U.S. Senate passes clean energy provisions in sweeping budget measure

The U.S. Senate passed a sweeping budget package Sunday along party lines that includes major provisions for clean energy and carbon emission reductions that will heavily impact energy-related utilities and businesses including electric vehicle makers and their buyers.

The measure is expected to pass the House on Friday and be signed by President Joe Biden. The president is also set to sign the CHIPS and Science Act on Tuesday, a separate measure expected to boost domestic chip production.

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The Inflation Reduction Act of 2022 invests $270 billion over 10 years in tax credits designed to push consumers into electric vehicles and move electric utilities toward wind and solar power energy.  Proponents said the bill could cut greenhouse gas emissions by 40% below 2005 levels by 2030.

Tax credits include $30 billion to spur production of solar panels, wind turbines, batteries, and processing of critical minerals. Another $10 billion in credits would go for factories to manufacture electric vehicles and solar panels. Another $500 million through the Defense Production Act would go for heat pumps and critical minerals processing.

The bill extends the $7,500 consumer income tax credit for the purchase of a new electric vehicle. There is also a new $4,000 credit for buying a used EV. Eligible new cars are capped at $55,000. There are also requirements for domestic manufacturing of EVs and their battery components to qualify for the extended credit. The law requires 40% of battery components be sourced from factories in the U.S. or free-trade agreement partners. Chinese components and minerals would be phased out starting in 2024.

About $60 billion would help poor areas disadvantaged by climate change, which includes $27 billion for the first green bank to help drive investments in clean energy mainly in poor areas. Oil and gas companies would have to pay penalties of $1,500 a ton for leaks of methane. The bill also reverses a 10-year moratorium on offshore wind leasing created by President Trump.

An indication of the politics involved in the Inflation Reduction Act’s passage are concessions to U.S. Sen. Joe Manchin III, D-West Virginia, to allow certain fossil fuel and drilling provisions.  The Senate passage was assured only with a tie-breaking vote by Vice President Kamala Harris.

The biggest measures affecting corporations include a 15% corporate minimum tax and a 1% excise tax on companies’ stock buybacks, both which are designed to raise more than $100 billion to reduce the deficit, although a final fiscal note is still being tallied and estimates of deficit reduction have gone as high as $313 billion.

A version of the bill at 755 pages was available Saturday before the final vote on Sunday.

TechNet, a group of 100 executives in the technology industry, praised Senate passage of the act in a statement.  “Addressing climate change is one of the most critical global issues of our time,” said TechNet CEO Linda Moore.  “This bill will significantly decrease carbon emissions by the end of this decade by making it easer and more attractive to manufacture and purchase electric vehicles, invest in clean energy innovations and increase the research and development of low and zero-carbon technologies.”

While the bill includes funding provisions below what President Biden has asked for in the past, the Democrats consider it a major victory.  Opponents are expected to continue fighting different provisions in the bill, especially if midterm elections in November result in a Republican majority in either chamber or both.

Vice President Harris said the tally in the final bill includes more than $300 billion to address the climate crisis. “When we look at the morning evening news, and you see wildfires are burning in California, floods, hurricanes -– what will we do to regain our footing as a worldwide leader on the issues of the climate crisis?” she asked.