A Guide to the Inflation Reduction Act
On August 16, 2022, President Biden signed the Inflation Reduction Act into law, marking the most significant action Congress has taken on clean energy and climate change in the nation’s history. With the stroke of his pen, the President redefined American leadership in confronting the existential threat of the climate crisis and set forth a new era of American innovation and ingenuity to lower consumer costs and drive the global clean energy economy forward.
The Inflation Reduction Act is aimed squarely at building a better America and delivering on President Biden’s vision to make sure the United States—powered by American workers—remains the global leader in clean energy technology, manufacturing, and innovation. The Inflation Reduction Act’s $370 billion in investments will lower energy costs for families and small businesses, accelerate private investment in clean energy solutions in every sector of the economy and every corner of the country, strengthen supply chains for everything from critical minerals to efficient electric appliances, and create good-paying jobs and new economic opportunities for workers.
In keeping with the Biden-Harris Administration’s commitment to working families, equity, and environmental justice, the Inflation Reduction Act prioritizes creating shared prosperity, making the nation more resilient to growing threats to health and well-being, and driving critical economic investments to historically underserved communities, particularly those living with legacy pollution. For several of the clean energy tax incentives, for example, the law offers bonus credits for projects that are located in economically distressed communities or traditional energy communities and for projects that meet requirements to pay the prevailing wage and hire qualified registered apprentices. The law also will advance the President’s Justice40 Initiative, which commits to delivering 40 percent of the overall benefits of climate, clean energy, and related federal investments to communities that are marginalized, overburdened by pollution, and underserved by infrastructure and other basic services. Further, through an all-of-government effort, the Administration will work to ensure that investments under the Inflation Reduction Act facilitate state and local contracting opportunities for underserved small businesses.
The Inflation Reduction Act builds on the foundational climate and clean energy actions taken by the Biden-Harris Administration and investments that President Biden secured in his Bipartisan Infrastructure Law (or Infrastructure Investment and Jobs Act), signed in November of 2021. Historic in its own right, the Bipartisan Infrastructure Law includes billions to modernize the electric grid, build a nationwide network of electric vehicle chargers, strengthen the battery supply chain, expand public transit and passenger rail, invest in new clean energy and emissions reduction technologies, improve resilience in physical and natural systems, and clean up legacy pollution in communities across the country—all while creating new, high-quality jobs, including union jobs, with good benefits and supportive services that build pathways for all to the middle class.
The Biden-Harris Administration is showing that American spirit and enterprise can alter the course of history and make people’s lives better in pursuit of bold ambition. The Biden-Harris Administration is showing that American spirit and enterprise can alter the course of history and make people’s lives better in pursuit of ambitious goals. In his first days on the job, President Biden set forth a bold climate agenda and has since vigorously advanced policy actions to achieve his commitment to reduce U.S. greenhouse gas emissions by 50-52 percent below 2005 levels by 2030. With the passage of the Inflation Reduction Act—in combination with the Bipartisan Infrastructure Law and other actions—the Department of Energy (DOE) estimates that the United States will achieve a 40 percent reduction in economy-wide greenhouse gas emissions below 2005 levels by 2030, positioning the United States to realize the President’s vision with additional executive branch, state, local, and private sector action. DOE estimates that the clean energy provisions of the Inflation Reduction Act and the Bipartisan Infrastructure Law together could reduce emissions by more than 1,000 million metric tons of CO2e in 2030, equivalent to the combined annual emissions released from every home in the United States.
Overview and Purpose of the Guidebook
This guidebook provides an overview of the clean energy, climate mitigation and resilience, agriculture, and conservation-related tax incentives and investment programs in President Biden’s Inflation Reduction Act, including who is eligible to apply for funding and for what activities. The Biden-Harris Administration is working quickly to design, develop, and implement these programs; as such, the information in this guidebook is current as of publication. In the coming weeks and months, we will publish new developments on www.CleanEnergy.gov to keep stakeholders and potential beneficiaries of these programs up to date on the latest deadlines and details. This guidebook does not cover the Inflation Reduction Act’s health care provisions or certain corporate tax reforms.
The guidebook groups the Inflation Reduction Act’s tax incentives and investment programs into thematic chapters and explains how the law will deliver on the President’s commitments to the American people. Each chapter outlines the significance of these programs and includes a one-page summary of each program’s eligible uses, potential beneficiaries, and other important information. Given the cross-cutting nature of energy and climate issues, many of these Inflation Reduction Act programs and tax provisions could fall under more than one chapter. For ease of presentation, each program or provision is featured only once in the guidebook.