Can the energy efficiency incentives in the US Inflation Reduction Act win over Republicans?

The IRA provides billions of dollars to transform America's economy, climate and homes. But some of its success will depend on Republican uptake.

The US Inflation Reduction Act (IRA) has passed its first anniversary and is already on its way to transforming the American economy with over $US 500 billion ($AUD 790 billion) in new spending and tax breaks.

This multi-pronged, landmark legislation is the largest investment in United State history that addresses climate change and is projected to reduce US greenhouse gas emissions to 40% below 2005 levels by 2030.

It is designed to help electrify American households, revolutionise how they interact with energy, modernise the electricity grid, and reshape American manufacturing.

Perhaps unsurprisingly though in a country so divided, and where global warming is still contested, the IRA has generated some bizarre responses.

Nikki Haley, one of the Republican Presidential hopefuls, recently called the IRA "a communist manifesto filled with tax hikes and green subsidies that benefit China and make America more dependent on Beijing."

And in a reference to Charlton Heston’s deluded support for gun rights, Congressmen Ronny Jackson and Matt Gaetz are among Republican politicians who have claimed their beloved gas stoves will have to be ripped from their "cold dead hands."

Sage Briscoe, the Federal Director of Policy for Rewiring America, told the SwitchedOn podcast, she fears there will be a lot of this sort misinformation and heated rhetoric about the IRA in the lead up to the next Presidential election.

“Most Americans have never heard of the IRA. They don't know what's in it. They don't understand what it actually means and what it could do for them,” says Briscoe. “And when you have an information vacuum like that, it can be filled by whoever screams the loudest.”

But Briscoe believes that once people see that the IRA is about jobs, local manufacturing, cheaper energy, modernising the grid and having EVs, then people will come on board, and as the IRA programs roll out it will gain a broad base of support and become less of a political football.

The key to its acceptance will be embedding the IRA programs in everyone’s day to day reality, whether they’re off to work at the Ford 150 Lightning factory, building batteries, or buying heat pumps.

“A lot of the manufacturing jobs are going into Republican districts and Republican states, and while the politicians in those states, and the populace in those states, may not be in love with the IRA, they do like the jobs.”

“We're seeing billions and billions of dollars and hundreds of thousands of jobs that are coming online, again, primarily in Republican states,” says Briscoe.

Even Republicans who have been critical of the bill “have been at ribbon cuttings when they have manufacturing openings in their districts.”

This is because a major focus of the IRA is supporting local US manufacturing to build up renewable energy industries. Domestic content requirements are scattered throughout the legislation.

Briscoe says the IRA is designed to ensure the US has a supply of efficient electrical appliances in decades to come and “a stable supply of all the components that we're going to need for the energy transition."

“Making sure that we don't face price uncertainty and price spikes and supply chain issues, that we've all been, unfortunately, too familiar with over the last few years.”

One of the quickest and pronounced IRA success stories has been the impact on the American car industry, which has seen a big growth in EV manufacturing.

In addition to the financial incentives for American automakers to use domestic products and produce vehicles locally, a US $7,500 (AUD $12,000) rebate is available for buyers of EVs which have “a certain percentage of the battery components and the critical minerals either domestically sourced or sourced from a trade ally,” like Australia, says Briscoe.

“That does cut down on the number of models that qualify right now because we don't have that many factories building batteries,” says Briscoe. However, “there have been so many announcements in the last year for new factories for batteries, for EV assembly, it's really taking off.”

There are also tax credits for businesses to build new manufacturing facilities, or retool existing facilities, that produce energy efficient appliances like heat pumps.

And for householders an annual $3,200 tax credit is available for the next ten years for energy efficiency upgrades, including the purchase of heat pumps, insulation, efficient doors and windows, electrical panel upgrades, and energy audits.

A 30 percent tax credit is also available to lower the installation cost of residential clean energy, including rooftop solar, wind, geothermal, and battery storage.

A lot of the work of Rewiring America is now focused on trying to make sure that the implementation of the IRA is done equitably.

“We want to make sure that there's equal access for everyone to be able to share in this abundant electric future.”

Low-income families can get up to US $14,000 (AUD $22,000) to electrify their homes under the IRA but Briscoe is concerned that although renters can benefit from some of the incentives, more still needs to be done for renters.

One program that will assist renters is “10% of [the rebate] funding that is set aside for affordable multifamily housing and is available for landlords to use, if the tenants qualify and if it's an affordable rental unit.”

“We're just starting to turn the corner, by having these rebates incentivise landlords to get involved.”

You can hear the full interview with Sage Briscoe on the SwitchedOn Australia podcast here.

Anne Delaney
SwitchedOn Editor
April 21, 2024
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