Climate Priorities in the Inflation Reduction Act

The Environmental Protect Agency summarizes the historic $437 billion in funding for climate priorities as follows: “The Inflation Reduction Act of 2022 is the most significant climate legislation in U.S. history, offering funding, programs, and incentives to accelerate the transition to a clean energy economy and will likely drive significant deployment of new clean electricity resources. Most provisions of the Inflation Reduction Act of 2022 became effective 1/1/2023.”

Subsidies are the main strategy the Biden IRA uses to lead the transition to clean energy: paying US businesses, households, nonprofits, educational institutions, state, local, and tribal organizations when they make investments that lead to reduced greenhouse gas (GHG) emissions. Using subsidies reflects lessons learned from prior efforts to pass major climate bills, like the America Clean Energy and Security Act (ACES) of 2009, which relied on measures that put a cost on carbon emissions to provide an incentive for adopting clean energy. It narrowly passed in the House but was blocked in the Senate.

President Biden was determined to pass major climate legislation, using carrots rather than sticks to build a coalition of producers incentivized to go all-in on large clean energy investments.The President succeeded in bringing progressive and conservative Democrats together, and the bill was passed in the House and Senate without a single Republican vote.

The EPA summary of the Biden IRA describes the different types of subsidies and provides a useful chart of their stage of development. The EPA website has another page that charts the environmental funding already awarded through the Biden IRA and the Infrastructure Law, as of February 8, 2024. Earthjustice also provides a great summary of the entire bill.

Many climate-friendly projects funded by the 2021 Biden Infrastructure Law are already underway. The Biden IRA, passed in August 2022, has a more complex structure: some subsidies were awarded in 2023, some grants are still open for applications, and tax credits are most often claimed after the fact. Therefore, we will be looking at investments and plans for California that are just beginning. We’ll bring you updates on climate-action projects in the future.

The Inflation Reduction Act in California

On August 16, 2023, Senator Padilla described the IRA as follows:

“One year since President Biden and Democrats in Congress passed the most ambitious climate investment in history, California has continued to lead the way with bold climate action that will dramatically reduce emissions, lower energy costs for working families, and improve air quality in disadvantaged communities.

“This is why the American people sent us to Congress — and why we will continue working to build on this historic progress — so that Californians have more money in their pockets, cleaner air to breathe, and a healthier future ahead.”

California IRA One-Pager (PDF), Senator Padilla

Urban Canopy Improvements

The Biden IRA includes $5 billion for urban canopy improvements, with about $100 million of that allocated to California. Those USDA Forest Service grants will go to forty-three cities in California for tree planting and maintenance and other related projects, with San Francisco receiving the largest award.

In September 2023, San Francisco received $12 million to hire about one hundred people to plant and maintain trees in the City. These trees will help combat extreme heat, improve access to nature in the City, and employ residents from the City’s underserved communities.

Green Banks

State and local green banks, like the California Alternative Energy and Advanced Transportation Financing Authority (CAEATFA), create high-paying, permanent jobs by providing financial incentives through a sales and use tax (STE) exclusion for manufacturers that promote alternative energy and advanced transportation. The STE Program is currently authorized through 2025.

Historic Drought in the West

The Biden IRA allocated $4 billion to address historic drought in the West. For California, so far, this has included:

Salton Sea Restoration: According to Governor Newsom’s office, $70 million in federal funding is being transferred to the state’s Salton Sea Management Program, the first part of funding from a $250 million federal commitment announced last year to accelerate dust suppression and aquatic habitat projects at the Salton Sea. California has committed more than $500 million in state funding for Salton Sea projects to date. CA Natural Resources Agency provides full report.
Lower Colorado River Basin System Conservation and Efficiency Program: California’s Colorado River water contractors and entitlement holders have closely collaborated with the Bureau of Reclamation to initiate efforts to develop agreements and conserve up to 400,000 acre-feet of water per year through 2026 for the benefit of the Colorado River System as part of Reclamation’s Lower Colorado River Basin System Conservation and Efficiency Program, funded through the Inflation Reduction Act.

Catastrophic Wildfires

In August 2023 the Governor’s Wildfire Resilience Task Force launched an interagency Treatment Dashboard that displays the size and location of state and federal forest and landscape resilience projects in California, including those funded through the IRA.

Lowering Energy Costs for Consumers

The Biden IRA has allocated $9 billion in consumer home-energy rebate programs to electrify home appliances and support energy-efficient retrofits, and it provides ten years of consumer tax credits to make homes more energy efficient and make heat pumps, rooftop solar, electric HVAC and water heaters, and electric appliances more affordable.

The California Energy Commission is submitting plans to the Department of Energy and has invited proposals to utilize funding from these parts of the Biden IRA:

Home Efficiency Rebates (HOMES) which funds whole house energy efficiency retrofits
High-Efficiency Electric Home Rebate Act (HEEHRA) to help low-moderate income households “go electric” through qualified appliance rebates.
Training for Residential Energy Contractors (TERC) to open up the fields of HVAC installation and maintenance to more workers through job training programs.

Consumer tax credit of up to $4,000 for middle- and lower-income people to buy used clean vehicles. This builds on programs that California has had for several years already; the state will be updating those programs to utilize the new tax credits.

Clean Vehicle Rebate Project (CVRP) | California Air Resources Board (Prior to IRA)
California’s clean vehicle rebate program will transition to helping low-income residents
Clean Cars for All, Bay Area Air Quality Management Board program closed until March 2024, probably to align it with the IRA.

CA Research Labs

The Department of Energy’s Office of Science received IRA funding to accelerate the future of energy research, and to upgrade our national laboratories and make them more environmentally sustainable, including these projects:

Lawrence Berkeley National Laboratory, Berkeley, CA: $200 million for upgrades to lab infrastructure and some of its technology, including more supercomputing resources, and to support ongoing physics research.(Inflation Reduction Act Funds Accelerate Berkeley Lab’s Ability to Bring Science Solutions to the World)

Lawrence Livermore National Laboratory, Livermore, CA: $2.4 million for experiments to improve our understanding of nuclear physics. (Lab-led nEXO project receives Inflation Reduction Act funding)
SLAC National Accelerator Laboratory, Stanford University, Menlo Park, CA: $135.8 million for upgrades that will support research into clean fusion energy and other extreme conditions and improve laboratory sustainability and resilience. (LCLS-II-HE | Linac Coherent Light Source)
DOE Office of Science Inflation Reduction Act Project Breakdown Project Laboratory Program Funding (PDF chart of additional projects)

CA Dept of Food & Agriculture

The Inflation Reduction Act supports climate-smart agriculture practices, which will help California’s 69,000 farms lead on climate solutions and reward their stewardship.

Among CDFA programs funded and seeking additional funding from the Biden IRA are the following:

$19 million in grants to support greenhouse gas reductions at California dairy farms, including the use of anaerobic digesters in California dairy operations to reduce methane emissions from cow manure. Some methane will be captured to use as fuel, while the rest will be turned into electricity or hydrogen. ( CFDA Awards More Than $19 Million in Grants to Support GHG Reductions at Dairies)
The USDA has welcomed applications from rural California for loans and grants through its Rural Energy for America Program (REAP), to be funded by the IRA for renewable energy systems and energy efficiency improvements (Rural Energy for America Program (REAP) Renewable Energy Systems & Energy Efficiency Improvement Guaranteed Loans & Grants in California )

The IRA is also funding a Small Agricultural Business Drought and Flood Relief program that can be accessed here: https://cadroughtfloodrelief.com/flood/