The Senate passed the IRA Act of 2022 last week, but the road to reducing emissions will take more than just a large infusion of money.
Now that Congress has taken a critical step in investing $369 billion in green energy causes through the Inflation Reduction Act of 2022, the real work can begin.
Last week the Senate passed the bill, along a party-line vote that saw Vice President Kamala Harris cast the 51-50, tie-breaking Senate vote.
The bill still needs to be passed by the Democrat-controlled House of Representatives, but it is expected to become law soon as the IRA is very similar to a version of the bill that the lower House already passed.
While the bill will admittedly do little to battle inflation, despite its name, the money allocated to the green economy represents the largest investment any country has ever made to battle climate change by reducing greenhouse gas emissions.
But the real question is what can the American public expect to get for the hundreds of billions being spent on their behalf.
“It’s going to take the industry a while to digest all of it, and that’s if the bill gets passed in its current form,” Amy Lynch, founder and president of FrontLine Compliance told TheStreet.
Tough Battle Fighting Climate Change
The IRA Act of 2022 is designed to lower energy costs for Americans “through lower prices at the pump and on electricity bills,” while increase American energy security, and efforts to decarbonize all sectors of the economy.
Some of the money in the bill will go to Main Street through subsidies for purchasing things like electric vehicles and solar panels.
The Energy Innovation: Policy and Technology think tank estimates that the bill could cut greenhouse gas emissions by between 37% and 41% below 2005 levels.
While the bill increases drilling activity from the oil and gas industries by granting more federal leases, the group estimates that for every ton on emissions increases generated, the bill avoids 24 tons of emission through other provisions.
An analysis from Rhodium Group says the bill puts the U.S. 2030 target of reducing emissions by at least 50% from 2005 levels in play.
The IRA Act includes over $60 billion for clean energy manufacturing in the U.S, $30 billion of which is through tax credits for clean energy companies to deploy more solar, wind, and batteries across the energy grid over ten years.
Another $10 billion goes to building green facilities, like buildings where wind turbines and solar panels are manufactured.
Tesla’s (TSLA) – Get Tesla Inc. Report next Gigafactory could be built with funds from this bill. Last year, Ford (F) – Get Ford Motor Company Report announced announced plans to spend $11.4 billion on EV manufacturing. The company could be a big recipient of some of these funds.
Consumers will get $7,500 per new electric vehicle and about $4,000 for each used electric vehicle they purchase until 2032. But there are new restrictions which limit the types of electric vehicles are eligible.
Wall Street’s Role
Industry was the third leading cause of greenhouse gas emissions in the U.S. in 2020, according to the EPA, accounting for 24% of total output.
Transportation and electric power generation are just ahead of industry, accounting from 27% and 25% of emission, respectively.
A recent Harris Poll for Google Cloud survey of 1,491 executives across 16 countries found that most had at least one program in place in the name of a greener future. However, 58% of executives said that their organization was guilty of greenwashing (the practice of marketing a company or organization so it appears more environmentally friendly).
According to the survey, 65% of respondents wanted to “advance sustainability efforts but don’t know how to actually do it.” Only 36% said their organizations even have the tools to even measure their efforts.
Only 17% are using those measurements to optimize their performance based on the results.
Whether the IRA programs are successful in reaching their targets and Americans see a benefit from the money spent remains to be seen.
“I really think it depends of the success of the program,” Lynch said. “Right now, we shouldn’t expect anything in the short-term. These are dollars that need to be distributed through various funding mechanisms that will take a while.”