The Manchin-Schumer Deal Could Be the Biggest US Climate Legislation Ever

sierraclub.org 7/30/2022 Nick Cunningham

Unless you’ve been on vacation this past week and completely unplugged, you no doubt heard the good news: Secret negotiations between Democratic senators Chuck Schumer and Joe Manchin finally resulted in an enormous political breakthrough that took the world by surprise. On July 27, the two announced a deal to make major investments in clean energy and climate. The announcement came just two weeks after the talks over a historic climate package appeared all but dead, and it left US climate activists with a giddy sense that victory may be at hand.

While it's far from perfect, the legislation, now called the Inflation Reduction Act, could result in an estimated 31 to 44 percent decline in US greenhouse gas emissions by 2030 if it's passed into law.

The legislation would pump $369 billion into energy and climate programs, making it “the biggest climate action in human history,” in the words of Senator Brian Schatz, a Democrat from Hawaii.

What does the legislation do? What are the most exciting provisions, and what are the drawbacks? Here’s a rundown of the landmark bill's main climate and energy provisions.

Clean electricity subsidies: The array of clean electricity tax credits, expected to total well over $200 billion, are the workhorse of the entire climate package, a long-term policy signal that locks in a faster shift to clean energy. The short-term production tax credits for renewable energy projects, which have to be renewed regularly and expired at the end of last year, will be extended through 2025. Nuclear power is also made eligible. And the investment tax credit, currently available only to solar projects, is extended for the next decade and broadened to include other types of carbon-free energy. Facilities will receive more generous subsidies if they pay their workers higher wages. Nonprofits and tax-exempt entities (like rural electric co-ops, tribes, and municipal utilities) can claim the incentives directly, a big improvement from the current system, which requires project developers to go through Wall Street middlemen to get tax credits.

Clean energy manufacturing: In an effort to bolster not just the deployment of clean energy but also the manufacturing of the equipment in the United States, the bill funnels $30 billion into the production of solar panels, wind turbines, batteries, and critical minerals processing. Another $10 billion in tax credits goes to clean technology manufacturing facilities. Roughly $2 billion is specifically offered for car factories to retool to make electric vehicles, and another $20 billion in loans goes to new clean vehicle manufacturing. In addition, the bill tops up the Defense Production Act with a fresh $500 million, to be used for heat pumps and critical minerals processing. Another exciting program is the $27 billion for a clean energy technology accelerator, a “green bank” of sorts to support the deployment of clean technologies.

The clean energy manufacturing incentives are “a huge new addition to why this [deal] is a massive win,” said Melinda Pierce, legislative director for the Sierra Club. “That's been a weakness when you think about US competitiveness and dependence on China for so many of these components.” New manufacturing facilities could emerge “up and down the supply chain” as a result of these new policies, she said. Read more here.