Dubbed the Cut Inflation Act of 2022, the deal includes a host 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 could help people who wish to make greener choices.
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The legislation has the potential to be “transformative,” said Leah Stokes, associate professor of environmental policy at the University of California, Santa Barbara.
“The bill will make access to clean technology more affordable for ordinary Americans,” Stokes said. Its incentives, she added, could help defray some of the upfront costs associated with investing in more sustainable innovations, such as electric vehicles or energy-efficient heat pumps. In turn, Stokes and other experts pointed out that many Americans can expect to see significant reductions in their overall energy costs.
If households invest in climate-friendly and energy-efficient technologies, with financial support from the bill, it could help the average household save $1,800 on their annual energy bill, according to an analysis by Rewiring America, an organization at nonprofit dedicated to electrification. Another analysis by RMI, a clean energy think tank, found that tax incentives for clean energy sources, which would increase the use of wind and solar over the next decade, could save US households up to $5 billion over the next two years.
Here is a breakdown of several key incentives that could have practical and direct benefits for you. Keep in mind, however, that there are limits and eligibility requirements that, depending on individual circumstances, may determine how much you can qualify for certain grants.
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Tax credits for electric vehicles
Many buyers of new and used electric vehicles would benefit from a tax credit.
The real “game changer,” Stokes said, is that the bill would also remove a previous limit that prevented popular electric vehicle makers from being able to offer tax credits once they had sold a certain number of vehicles. vehicles.
For new electric vehicles, a tax credit of $7,500 could be applied at the point of sale. Those who buy used electric vehicles could be eligible for a credit of up to $4,000.
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The new credit for previously owned electric vehicles could be important 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 really invisible catalysts,” Britton said, noting that about 70% of Americans aren’t looking for a new car.
“Because once you get behind the wheel of an electric vehicle, you have a 95% chance of never going back,” Britton added, “and therefore exposing Americans of all income levels to the electrification will have a really positive impact on our ability to make the transition.”
While there have been discussions that paying people to get non-electric vehicles 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. “Vehicle retirement programs are getting more complicated.”
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Although tens of millions of Americans can benefit from these tax credits, there are eligibility requirements.
For new electric vehicles, the tax credit would apply to income below $300,000 “in the case of joint filing or surviving spouse”, $225,000 for those filing as head of family and $150,000 for single filers. For used electric vehicles, revenues from the same categories cannot exceed $150,000, $112,500 and $75,000, respectively.
There are also limits to the cost of the vehicle.
“If you wanted to buy an electric Lamborghini, sorry, it won’t be eligible,” Nadel said.
To qualify for a credit, new electric vehicles that are vans, SUVs or pickups cannot exceed $80,000, while other types of vehicles cannot cost more than $55,000. Used electric vehicles may qualify if they cost no more than $25,000.
The credit also depends on which manufacturers make qualifying vehicles, Britton said. But, he noted, the bill includes funding that would help achieve those goals.
Clean energy and energy efficiency incentives
The bill contains numerous incentives, including rebate programs and tax credits, intended to encourage home improvements that would increase energy efficiency and use more clean energy technologies.
For example, the HOMES rebate program would reward eligible households for energy savings, Nadel said. People would typically receive $2,000 if they made changes that saved them 20% or more on overall energy costs and $4,000 if they save 35% or more. These amounts could increase for low- and moderate-income households, which the bill defines as individuals or families whose total income is less than 80% of the median income of the region in which they live. Households in underserved communities would also be eligible for incentives.
Additionally, the bill would encourage home electrification projects and efficiency improvements. Eligible persons who install heat pumps for space heating or cooling; heat pump water heaters; electric pump clothes dryer; or electric stoves, cooktops, stoves or ovens, among other technologies, could benefit from rebates and tax credits.
Additionally, other home improvements, such as improving insulation, air sealing or ventilation to also help increase energy efficiency, could be subsidized.
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The legislation would also support residential and community solar power.
The previous credit for residential solar projects was due to expire at the end of 2023, but if passed, the bill would institute a 30% credit for households that install solar panels until 2032 before a reduction period two-year increment.
“That’s a significant number,” Erin Duncan, vice president of congressional affairs at the Solar Energy Industries Association, said of the 30% credit. Duncan said the bill’s provisions “will allow the industry as a whole to have greater predictability about what it can offer consumers and will also allow consumers to make choices based on when it is right for them.” agrees”.
Other elements of the agreement would help facilitate the progress of community solar projects — or projects that multiple community members can invest in and benefit from — she added. “Community solar could be extremely important in democratizing who can participate in this energy choice.”
Affordable Housing Improvement Fund
The agreement would also provide funding, including a $1 billion grant program, to eligible affordable housing owners or sponsors to make properties more energy and water efficient.
Some eligible projects would include climate resilience as well as improving indoor air quality or sustainability, implementing the use of low-emission technologies, including zero-emission electricity generation, energy storage or the electrification of buildings.
If affordable housing is able to make renovations with the help of the bill’s funding, Nadel said it would mean “renters of these apartments will have much more modern, comfortable and energy-efficient apartments” and lower bills. reduced energy.
Overall, experts have broadly welcomed the climate deal, calling on lawmakers to move quickly to pass the legislation so people can start taking advantage of these incentives.
“For consumers, this is a step change in the most positive way that will make our communities more resilient and help us keep our costs manageable,” Duncan said. “We’re also going to create tons of jobs for our neighbors, or maybe for ourselves, so I think that’s really exciting.
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