How the Climate Bill can save you money and change what you buy

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With more than $300 billion in spending focused on reducing emissions and promoting clean energy production, the agreement reached Wednesday between Senate Leader Charles E. Schumer (DN.Y.) and Sen. Joe Manchin III (DW. .va.) the country’s most important climate law to date — with many provisions that, if passed, would have direct implications for the lives of millions of Americans.

The deal, dubbed the Inflation Reduction Act of 2022, includes a slew of incentives, such as tax credits for electric vehicles or EVs, and sustainable home improvement efforts, which aim to change the way households consume and use energy, and would can help individuals who want to make greener choices.

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The legislation has the potential to be “transformative,” said Leah Stokes, an associate professor of environmental politics at the University of California at Santa Barbara.

“The bill will make it more affordable for ordinary Americans to afford clean technology,” Stokes said. The incentives, she added, could help cover some of the initial costs associated with investing in more sustainable innovations, such as EVs or energy-efficient heat pumps. For their part, Stokes and other experts emphasized that many Americans could expect significant reductions in their overall energy costs.

If households invest in climate-friendly and energy-efficient technologies, with financial backing from the bill, it could help the average household save $1,800 on its annual energy bill, according to an analysis by Rewiring America, a nonprofit dedicated to electrification. Another analysis from RMI, a clean energy think tank, found that the clean energy tax incentives, which would ramp up wind and solar use over the next decade, could save US households as much as $5 billion within two years. to spare.

Here’s an overview of some key incentives that can have practical and immediate benefits for you. However, keep in mind that there are restrictions and eligibility requirements that, depending on individual circumstances, may determine how much you can benefit from some grants.

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Tax credits for electric vehicles

Many buyers of both new and used electric vehicles would get a tax credit.

The real “game changer,” Stokes said, is that the bill would also remove an earlier cap that prevented manufacturers of popular EVs from offering tax credits once they’ve sold a certain number of vehicles.

For new electric vehicles, a $7,500 tax credit can be applied at the point of sale. Those who purchase used EVs can qualify for a credit of up to $4,000.

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The new credit for previously owned EVs could play an important role in helping the country move away from fossil fuel-powered vehicles, said Joe Britton, executive director of the Zero Emission Transportation Association.

“That’s going to be one of the real kind of invisible catalytic converters,” Britton said, pointing out that about 70 percent of Americans aren’t looking for a brand new car.

“Because once you get behind the wheel of an EV, 95 percent likely you’ll never go back,” Britton added, “and so exposing Americans of all income levels to electrification will have a really positive impact on us.” ability to transition.”

While there has been discussion that paying people to get non-EVs off the road might be a better approach, the bill’s provisions would likely be “much simpler,” said Steven Nadel, executive director of the American Council for an Energy-Efficient Economy. “The programs to retire vehicles are getting complicated.”

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While tens of millions of Americans can take advantage of these tax credits, there are eligibility requirements.

For new EVs, the tax credit would apply to incomes less than $300,000 “in the case of a joint filing or surviving spouse,” $225,000 for those applying as head of household and $150,000 for single filers. For used EVs, incomes for the same categories cannot exceed $150,000, $112,500, and $75,000, respectively.

There are also limits to how much the vehicle may cost.

“If you wanted to buy an electric Lamborghini, sorry, it’s not eligible,” Nadel said.

To qualify for a credit, new EVs that are vans, SUVs, or pickup trucks must not exceed $80,000, while other vehicle types must not exceed $55,000. Used EVs can qualify if they cost no more than $25,000.

The credit also relies on manufacturers making eligible vehicles, Britton said. But, he noted, the bill includes funding that would help meet those goals.

Clean energy and efficiency incentives

The bill contains numerous incentives, including rebate programs and tax credits, designed to encourage home improvements that would increase energy efficiency and use more clean energy technologies.

For example, the HOMES discount program would reward eligible households for energy savings, Nadel said. People would normally receive $2,000 if they make changes that save them 20 percent or more on total energy costs and $4,000 if they save 35 percent or more. Those amounts could rise for low- and middle-income households, which are defined in the bill as individuals or families whose total income is less than 80 percent of the median income of the area in which they live. Households in disadvantaged communities would also be eligible for incentives.

In addition, the bill would encourage residential electrification projects and efficiency upgrades. Eligible persons installing heat pumps for space heating or cooling; heat pump boilers; electric pump dryers; or electric cookers, hobs, stoves or ovens, among other technologies, can take advantage of discounts and tax credits.

In addition, other home improvements, such as improving insulation, air sealing or ventilation to also increase energy efficiency, can be subsidized.

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The legislation would also support residential and community solar.

The previous credit for residential solar projects was set to expire at the end of 2023, but if passed, the bill would establish a 30 percent credit for households installing solar panels through 2032 before another two-year phase-out period.

“That’s a significant number,” Erin Duncan, vice president of congressional affairs at the Solar Energy Industries Association, said of the 30 percent credit. Duncan said provisions in the bill “will allow the industry as a whole to have greater predictability about what they can offer consumers and also allow consumers to make choices based on when it’s right for them.”

Other elements of the agreement would make it easier for community solar projects — or projects that multiple community members can invest in and benefit from — to move forward, she added. “Community solar can be incredibly important for democratizing who can participate in this energy choice.”

Funds for Affordable Housing Improvements

The deal would also provide funding, including a $1 billion grant program, to owners or sponsors of eligible affordable housing to make the properties more energy and water efficient.

Some eligible projects include addressing climate resilience and improving indoor air quality or sustainability, implementing the use of low-emission technologies, including zero-emission electricity generation, energy storage or electrification of buildings.

If affordable housing is able to make renovations using the bill’s funding, Nadel said it would mean “tenants in those apartments will have much more modern, comfortable, energy-efficient apartments” and lower energy bills.

Overall, experts have largely praised the climate deal and called on lawmakers to act quickly to pass the legislation so that people can start taking advantage of these incentives.

“For consumers, this is a turning point in the most positive ways that will make our communities more resilient and help us keep our costs under control,” Duncan said. “We’re also going to create tons of jobs for our neighbors, or maybe for ourselves, so I’m really excited.

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