The Inflation Reduction Act of 2022: Key Provisions and Implications for Corporate Climate Action

On Wednesday, July 27, Senator Joe Manchin (D-WV) shocked policy observers and policymakers alike by announcing his support for a new version of the Democrats’ massive reconciliation bill. Manchin, thought to represent the critical 50th vote for the bill in the Senate, had been opposed to earlier versions, and that opposition seemed to have doomed hopes for major climate-related legislation in this Congress. Manchin’s sudden reversal—not yet fully explained—means the bill, and climate policy momentum, have new life.

In its current form, the bill comprises over 700 pages of legislative text. In addition to climate provisions, it contains important changes to health care and tax policy, including an increase of the minimum corporate tax rate to 15%. Further changes are possible as the bill moves to a Senate vote as soon as next week, and, if it indeed passes there, to the House of Representatives.  While the Senate’s version is pulled rightward by the centrist tendencies of Manchin and Arizona senator Kyrsten Sinema (whose position on the revised version is still unknown), progressives in the House may attempt to pull it leftward, especially given several fossil-fuel-friendly additions that may have been what brought Manchin into the fold.

As with any major legislation, passage and signing is only the beginning. Many of the important programs this bill would establish or expand depend on agency-level rulemaking, a process which takes time and sustained political will. Nevertheless, should the Inflation Reduction Act of 2022 be enacted as law, the outlook and strategic calculus for corporate climate action will be significantly improved.

The Climate Board reviewed the details of the proposed legislation and identified four major themes and important climate-related provisions in the bill as it currently stands, along with implications for corporate climate action.

Theme 1: Extensive support for expansion of clean energy will change the calculus for producers and purchasers alike.

Theme 2: Expanded but targeted subsidies will push the electric vehicle market over the tipping point.

Theme 3: Targeted efforts to decarbonize foundational industries will cascade through value chains.

Theme 4: The bill’s focus on community and environmental justice aims to generate much broader political and social momentum for climate action.

Click here to read more about the most important climate-related provisions and what they mean for your company’s climate action plan.

The Climate Board will continue to monitor the legislative progress of the Inflation Reduction Act and any other climate-related legislation that may follow. Our member organizations enjoy direct access to our experts to discuss these developments and the specific implications for their businesses and climate action plans. For more information, reach out at www.theclimateboard.com/contact.

 

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