How the climate bill could save you money and change what you buy

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With over $300 billion in spending focused on cutting emissions and promoting clean energy generation, Wednesday’s agreement Between Senate Majority Leader Charles E. Schumer (DN.Y.) and Sen. Joe Manchin III (DW.Va.) The country’s most important climate bill ever It has a number of provisions that, if enacted, will have a direct impact on the lives of millions of Americans.

Dubbed the Inflation Reduction Act of 2022, the deal includes a number of incentives, such as tax credits for electric vehicles, or EVs, and sustainable home improvement efforts, aimed at reducing the way homes consume and use energy. want to change, and help individuals to make green choices.

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The law has the potential to be “transformative”, said Leah Stokesan associate professor of environmental politics at the University of California at Santa Barbara.

“This bill will make it more affordable for everyday Americans to afford clean technology,” Stokes said. Its incentives could help offset some of the upfront costs associated with investing in more sustainable innovations, such as EVs or energy efficient heat pumps, he said. In return, Stokes and other experts stressed, many Americans can expect to see a significant reduction in their overall energy costs.

If families invest in climate-friendly and energy-efficient technologies with financial support from Bill, it can help the average family save $1,800 on their annual energy bill. Analysis by Rewiring AmericaA non-profit dedicated to electrification. Another analysis from RMIThe clean energy think tank, found that tax incentives for clean energy sources, which would increase the use of wind and solar over the next decade, could save American households up to $5 billion within two years.

Here are a few key incentives that can have practical and direct benefits for you. However, keep in mind that there are certain limits and eligibility requirements, which can determine how much you can take advantage of certain subsidies, depending on individual circumstances.

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electric vehicle tax credit

Many buyers of electric vehicles, both new and used, will get the tax credit.

A real “game changer,” Stokes said, is that the bill would also remove the previous limit that prevented makers of popular EVs from being able to offer tax credits after a certain number of vehicles have been sold.

For new electric vehicles, a tax credit of $7,500 can be applied at the point of sale. Those who purchase a used EV may be eligible for a credit of up to $4,000.

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The new credit for previously owned EVs could be key in helping the country move away from fossil fuel-powered vehicles, said Joe BrittonExecutive Director of the Zero Emissions Transportation Association.

“It will be one of the really overlooked catalysts,” Briton said, noting that about 70 percent of Americans aren’t in the market for a new car.

“Because once you’re behind the wheel of an EV, you’re 95 percent likely to never go back,” Briton said, “and so our efforts to transition from exposing Americans of all income levels to electrification.” Will have a really positive effect on capacity. ,

While there has been talk that paying people to get non-EVs off the road might be a better way, the bill’s provisions will likely be “too simple”. steven nadelleExecutive Director of the American Council for an Energy Efficient Economy. “Programs for retiring vehicles get complicated.”

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Although millions of Americans may benefit from these tax credits, there are eligibility requirements.

For new EVs, the tax credit will apply to income less than $300,000 “in the case of a joint return or surviving spouse,” $225,000 for those filing as head of household and $150,000 for single filers. For used EVs, earnings cannot exceed $150,000, $112,500 and $75,000, respectively, for the same categories.

There are also limits to how much a vehicle can cost.

“If you want to buy an electric Lamborghini, sorry, it won’t qualify,” Nadel said.

To be eligible for the credit, new EVs containing vans, SUVs or pickup trucks cannot exceed $80,000, while other types of vehicles cannot exceed $55,000. Used EVs may be eligible if their cost does not exceed $25,000.

Credit is also dependent on manufacturers producing eligible vehicles, the Briton said. But, he said, the bill includes funding that will help achieve those goals.

Clean energy and efficiency promotion

The bill includes a number of incentives, including rebate programs and tax credits, to encourage home improvements that will increase energy efficiency and use more clean-energy technologies.

For example, the Homes rebate program would reward eligible households for energy savings, Nadel said. People will typically receive $2,000 if they make changes that save them 20 percent or more on overall energy costs. and $4,000 if they save 35 percent or more. Those amounts may increase for low- or middle-income households, which the Bill defines as individuals or households whose total income is less than 80 percent of the median income of the area in which they live. Families from disadvantaged communities will also be eligible for incentives.

Additionally, the bill will encourage domestic electrification projects and efficiency up-gradation. eligible people installing heat pumps for space heating or cooling; heat pump water heater; Electric pump clothes dryers; Or electric stoves, cooktops, ranges or ovens, among other technologies, could benefit from exemptions and tax credits.

In addition, other home improvements, such as upgrading insulation, air ceilings or ventilation, may also be subsidized to help promote energy efficiency.

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The legislation would also support residential and community solar.

The previous credit for residential solar projects was set to expire at the end of 2023, but if it is passed, the bill would set up a 30 percent credit for households that are from a subsequent two-year step-down period. First let’s install solar panels by 2032.

“That’s a significant number,” Erin Duncan, vice president of congressional affairs at the Solar Energy Industry Association, said of the 30 percent credit. Duncan said the provision in the bill would “allow the industry as a whole to make more guesses about what consumers have to offer and allow consumers to make choices based on what’s right for them.”

Other elements of the agreement will help make it easier for community solar projects — or projects in which multiple community members can invest in and benefit from — to move forward, he said. “Community solar can be incredibly important to the democratization that participates in this energy choice.”

Fund for Affordable Housing Improvement

The deal will also provide funding, including a $1 billion grant program for eligible affordable housing owners or sponsors, to make the property more energy and water efficient.

Some worthy projects would include implementing the use of low-emissions technologies to address climate resilience as well as improving indoor air quality or sustainability, including zero-emissions power generation, energy storage or building electrification.

If affordable housing is able to renovate with the help of property bill funding, Nadel said it would mean “tenants in those apartments will have more modern, comfortable, energy-efficient apartments” and lower energy bills.

Overall, experts have largely praised the climate deal, calling on lawmakers to act swiftly to pass legislation so that people can start taking advantage of these incentives.

“For consumers, this is a sea change in the most positive ways that will make our communities more resilient and help us manage our costs,” Duncan said. “We’re going to create a lot of jobs for our neighbors, or maybe even for ourselves, so I think that’s really exciting.

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