Policy & Regulation

The IRA has benefitted 3.4 million American families. Will it survive?

The IRA has benefitted 3.4 million American families. Will it survive?
President Joe Biden signs the Inflation Reduction Act into law on August 16, 2022 (courtesy: The White House)

The U.S. Department of the Treasury released new data Wednesday from the IRS and a fresh analysis by the Office of Economic Policy demonstrating that more than 3.4 million American families benefitted from $8.4 billion in Inflation Reduction Act tax credits in 2023.

The Inflation Reduction Act, intended to decrease the upfront cost of clean energy and energy efficiency investments and monthly utility bills for American families, has made an indelible impact since President Joe Biden signed the legislation into law nearly two years ago, on August 16, 2022.

Wednesday’s announcement marks the first public release of data from 2023 tax filings showing the benefit of the IRA’s clean energy tax incentives for consumers. It indicated the number of families taking advantage of the credits increased by almost one-third compared to the tax year 2021. The aggregate value of the credits increased by nearly two-thirds.

Recent research from U.S. national labs and analysis from the Treasury’s Office of Economic Policy shows that after consumers adopt energy upgrades, they can save hundreds or thousands of dollars per year on their utility bills. Households installing residential solar have saved a median of $2,230 annually, and households that install efficient heat pumps and improve building efficiency are expected to save up to $600, $1,200, or $3,100 per year, based on the type of heating and cooling system that is being replaced.

“The Biden-Harris Administration’s top economic priority is lowering costs for American families, and the Inflation Reduction Act is advancing that goal by making home energy upgrades more affordable and cutting monthly utility bills,” said U.S. Secretary of the Treasury Janet L. Yellen. “The law has lowered the cost of clean energy upgrades for more than 3.4 million American families, saving them hundreds, if not thousands, of dollars annually on their utility bills for many years to come.” 

American families claimed more than $6 billion in credits for residential clean energy investments on 2023 tax returns filed and processed through May 23, 2024. This credit works toward investments in solar electricity generation, solar water heating, battery storage, and more. Families have also claimed more than $2 billion for energy-efficient home improvements, including heat pumps, efficient air conditioners, insulation, windows, and doors during the same period. These estimates are expected to increase as additional returns are filed and processed, says Treasury.

The IRA in the crosshairs

The Inflation Reduction Act is quickly becoming a focal point in the United States’ impending presidential election, despite its apparent impact. There are fears a second Donald Trump presidency will unwind many of the benefits of the legislation. Those sentiments are echoed in a letter addressed to House Speaker Mike Johnson this week, signed by 18 Republican members of Congress urging him not to repeal the IRA.

“As Members of the House Republican Conference, we write to urge you to prioritize business and market certainty as you consider efforts that repeal or reform the Inflation Reduction Act (IRA),” the letter reads.

“Today, many U.S. companies are already using sector-wide energy tax credits – many of which have enjoyed bipartisan support historically – to make major investments in new U.S. energy infrastructure,” the note continues. “We hear from industry and our constituents who fear the energy tax regime will once again be turned on its head due to Republican repeal efforts. Prematurely repealing energy tax credits, particularly those which were used to justify investments that already broke ground, would undermine private investments and stop development that is already ongoing. A full repeal would create a worst-case scenario where we would have spent billions of taxpayer dollars and received next to nothing in return.”

How do the VP candidates feel about it?

New Democratic Vice Presidential candidate Tim Walz has been a consistent advocate of clean energy, as demonstrated over the course of his two terms as Minnesota Governor. In February of last year, Walz signed one of the strongest green energy bills in the country, requiring his state to entirely eliminate carbon from its electricity generation by 2040. The only states with the same timeline are Michigan, Connecticut, New York, and Oregon; Rhode Island wants to get to 100% renewables by 2033.

“Climate change impacts lives and livelihoods in every corner of our state,” said Governor Walz. “Minnesota will continue to lead the way on combatting climate change and we’ll create clean energy jobs in the process. This bill is an essential investment in our future that will continue to pay off for generations to come.”

Walz joined Presidential candidate Kamala Harris on the campaign trail this week, where he will likely continue to promote the more than $1 trillion spent on clean energy infrastructure comprising the IRA and 2021 bipartisan infrastructure law.

“We all remember what it was like before the Inflation Reduction Act,” Harris told a crowd in Eau Claire, Wisconsin on Wednesday. “We’re not going back.”

“Walz seems capable of holding nuanced views on energy policy,” notices Scott Segal, an international trade and election lawyer and a partner in the Bracewell law firm’s Policy Resolution Group. “While he supports the buildout of charging infrastructure and electric school buses, Walz also understands the importance of liquid motor fuels, particularly given the significant footprint of biofuels production in the state. New developments are in the offing for biofuels, renewable diesel, and sustainable aviation fuel, and Walz will be a familiar leader on each.”

In late June, Walz also signed permitting reform legislation, streamlining Minnesota’s energy permitting procedure by creating two separate review processes: a standard review for smaller wind and solar projects and power lines and a more intensive review for larger projects, such as major transmission lines or power plants.

The Republican choice for Vice President, Ohio Senator J.D. Vance, has taken an opposite stance. According to Politico, Vance has championed fracking and spoken out against clean energy since he was elected in a campaign partially funded by fossil fuel companies. Watchdog OpenSecrets indicates the oil and gas lobby has donated more than $340,000 to Vance’s campaigns since 2019.

“I’m skeptical of the idea that climate change is caused purely by man,” Vance told the American Leadership Forum during his Senate race.

“The Biden administration is doing everything it can to subsidize alternative energy sources and demonize our nation’s most reliable sources of power,” Vance wrote in an op-ed in Ohio’s Marietta Times last year. “In a time of grinding inflation, increasing energy costs, and continuing global instability, we Ohioans are lucky to live on top of the Utica Shale oil and gas basin,” Vance added.

As a Senator, he introduced bills to repeal the IRA’s federal tax credits for electric vehicles, attempting to replace it with a $7,500 credit specifically for gas or diesel vehicles. According to The Guardian, he also co-sponsored a bill that would roll back Environmental Protection Agency rules on vehicle emissions and repeal an IRA program designed to halt methane leaks. These efforts were unsuccessful.

Interestingly, it appears Vance had different opinions before he ran for Senate. He previously questioned the long-term role of fossil fuels in Ohio and has personal investments in an energy storage developer and EV-charging company.

“J.D. Vance will sell out to the highest bidder, whether that’s Trump or the fossil fuel industry,” declared Stevie O’Hanlon, communications director of American 501(c)(4) political action organization Sunrise Movement. “That makes him dangerous… J.D. Vance will empower Donald Trump to enact even worse damage on our planet in a second Trump administration.”