How the New Climate Bill Promises to Cut Inflation, Upgrade the Economy, and Slash Emissions

This RMI briefing analyzes the potential impacts of the Inflation Reduction Act on the United States economy and climate goals. The legislation commits $369 billion to energy and climate, targeting the decarbonization of buildings, transportation, and heavy industry while aiming to reduce inflation by securing domestic clean energy supply chains.

• The Inflation Reduction Act allocates $369 billion to energy and climate, focusing on renewable electricity, clean transportation, efficient buildings, and supply chain infrastructure to reduce costs and stimulate domestic manufacturing.
• The legislation supports the electric vehicle (EV) sector by providing billions for domestic sourcing, refining, and recycling of critical minerals, and by extending tax credits for new and previously owned clean vehicles. Specifically, a $40,000 tax credit is available for vehicles over 14,000 pounds, and $1 billion is allocated for clean heavy-duty vehicles, with approximately $400 million of that dedicated to high pollution communities.
• Residential tax credits for upgrades such as heat pumps, insulation, and energy audits could result in annual energy bill savings of $37 billion for 103 million households.
• The bill invests $1.5 billion into urban and community forestry through the Urban and Community Forestry Assistance Program to mitigate extreme urban heat and reduce pollution.
• To decarbonize aviation, the bill provides production tax credits for sustainable aviation fuel (SAF), which can reduce flight lifecycle emissions by up to 80 percent. SAF capacity is projected to grow 15 times in five years, exceeding 500 million gallons annually, with proposed credits potentially saving producers at least $1.3 billion by 2027.
• The act introduces a hydrogen production tax credit of $3 per kilogram for 'green hydrogen' produced with renewable electricity, aiming to make it cost-competitive with fossil fuels for use in fertilizer, steel, and shipping sectors.
• Industrial decarbonization for steel, cement, aluminum, and chemicals is supported through $5.8 billion in increased funds for emission-cutting technologies and tax credits to close cost gaps.
• The bill supports energy community recovery, particularly in Appalachia, by providing higher tax credits for projects using domestic products or located in former fossil energy communities, and by permanently extending funding for the Black Lung Disability Trust Fund.
• Clean electricity tax credits for solar, wind, and battery storage are extended for 10 years. RMI analysis suggests these credits could reduce nationwide electricity bills by $5 billion per year by 2024.
• The legislation targets methane emissions by imposing a fee on facilities that exceed specific annual emission limits and increases the tax credit for direct air capture (DAC) to up to $180/tCO2, which may represent a 30 to 50 percent subsidy for such projects.

APA

RMI (2022). How the New Climate Bill Promises to Cut Inflation, Upgrade the Economy, and Slash Emissions. https://rmi.org/resources/how-the-new-climate-bill-promises-to-cut-inflation-upgrade-the-economy-and-slash-emissions/

Chicago

RMI. How the New Climate Bill Promises to Cut Inflation, Upgrade the Economy, and Slash Emissions. 2022. https://rmi.org/resources/how-the-new-climate-bill-promises-to-cut-inflation-upgrade-the-economy-and-slash-emissions/.

Wikipedia

{{cite report |author=RMI |title=How the New Climate Bill Promises to Cut Inflation, Upgrade the Economy, and Slash Emissions |date=3 August 2022 |url=https://rmi.org/resources/how-the-new-climate-bill-promises-to-cut-inflation-upgrade-the-economy-and-slash-emissions/ |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{rmi2022how, author = {{RMI}}, title = {{How the New Climate Bill Promises to Cut Inflation, Upgrade the Economy, and Slash Emissions}}, institution = {RMI}, year = {2022}, month = aug, url = {https://rmi.org/resources/how-the-new-climate-bill-promises-to-cut-inflation-upgrade-the-economy-and-slash-emissions/}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }