Briefing Series: IRA and IIJA Progress Report

Want to learn more about climate policy? But not sure where to start? We have you covered. The Environmental and Energy Study Institute (EESI) invites you to join us for our start-of-the-new Congress briefing series, Climate Camp. We went over the basics of the legislative process, highlighting key areas and opportunities for climate mitigation and adaptation policy. 

Our fourth session in EESI’s Congressional Climate Camp series was also the first briefing in our IRA and IIJA Progress Report series, which was on implementing the Inflation Reduction Act and Infrastructure Investment and Jobs Act. These laws provide billions of dollars to confront the climate crisis and strengthen critical infrastructure. Panelists provided an update on the status of their implementation, described how state and local governments and organizations are accessing funds, and explained the oversight role Congress must play to maximize these investments.

Key Takeaways

• The Infrastructure Investment and Jobs Act (IIJA) (P.L. 117-58), also referred to as the Bipartisan Infrastructure Law, provides $1.2 trillion for infrastructure across a variety of sectors, including transportation, energy, broadband, and water. More than half of IIJA funding—$660 billion—flows by formula, meaning that the law itself specifies who is going to get the funds and how much they will receive. In addition to formula funds, there are over 100 competitive grant programs in IIJA.

• The Inflation Reduction Act (IRA) (P.L. 117-169) provides a market environment that strongly favors the deployment of new clean electricity generation.

• The IRA focuses on bringing funds down to the community level. Community-based organizations, such as green banks, community development financial institutions, and credit unions, will have a role in facilitating the flow of these funds from state and federal agencies to communities.

• The IRA contains numerous consumer rebate provisions and tax credits for residential energy efficiency and electrification. All consumers are eligible for these rebates and low-to-moderate income households may receive enhanced benefits.

• As implementation gets underway, it is important to consider what measures should be tracked to understand the outcomes of investments made through the IIJA and IRA.

The Environmental and Energy Study Institute (EESI) held a briefing about the status of the wide range of clean energy tax incentives enacted as part of the Inflation Reduction Act (IRA). Effective implementation of tax incentives for home energy efficiency and electrification, electric vehicles, sustainable fuels, clean and renewable energy, and energy storage—plus the game-changing “direct pay” option—will deliver many benefits to families and communities, including lowering household utility bills and expediting the transition to a decarbonized clean energy economy.

This briefing highlighted both individual- and industry-oriented tax credits, which will provide the bulk of the law’s emissions reductions. Panelists discussed eligibility and timelines for the IRA tax incentives, implementation status, and the role Congress can play in overseeing and supporting these programs.

Key Takeaways

• The Inflation Reduction Act (IRA) (P.L. 117-169) is the single biggest investment in clean energy in U.S. history.

• The IRA improves three main tax incentives for making buildings more energy efficient. They cover new construction and existing building retrofits and can be found in sections 25C, 45L, and 179D of the Internal Revenue Code (IRC).

• The consumer-facing electric vehicle tax credits are IRC sections 30D, 45W, and 25E.

• Direct pay, also referred to as elective pay, is a new financial mechanism provided by the IRA that allows tax-exempt entities to receive direct payments from the federal government equal to the value of a tax credit. Twelve of the IRA’s tax credits are eligible for direct pay.

• The IRA made important adjustments to the Investment Tax Credit (ITC) and the Production Tax Credit (PTC). The long-term extensions of both credits provide more business certainty for clean energy developers.

• Key biofuel provisions in the IRA affect the Biodiesel Blending Credit (IRC 40A), Sustainable Aviation Fuels Blending Credit (IRC 40B), Clean Fuel Production Credit (IRC 45Z), and Carbon Capture Tax Credit (IRC 45Q).

• The IRA allocated $13 billion for clean hydrogen production. This number also includes investments in clean vehicles when hydrogen is included as a transportation fuel.

• The 45U tax credit, or the Zero-Emission Nuclear Power Production Tax Credit, aims to prevent premature closure of existing nuclear facilities in the United States.

• The 45Q tax credit is for the capture of qualified carbon oxide from industry, power, or direct air capture for storage or reuse.

• The 48C Advanced Energy Project Investment Tax Credit provides $10 billion for a 30% investment tax credit for facilities that manufacture clean energy technologies. The 45X Advanced Manufacturing Production Tax Credit provides a per-unit production incentive for clean energy technologies that are domestically manufactured.

The Environmental and Energy Study Institute (EESI) held a briefing about the implementation of the bipartisan Infrastructure Investment and Jobs Act (IIJA) and the Inflation Reduction Act (IRA) in rural America. What programs are uniquely designed for and supportive of rural communities? What types of projects are making a difference in people's lives? What are the remaining barriers preventing small and rural communities, institutions, and companies from accessing IIJA and IRA support?

Panelists addressed these questions and shared the latest updates on U.S. Department of Agriculture, Department of Energy, and other agency programs that provide for rural communities. They outlined how these laws directly help rural communities—from farms and ranches to rural town centers. Using specific examples from around the country, panelists also discussed key topics from a rural perspective, including electricity provision, broadband access, drinking water availability, and pollution reduction.

The Environmental and Energy Study Institute (EESI) held a briefing that explored the Inflation Reduction Act (IRA) and Infrastructure Investment and Jobs Act (IIJA) funding dedicated to nonprofit organizations and municipalities. For example, the introduction of “direct pay” is allowing tax-exempt entities to access the benefits of federal tax credits for the first time. Meanwhile, the Department of Energy and the Environmental Protection Agency are hard at work rolling out new programs specifically tailored to these entities. The IRA and IIJA are opening new doors for nonprofits and local governments working to reduce greenhouse gas emissions and adapt to a changing climate. 

These opportunities also bring questions: What capacities do varying organizations and municipalities have to apply for, manage, and monitor funding? What reporting requirements could pose challenges for grantees? What does equity look like across these different programs? 

Panelists addressed these questions and described the status of IRA and IIJA programs that increase the technical and financial capacity of public sector groups. They also shared case studies from across the country where funding is making a difference in communities, and discussed what lessons can be learned to bolster these federal efforts going forward.