By Jenevra Wetmore
Solar panels installed at a local farm. Photo credit: Maddie Cook and Kieran Ahern.
The Environmental Protection Agency calls the Inflation Reduction Act (IRA) the “most significant climate legislation in US history.” Despite this, 7 in 10 Americans say they’ve heard little or nothing about it, according to a Washington Post-University of Maryland poll. The act was passed in August 2022, and many provisions went live in January 2023, meaning that some of the benefits of the IRA are available to households right now. It is high time for an update on the progress of the IRA, and what is to come in 2024.
Together, the IRA and the Bipartisan Infrastructure Law will cut U.S. greenhouse gas emissions by up to 41 percent by 2030. The key climate and energy provisions of the bill include:
- Encouraging renewable energy by extending the available federal income tax credits for energy sources such as solar and wind;
- Increasing the affordability of electric vehicles (EVs). Specifically, the IRA maintains the existing $7,500 consumer credit for the purchase of a qualified new EV and eliminates a previous manufacturer quota that phased out the credit after manufacturers had sold 200,00 EVs;
- Creating a consumer tax credit for the purchase of used EVs;
- Ramping up domestic production of batteries and computer chips critical to producing EV’s and other electric-based systems and equipment;
- Investing $60 billion to address equity and environmental justice by reducing pollution in low-income and disadvantaged communities.
These provisions might sound abstract, but the IRA provides many home energy rebates for homeowners– sections 50121 and 50122 authorize 8.8 billion in rebates for home energy efficiency and electrification projects. You can see how much money you are eligible for at www.rewiringamerica.org/app/ira-calculator. Enter your household size and income and the site will show what tax credits you can use right now. It also shows electrification rebates, which aren’t available yet but are expected to be available in much of the country in 2024.
For example, a single homeowner making $65,000 a year is eligible for up to $20,550 in incentives. This includes tax credits, such as a 30% tax credit on solar and battery storage. This means that, with the average solar installation in Vermont costing $16,800, a homeowner can expect a $5,040 reduction in their taxes. If the credit is worth more than you owe in taxes, you can carry it over into the next year for as long as the credit remains in effect. This is a great incentive, however it depends on the homeowner owing taxes. If you are retired or low-income, income tax incentives are not as appealing. This is where the IRA’s electrification rebates come into play.
Unlike a tax credit, which relies on the household owing income tax, the IRA’s rebates are designed to provide a discount at the point of purchase. This means that households will receive automatic discounts based on income. For low-income households (under 80 percent of Area Median Income), the Electrification Rebates cover 100 percent of your heat pump costs up to $8,000. According to the American Society of Home Inspectors, it costs $4,000 to $8,000 to install a heat pump, with an average cost of $5,500. This means that low-income households will be eligible to install a heat pump for free, with no upfront cost. For moderate-income households, the Electrification Rebates will cover 50 percent of heat pump costs up to $8,000. Other point of purchase rebates include: electrical panel upgrades, heat pump hot water heaters, weatherization, induction stoves, heat pump clothes dryers, and electrical wiring upgrades.
Unfortunately, point-of-purchase rebates aren’t available yet. If you are interested but not sure which energy upgrades may be a good fit for your home, consider getting a home energy assessment from a professional. Efficiency Vermont has a list of Efficiency Excellence Network weatherization contractors (EENs) who you can hire to come do a full audit of your house. They can advise you on the best place to start making upgrades, whether that be insulating your attic or replacing your old hot water heater.
You might wonder: why aren’t these life-changing rebates available now? The way the IRA is designed, states are responsible for designing and administering their own home energy rebate programs that will make the rebates accessible to households. This will likely be managed by Efficiency Vermont, which maintains a list of current rebates available to Vermonters and helps implement them. As of now, there is no way for residents to access the rebates until Vermont implements a method of doing so– the only parts of the IRA available to residents are the tax credits.
Watching how our state rolls out rebates will be vital in 2024. As many of us remember, the website launch that was supposed to operationalize the Affordable Care Act was a complete failure; only eight people managed to sign up the first day. Poor implementation of this law nearly undid the entire legislative effort. This lesson should also be applied to the IRA, which involves carefully crafted financial incentives. If it is difficult or confusing to access incentives, people will give up and they will go unused, stunting our efforts to lower emissions. This is the biggest piece of climate legislation in our country’s history– we cannot afford to make a mistake.