Explained | The new U.S. Bill on climate action

Does the new Bill completely leave out fossil fuel industries? What are the listed incentives to switch to clean energy?

The story so far: On August 7, the U.S. Senate approved a Bill titled the Inflation Reduction Act (IRA) 2022, with a simple majority of 51 to 50. Vice President Kamala Harris cast her tie-breaking vote to aid the approval after the Senate was evenly divided. Even though all Republicans opposed the bill, the Democrats pushed through after a long debate taking advantage of the budget reconciliation process. The bill is a scaled-down version of President Biden’s Build Back Better Act (BBBA), which failed to get approval from the Senate. The IRA has a special focus on climate, healthcare, and tax provisions to address inflation.

The Bill marks the largest American investment aimed toward making the U.S. a leader in clean energy. It includes packages worth $369 billion for the clean energy transition.

It provides a tax deduction to low and middle-income households to go electric and seeks to lower the energy bills of American households. It also aims to bolster the domestic production of heat pumps and critical minerals. For disadvantaged low-income communities and tribal communities, the Bill provides funding to benefit from zero-emission technologies which reduce greenhouse gas emissions, enhance climate resilience, and mitigate risks from extreme heat.

The Bill provides significant investment in renewable energy through heavy tax credits for wind and solar energy projects and electric vehicles. Additionally, the Bill imposes a tax on the largest and most profitable companies in order that they pay their fair share, without levying any taxes on households with income less than $40,000 per annum. It also imposes a fee on methane leaks from oil and gas drilling.

At the same time, the Bill also aims at more investments in fossil fuels.

It seeks to expand oil and gas drilling, with the federal government offering land for onshore and offshore drilling as a prerequisite for developing renewable energy. Thus, it handcuffs the expansion of oil and gas with renewable energy development.

The U.S is currently facing extreme climate threats. This includes heatwaves, wildfires, cyclones, floods, and hurricanes that have become frequent and intense in the past few years. The ongoing floods in Kentucky triggered by heavy rainfall and the wildfires in California induced by dry lightning have become a major concern for the country. There is a link between extreme weather events and climate change.