The massive climate bill signed into law by Joe Biden on Tuesday will touch countless aspects of Americans’ lives, helping shape everything from the cars they drive to the stovetops in their kitchens.
Biden has hailed the $369 billion climate spending in the Inflation Reduction Act as the “biggest investment ever to address the existential crisis of climate change” and predicted it will save people hundreds of dollars in energy bills every year. This claim is based on a series of investments aimed at shifting buying habits away from an polluting status quo towards cleaner, electrified vehicles and appliances.
According to a recent estimate, a US household could save $1,800 in energy bills each year, although this would require installing electric heat pumps for hot water and air conditioning, replacing a gasoline-powered car with an electric vehicle, and installing solar panels on the roof.
But even without these changes, the climate law is expected to reduce costs by directing support for renewable energy projects like wind and solar, which provide a less price-volatile source of electricity than gas, coal and oil.
“There are people who are really on the front lines of the inflation crisis and how expensive fossil fuels are [Vladimir] Putin’s invasion of Ukraine, and this law will bring great energy savings to those people,” said Leah Stokes, climate policy expert at the University of California.
The new law, once passed, will provide a tax refund of up to $7,500 for a new electric vehicle that can be transferred to the car dealer so it can act as an upfront payment. Electric cars have historically been the domain of the wealthy, accounting for less than 5% of total auto sales in the US, and the bill seeks to remedy that by also offering a $4,000 tax credit for used electric vehicles (EVs) that people hope with lower incomes can benefit from it.
However, it’s uncertain how strong the initial sales will be. The tax credit applies to cars made with parts manufactured in the US or from countries that have a free trade agreement with the US, meaning the leading suppliers of key materials like cobalt and lithium – China and Russia – are excluded .
Ongoing supply chain problems also mean that demand for electric vehicles is currently outstripping supply, as many automakers have long waiting lists for models, while public charging infrastructure is still patchy across much of the country.
Anyone who wants to install solar panels on their property can now get a 30% tax credit, a program that runs through 2034. People who use batteries at home for energy storage can also access the credit.
Putting up solar panels doesn’t come cheap, averaging $20,000 according to the Solar Energy Industries Association, but those upfront costs are eventually recouped in savings on energy bills.
Roof panels are also becoming more common in new construction as states such as California enact regulations that new developments must include them. People living in apartments may have the option of leasing a rooftop solar system or joining a community solar park.
Some of the biggest changes ushered in by the Climate Act are likely to be found in Americans’ homes, with up to $14,000 in rebates for low- and middle-income households to make their homes greener and more efficient.
A rebate of $8,000 will be available to help install heat pumps, which are efficient electrical devices that both heat and cool homes, with an additional $1,750 for hot water. When buying a tumble dryer or an electric cooker, for example a high-efficiency induction hob, a slightly lower tax credit can be claimed.
Tax credits covering 30% of the cost of home improvements that reduce heat leaks, like improved windows and doors, are also part of the bill, with a $1,600 rebate for insulating and sealing a home and a $2,500 tax credit for electrical wiring improvements .
Household savings “will be reflected in lower monthly energy bills and reduced utility bills
volatility and a reduction in disproportionate energy burdens in disadvantaged communities,” said Jamal Lewis, director of policy partnerships at Rewiring America, a clean energy research organization.