Contract documents

August 22, 2022

The Inflation Reduction Act of 2022 (IRA), signed into law by President Biden on August 16, 2022, was generally presented as a means to fight inflation.   Whether it does so or not, the part we might all be telling future generations about is how the new law finally took meaningful steps to combat climate change – a challenge first brought to Congress thirty-four years ago.

It was June 1988 when NASA scientists first urged legislators to take action on global warming.  Since that time, though, legislative hopes were repeatedly dashed in the Senate (see report in The Atlantic).  Now, though – despite one of the most divided atmospheres in American political history – conditions were fortuitously right.

The new law promises to help shore up American energy security, fight climate change, and improve the resilience of American communities. The IRA raises $737 billion in total, and authorizes $369 billion in spending on energy and climate change. It is no less than a momentous stride forward. A few highlights follow.

Domestic Clean Energy and Decarbonization

The IRA reduces reliance on fossil fuels by making an unprecedented investment in domestic clean energy production.  Plans to reduce carbon emissions by 40 percent in the U.S. by 2030 will proceed through tax incentives for energy efficient buildings, grants to state and local governments to adopt the latest energy codes and zero-energy stretch codes, rebate programs for electrifying homes, and funding to improve energy efficiency and resilience in affordable housing.

Electric Vehicles

The IRA includes up to $7,500 in tax credits for new electric vehicles and $4,000 for used electric vehicles, while also helping manufacturers promote sales by eliminating a cap on the number of vehicles sold per manufacturer that may qualify for the tax credit. To promote the sale of electric cars to the middle class, the EV tax credits are available only to individuals making less than $150,000 per year, and couples making less than $300,000.

Support for Clean On-Shore Manufacturing

The IRA makes a heavy investment to promote manufacturing using clean energy and materials, with $60 billion allocated for domestic clean energy manufacturing across the full supply chain. The manufacturing incentives aim to alleviate inflation and reduce the risk of dramatic price fluctuations by reducing the cost of clean energy, technology and transportation, as well as providing relief from supply chain disruptions.

Environmental Justice

The IRA takes important steps toward environmental justice for disadvantaged communities. It includes several new grant programs: $3 billion for Environmental and Climate Justice Block Grants for community-led projects to address disproportionate environmental and public health harms; $3 billion for Neighborhood Access and Equity Grants to support safety, equity, and access to affordable transportation in underserved communities; and $3 billion for Grants to Reduce Air Pollution at Ports that will support the use of zero-emission equipment and technology and the development of port climate action plans.

Resilience

With climate change-driven wildfires and droughts increasing in the west, the IRA will strengthen rural, Tribal and Native Communities by providing financial incentives and support especially to farmland and wildland owners to participate in climate solutions, and by providing support for rural communities to adapt to the changing environment.

The Path Ahead

While the new law does not contain everything that activists had hoped for to combat climate change and protect future generations, it is a major step in the right direction – and at long last, the legislative path has been cleared for true progress.

Inflation Reduction Act One Page Summary (senate.gov)

Jessyca Henderson is an attorney and architect based in Maryland, providing legal services and consulting to design professionals, corporations and government related to sustainable design, building science, and environment. www.jlhlawoffice.com

AIA Contract Documents has provided this article for general informational purposes only. The information provided is not legal opinion or legal advice and does not create an attorney-client relationship of any kind. This article is also not intended to provide guidance as to how project parties should interpret their specific contracts or resolve contract disputes, as those decisions will need to be made in consultation with legal counsel, insurance counsel, and other professionals, and based upon a multitude of factors.