7
Extend active loss tax limitation two years$52.8

HEALTH CARE

REVENUE IN BILLIONS
Repeal a regulation on prescription drug rebates
This regulation has never gone into effect, so the savings are mostly just on paper
$122.2
Drug price negotiation*
Medicare negotiation on prices for certain drugs
$99.0
Limits on drug price increases*$62.3
*These are estimates and subject to minor changes to the drug price provisions in exact cost and savings estimates. Savings from the drug price negotiation policy may end up being lower, and the savings from limits on drug price increases are unofficial estimates based on an analysis by Don Schneider, a former chief economist of the House Ways and Means Committee.

ENERGY AND CLIMATE-CHANGE ABATEMENT

REVENUE IN BILLIONS
Methane reduction incentives
Sets methane waste emissions thresholds and charges facilities that exceed them. (Increased revenue net of new spending.)
$4.8
Reinstatement of Superfund
Increased revenue net of new spending.
$1.2
Tax to fund the Black Lung Disability Trust Fund
Permanent extension
$1.2
New oil and gas leases
On federal land and in the Gulf of Mexico
$0.5
Other tax adjustments$0.3
Wind lease sales$0.2
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