WILLIAM RAU

If you want to help arrest global warming but are not sure about your best actions, then the Inflation Reduction Act, or IRA, offers a lengthy list of things to do.

Over the next 10 years (2023-32),
this breakthrough climate legislation allocates $369 billion for an array of clean energy initiatives, including $60 billion for environmental justice and
$43 billion to help families decarbonize their homes and possibly buy an electric auto.

Let’s start with homes.

Many American homes are energy hogs because of inadequate insulation, substantial air leakage, McMansion super sizing, and inefficient appliances that burn carbon-spewing natural gas. As a result, homeowners are major contributors to rising temperatures because household energy use causes about 20% of total U.S. greenhouse gas emissions (Benjamin Goldstein 2020). There are, however, two ways to decarbonize our energy hoggish homes: (1) tighten up building envelopes to reduce energy waste; (2) replace gas-burning equipment with hyper-efficient heat pumps. In short, increase energy efficiency and electrify everything for significant reductions in utility bills. Since grid electricity will soon become predominantly renewable, building electrification is one key to slashing emissions.

The IRA minimizes the major financial barrier to home decarbonization: the high upfront costs of major weatherization projects, solar/battery installations, and heat pumps. It provides tax credits for all families and direct or upfront rebates for limited- and moderate-income families. A low-income (less than $70,960) Peoria family of four will receive upfront rebates for the following: weatherization — $1,600; air-source [heating/cooling] heat pump(s) — $8,000; heat pump hot water tank — $1,750; heat pump clothes dryer — $840; electric or induction stove — $840; new electric panel — $4,000; electric wiring — $2,500. Moderate-income families ($70,960 to $133,000) will receive 50% for each rebate item. High income families will not receive rebates but will receive tax credits up to $12,700 per year. Moderate- and low-income families will also have access to smaller tax credits. It appears that there is an interplay between upfront rebates and tax credits (e.g., IRS 2022, 2023), but I have not yet been able to get my mind around the details of this complex law. Moreover, rebates will not be available until later this year because the federal government is presently developing rebate machinery with state agencies who will issue the rebates.

There are other important incentives. If insulation and HVAC upgrades can reduce home energy consumption by 35%, then there is an additional rebate of 80% of project costs up to $8,000, or up to $4,000 if energy reductions reach at least 25%. Achieving such reductions should be a cakewalk. In another essay, I will show how I cut energy use in my home by well over 50%. As noted, American homes bleed energy like stuck pigs.

Last but not least, IRA will cover, as tax credits, up to 30% of the costs for solar arrays and battery storage. The place to begin decarbonization, however, is with an energy audit to guide a comprehensive upgrade in your home’s thermal envelope because that initial step will reduce the size of a solar array and heat pump to cool and heat your home. Next month I will turn to that first step.

References

Goldstein, Benjamin, et al. 2020 (July 20). The carbon footprint of household energy use in the United States. Proceedings of the National Academy of Science; https://www.pnas.org/doi/epdf/10.1073/pnas.1922205117

IRS. 2022 (Dec 22). FAQs about energy efficient home improvements and residential clean energy property credits. U.S. Government; https://www.irs.gov/pub/taxpros/fs-2022-40.pdf

______. 2023 (Mar 29). Home Energy Tax Credits. U.S. Government; https://www.irs.gov/credits-deductions/home-energy-tax-credits

Leber, Rebecca. 2023 (Jan 3). How you can take advantage of tax breaks in the Inflation Reduction Act. Vox; https://www.vox.com/energy-and-environment/23498215/ev-tax-credit-2023-heat-pumps-solar

Rewiring America. 2023. Go Electric! Rewiring America’s Guide to the Inflation Reduction Act; https://www.rewiringamerica.org/IRAguide

Takemura, Alison F. 2022 (Aug 30). Could you get home energy and EV incentives under the climate law? Canary Media; https://www.canarymedia.com/articles/guides-and-how-tos/could-you-get-home-energy-and-ev-incentives-under-the-climate-law