More than a year after its passage, much about President Biden’s climate law, the Inflation Reduction Act, is working.
America is putting in more solar panels than ever before, with installations expected to be up 52 percent compared with last year. The law has helped lock in America’s transition to electric vehicles. Companies have announced more than $60 billion in E.V. manufacturing investments since the I.R.A. passed, and Hyundai is rushing to finish its new E.V. factory in Georgia because the law’s incentives are so good. Across the country,investment in all forms of clean-energy manufacturing has ramped up, with spending this spring five times the level of two years ago, according to a new tracker from M.I.T. and the Rhodium Group, a research firm.
The law is supposed to do more than transform the economy, though. It’s also supposed to change how and even where Americans live. The I.R.A. contains nearly $9 billion in rebates meant to help people upgrade and decarbonize their homes — for example, install an induction stove, a heat pump or a new electrical or insulation system. Since the climate law passed last year, Mr. Biden and Democrats in Congress have hyped the savings on energy that these policies will bring to consumers; that is, after all, the inflation that the law is meant to be reducing.
But I have grown worried about these efforts — and about the next phase of the I.R.A.’s implementation more broadly. The building sector accounts for about 13 percent of America’s climate pollution, so the success of these programs is essential to the country’s decarbonization efforts. Yet more important, the execution of these programs poses a political risk for the Biden administration. These rebate and tax credit programs are some of the law’s most visible provisions. Other than the law’s electric vehicle subsidies, these home-focused policies will be most Americans’ best opportunity to get I.R.A. money in their pockets.
If the programs fail, they could seriously mar the I.R.A.’s public image. And right now, they are faltering.
Perhaps the biggest problem is inherent to their design. The most successful federal programs are simple, straightforward and easy to use. Think of the U.S. Postal Service sending free at-home Covid tests to all Americans or the relative ease of signing up for and receiving Social Security benefits. These new home-upgrade programs, meanwhile, seem likely to be especially persnickety, complicated and onerous for many Americans.
That’s because, first, there are a lot of programs in play. Although the I.R.A. streamlined some of the most important existing climate tax credits (for example, for greening the grid), it included four home-focused programs. Two of these programs are tax credits meant to give Americans a tax discount when they install a new rooftop solar system, a geothermal-powered heater, a heat pump or another technology that reduces demand for carbon-emitting fossil fuels. Unlike other tax credits in the law, these programs have no income cap, so they can be used by wealthy Americans who can presumably afford to pay upfront to install residential equipment like a water heater. But like other new tax credits in the law, they require Americans to have some federal tax liability in the first place. If you owe nothing on your taxes, then you can’t get a discount.
These credits are likely to be generous in aggregate, but in some cases they will be too small to spur a serious change of behavior. Installing a whole-home heat-pump system, for instance, can cost tens of thousands of dollars, but the I.R.A.’s new tax credit will cover only $2,000 of that in one calendar year.
That’s when another set of programs is supposed to come in. The I.R.A. introduced a pair of rebate programs meant to help working- and middle-class Americans afford to upgrade appliances and other features of their homes. These two programs, known as HOMES and HEEHRA, are important. When it’s finally put in place, HEEHRA will lower the cost of heat pumps and other climate-friendly appliances at the point of sale, making them more affordable to consumers, including those who are not even aware of the policy. More than perhaps any other programs in the law, these rebates are meant to allow low-income Americans to reduce their monthly energy costs. And because they involve direct cash grants, using the rebates will not require oweing any taxes to the federal government. That is huge for retirees and Social Security recipients, many of whom have no earned income and little to no federal tax liability.
Regardless of how consumers are reimbursed, the programs are exceedingly — perhaps even fatally — complicated. The reason they have yet to take effect is that although these programs will be overseen by the Department of Energy, they will be administered separately by each state’s energy office. The department is still finalizing the last few rules that will govern how these programs work. When it finishes that process, then states will apply for their share of the money. Only then — after states receive their funding and set up their programs — will they be able to start disbursing it to their residents.
So far, very few state offices have received any funds from the programs — not even the preliminary funds meant to help them hire more staff members and manage administration costs. This could directly hurt the programs’ chances of success in the next year. State energy offices employ anywhere from a handful of people to more than 100, and they have now been tasked with overseeing complicated, high-stakes federal programs.
The experts and business leaders I’ve talked to think that these problems will push any serious efforts to carry out the programs well into next year. Montana has said that it doesn’t expect to make rebates available until the first half of 2024. Georgia’s energy office recently estimated that rebates would become available by Sept. 30, 2024, at the latest — barely a month before the presidential election.
Even then, major questions remain about how the programs will work. Democratic lawmakers have called on the Energy Department to consider allowing the rebates to be used retroactively — meaning that someone who bought, say, a heat pump in late 2022 could get free money for it under the law. But that would sharply increase the program’s complexity, and it would more quickly deplete the limited funds allocated to the rebates. The programs draw from fixed pools of funding — about $250 million per state — and when that money runs out at the state level, the rebates will lapse in most cases.
This is not the only place where the I.R.A.’s implementation is mired in confusion. The initial rules of the home energy rebates have left state officials unsure of whether they can use someone’s eligibility for other social welfare programs, such as food stamps, to gauge whether they qualify for a rebate. (The Energy Department has published guidelines about this, but they are not comprehensive.) That may force states to set up expensive processes that will duplicate work that’s already been done and make it even more burdensome for people to use these programs. It’s also unclear whether households can use several Energy Department programs at once — such as the new HOMES rebates and the longstanding weatherization-assistance program — to reduce the cost of a major project.
Unless the Biden administration acts now, these consumer-facing programs could be a big mess by next fall. They will have confusing criteria, work differently in each state and may require applicants to go through time-sucking paperwork before receiving any funds. They will not showcase the nimble, modern government, fighting for working people, that Mr. Biden hopes to sell to voters.
The I.R.A. is going to change people’s lives — I have little doubt of that. But only eventually. And for the next year, many of the law’s benefits for average Americans will remain largely theoretical. The M.I.T. and Rhodium tracker says that of the $137 billion in announced clean-energy investment, only $37 billion — just 27 percent — has started to flow. There is a growing risk that as the presidential election arrives, the law’s most world-changing programs to stimulate clean electricity and E.V.s will have yet to show their impact, and its smaller programs will be mired in public operation headaches.
There is recent precedent for such a failure. Although most Americans now approve of the Affordable Care Act, the law was blamed for Democrats’ losses in the 2010 midterms, and it remained desperately unpopular for much of the following decade. Even when Donald Trump was elected, most independents still disapproved of the law and wanted to see it rolled back. Only in 2017, when Republicans repeatedly tried to repeal the law, did popular opinion swing in its favor. It has remained popular ever since.
The I.R.A., like the Affordable Care Act, aims for a higher purpose than being politically popular. But the law’s survival depends on its — and Mr. Biden’s — ability to win a literal popularity contest next year. Mr. Trump and other Republicans are already cultivating a hatred of the clean-energy transition among voters; failing consumer-facing rebate programs would be a gift to them. And if Mr. Trump wins next year, his team will have plenty of opportunities to undermine the I.R.A.’s emission-cutting policies, even without repealing the whole law.
The aspirations of 30 years of climate policies ride on the I.R.A. If this one law is successful, it will open up other ways of making policy for the environment and economy; if it fails, then lawmakers will shy away from tackling climate change for years. The law’s home-rebate programs will not be large enough to fully decarbonize America’s millions of buildings. But if they are successful, then they will allow the creation of future policy that is.
The I.R.A., I believe, is still on track to be a success. But voters won’t see the new E.V. factories that it’s building or the sparkling new manufacturing hubs. They will see what’s at Home Depot or in the back of their contractor’s pickup truck. And if people have to fill out 20 pages of paperwork just to save less money on a heat pump than they initially hoped for, that’s what they’ll always remember about the I.R.A.
The climate fight might be waged in the streets. But it will be won in the appliance aisle.
Robinson Meyer is a contributing Opinion writer and the founding executive editor of Heatmap, a media company focused on climate change.
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