I try to keep it positive. Not just in this email, but offline as well. This is partially the way I’m built, but it’s also a choice that keeps me from shutting down in the face of terrible news. Of which we have plenty.
For the past several months, though, I’ve been uncharacteristically angry. I’ve been angry, specifically, at Joe Manchin. This hasn’t been some background simmer, but a full-on rage boil. Folks like you and I do our best to preserve our world: we alter our diets, go easy on plastic, drive slow, etc. Then this dude rolls up on the Capitol and parks his Maserati in front of any meaningful legislation that could help slow global warming.
Our action is important and it adds up; but that coal-snorting shitbag has been bogarting the keys to a much larger vehicle for change: the Biden Administration’s climate agenda. I have spent a lot of time wanting to punch Joe Manchin in his dime-store soul.
Today, though, I’m feeling pretty good. I’m still pissed at Manchin, but mostly because he made me get up before sunrise to read 725 pages of Washington-speak and write a whole new newsletter when I had a perfectly decent one ready to go. Well, it’s 1:45PM on the East Coast, 10:45AM out West now, and nowhere in the world is it too early to celebrate what I believe is a straight up win for the environment.
Some will rightly point out that our government could do more, but America looks to be in a far better place today than it was at the beginning of the week. I believe this bill is good progress, and I’m here to tell you what it means.
For those of you who have no idea what I’m talking about, here’s the short version: Yesterday evening, the West Virginia senator whose name I am sick of typing announced his support for the most significant piece of climate legislation in American history. It is called the … drumroll… Inflation Reduction Act of 2022. Huh?
As far as I can tell, the bill mainly aims to address inflation by investing in renewable energy—which is inherently deflationary—and reducing the federal deficit by $300-ish billion. There are also healthcare and prescription drug subsidies that should ease financial pressure on many Americans. That sounds kind of thin to me, but a) economics is not my area, b) who cares, and c) I’m fine with the inflation reduction rhetoric being lip service to satisfy Manchin’s conservative base.
Inflation will rise and fall over the coming decades no matter what this Congress does; but failing to enact measures that combat Global Warming will spend years our planet doesn’t have.
Let’s take a moment to cross our fingers and toes, because this bill isn’t signed yet. It looks like the Senate may vote on it as early as next week, but Kyrsten Sinema (another winner) still has to voice her support, and who knows what this thing will look like by the time it gets to Biden’s desk. If you have a few minutes, reach out to your representatives to ensure they don’t stop pushing on this thing until it’s the law.
OK, back to Optimism Mode. Breathe in; arms up to the sky. Let’s manifest this mofo through the Cretan labyrinth that is Congress. And now let’s look to the future and understand what this legislation will actually do:
The Inflation Reduction Act of 2022 proposes to raise $739 billion and spend $433 billion over the next 10 years: $369 billion for energy and the climate, and $64 billion for healthcare. The remaining $306 billion will be credited towards the federal deficit.
Where the money comes from
It’s worth taking a beat to understand how this bill generates cash, because a key component of any climate legislation these days is that it pays for itself.
The largest chunk of the Inflation Reduction Act is a 15 percent corporate minimum tax. The current U.S. corporate tax rate is 21 percent, but it’s based on a companies’ tax returns: what they tell the IRS they’ve earned after applying every possible deduction and credit. This bill’s 15 percent rate, though, will be based on a company’s book income, which is what a company tells its shareholders it earned. Book income is almost always higher than taxable income, so even though the tax rate looks like it’s going down, this one change should bring in an additional $313 billion. Hot damn.
IRS reform will contribute another $124 billion. This one is hilarious and sad at the same time. The bill will increase the IRS’s budget “to determine and collect owed taxes, to provide legal and litigation support, to conduct criminal investigations (including investigative technology), to provide digital asset monitoring and compliance activities, to enforce criminal statutes related to violations of internal revenue laws and other financial crimes.” In other words, the previous administration cut the IRS’s enforcement budget so deep, it couldn’t afford to collect the money it was owed.
A further $288 billion comes from prescription drug price reform, which includes allowing Medicare the ability to negotiate prices. A little mysterious that this doesn’t already happen, but if today is the rainy day Congress was saving this one for, great. It should lower costs both for the government and consumers. And then the final $14 billion is the result of closing the “carried interest” loophole, which allows investment managers to pay long-term capital gains taxes rather than income taxes (20 percent vs as much as 37) on some of their compensation.
Where the money goes
$64 billion from the bill will extend subsidies for the Affordable Care Act through 2025; they were going to expire this year. That money also allows people and families “whose household income exceeds 400 percent of the poverty line” to remain eligible for ACA subsidies. This is all incredibly important, and the bill spends about 200 pages on healthcare, but you’re here for environment stuff, so I am moving on.
I’m not going to list every climate provision in this 725-page bill, but I did pick out the items that I think matter most to most people:
You may have heard about the $7,500 EV tax credit; it’s been around since 2009. The deal was, you’d get money back on your taxes if you bought an electric vehicle from an automaker that had sold less than 200,000 of them.
Well, that volume cap has been lifted, so companies like Tesla and GM, who have sold lots of EVs, qualify again. And now you’ll get your discount when you buy the car instead of when you submit your taxes. Additionally, there’s a new $4,000 credit for buying a used electric vehicle, which is huge.
In order to qualify, the vehicle has to be assembled in the U.S., and the majority of its battery components need to be American-made as well.
The credits apply to electric sedans that cost less than $55,000 and SUVs, trucks, and vans that you can get for south of $80,000. Your financial picture matters more now, though not in the typical car-buying way; you can only get the credit if you make less than $150,000 ($300K for joint filers).
Even the Postal Service can benefit—the bill contains $3 billion for the USPS to purchase zero-emission vehicles.
The US is not a leading manufacturer of, for example, solar panels. Yet. This bill aims to change that with $30 billion worth of incentives to companies to produce clean energy tech here. The bill will give tax credits to firms that make solar panels, wind turbines, and storage batteries in the U.S.. The bill will also incentivize domestic minerals processing; materials like cobalt and lithium are key ingredients in advanced battery tech.
There’s also $10 billion in tax credits for companies to build new cleantech factories—places where more turbines, panels, and EVs are made—plus another $20 billion in loans to facilitate that construction. The bill has $2 billion in grants to turn existing auto factories into ones that make electric vehicles, and $500 million worth of Defense Production Act money that can be used to manufacture heat pumps. This is good stuff.
Home energy incentives
The bill contains $9 billion in rebates to help people retrofit their homes with cleaner appliances like electric stoves and heat pumps. Right now, states like New York are carrying the most water in this area, and federal help will be huge.
In addition to the rebates available to the general public, the bill has a billion dollars to make public housing more efficient. Environmental justice is a hugely overlooked aspect of global warming, so it’s great to see investment here. The bill contains around $60 billion in environmental justice investment altogether, including $15 billion earmarked for clean energy in disadvantaged communities.
$3 billion will go towards cleaning up abandoned mines.
The green bank
You might have heard of the green bank before—it’s an idea that’s been floating around since last year as part of Biden’s original $2.25 trillion American Jobs Plan. Honestly, I didn’t think it would ever see the Senate floor, but I’m stoked that it will (🤞).
The green bank, also called the clean energy accelerator, is a way of funding new projects. It works like a regular bank: Companies borrow money from it and pay those funds back with interest. Alternative energy carries some risks, and this new entity will allow the government to assume some of that.
This green bank is set up to be a public/private blend; the government fronts $27 billion to get it started—administrative costs and initial funds—and then brings on private money to boost its investment capital. A project like it worked well enough in the UK that the government spun it off as a private company.
Natural resources and agriculture
It’s good to see green things getting some love. There’s actually quite a bit, with some surprising nuance and specificity. In addition to $5 billion that’s earmarked for forest conservation and urban tree-planting, there’s $2.6 billion for coastal habitat restoration.
Forests—both on land and in the ocean—are crucial carbon sinks, storing and sequestering a lot of what humanity (and nature) emits. As the human population grows, we’re using more and more land for farming, which significantly diminishes our planet’s capacity for anything that emits CO2.
CO2, of course, is not the only greenhouse gas we need to worry about. Methane is even more potent, and agriculture emits a lot of it. The bill contains $9 billion in agricultural subsidies with $50 million specifically aimed at “prioritizing proposals that utilize diet and feed management to reduce enteric methane emissions from ruminants.” America will do anything to keep eating steak.
There’s more, of course, but I think I hit on the core stuff. Reach out if you think I missed anything important. We all need to be as fluent as possible in the ways our government is addressing global warming, because the more we know, the more nervous we’ll make them. Bill McKibben put it best in a note he sent out last night:
We fight to change the zeitgeist, people’s sense of what is normal and natural and obvious. Yes, we fight to block this pipeline or divest that pension fund, and each of those is important: but they add up to something more, a slowly moving weight that eventually shifts from one side to the other.
That’s what happened last night when Joe Manchin caved.
If you’ve ever called your congressperson or showed up at a march or rage-posted on Instagram (❤️ U, Cliff) or even been that person at dinner who wouldn’t shut up about global warming, you helped make this happen. You should feel good today. You should celebrate this victory now and when the bill gets signed.
This fight is far from over, but we haven’t lost yet either. Stay optimistic. Be proud. Take care of yourselves—and the rest of us, too.