How the Inflation Reduction Act Will Fight Climate Change

Billions in this historic bill passed by the House and Senate this week will go toward addressing the climate crisis. Here's what you need to know.

Marguerite Reardon Former senior reporter
Marguerite Reardon started as a CNET News reporter in 2004, covering cellphone services, broadband, citywide Wi-Fi, the Net neutrality debate and the consolidation of the phone companies.
Marguerite Reardon
4 min read

Activists outside the Capitol on Aug. 12 ahead of the House vote on the Inflation Reduction Act of 2022.

Olivier Douliery/Getty Images

America's first significant climate legislation is heading to the desk of President Joe Biden for his signature, fulfilling his promise to cut the country's fossil fuel emissions with hundreds of billions of dollars to fight climate change.

On Friday, the House of Representatives passed the Inflation Reduction Act with a vote of 220-207. No Republicans voted for the bill. 

The House vote comes days after a marathon-long debate in the Senate on Sunday, in which all 50 Democrats signed on to the legislation. Vice President Kamala Harris cast the tie-breaking vote in the Senate. Like in the House, no Republicans in the Senate supported the bill. The legislation will now advance to Biden, who's expected to quickly sign it into law. 

The sweeping spending and tax package addresses a wide array of priorities for Democrats, including extending health care coverage and reducing the deficit. But the majority of the spending will be used to tackle the climate crisis. This includes about $370 billion in spending, which involves tax credits to promote the use of electric vehicles and clean energy, in addition to incentives for companies to expand renewable energy production and fund technologies to remove carbon dioxide from the atmosphere.

The passage of the bill is a win for the fight against climate change and a remarkable turnaround from last year, when Biden's proposed $2 trillion Build Back Better Act, which included more than $500 billion in climate change funding, was passed by the House but died in the Senate.  Experts say the pared down Inflation Reduction Act is still a very big deal that could potentially reduce the nation's greenhouse gas emissions by 40% by the end of the decade. Biden called the bill the "largest investment ever in combating the existential crisis of climate change." 

To help you understand what this historic legislation means to you and climate change, CNET has put together this FAQ. 

How will the Inflation Reduction Act promote clean, renewable energy use?

The main driver of the Inflation Reduction Act are tax credits, which the administration hopes will help the country pivot industry and consumers away from fossil fuels and toward renewable energy. The bill extends several tax credits already available for renewable energy. It also creates new incentives for investment in clean energy technology. 

This includes billions of dollars that will be used to expand the production of electrical power via wind and solar, as well as provide investment and incentives for industrial companies to use clean energy in their manufacturing and production to help reduce US carbon emissions. 

Are there any tax credits for me as an individual to do my part to make the environment cleaner? 

Yes. That's also a major part of this bill. The bill includes tax credits to encourage consumers to buy and use electric appliances, heat pumps and other technologies to increase energy efficiency in homes. It also includes tax credits to consumers to buy electric vehicles, solar panels and battery storage. This includes extending a $7,500 tax credit on the purchase of a new electric vehicle and establishes a $4,000 credit on a used electric vehicle. There are also credits for the purchase of electric vehicles for commercial use. 

Is the bill expected to move the needle on goals for reducing carbon emissions?

Climate experts say the bill could reduce US emissions by about 40% below 2005 levels by 2030. This would mark a significant step toward guarding against the worst consequences associated with global warming. 

Biden had previously set a goal of reducing greenhouse gas emissions in the country by at least 50% by 2030. That target is part of the broader goals set out by the Paris Agreement, which aims to keep global warming under 1.5 degrees Celsius to limit irreversible impacts on ecosystems and human health.

What about people who are already suffering from the effects of climate change and pollution from fossil fuels? Is there anything in the bill for them?

The Inflation Reduction Act puts $60 billion toward helping Americans who have suffered the worst effects of fossil fuel pollution.  This includes funding efforts to clean up pollution while also building resilience in communities most affected by the consequences of the climate change, such as sea level rise, damage from more powerful storms and hurricanes, and communities affected by wildfires. 

The bill also penalizes companies emitting excessive amounts of methane. 

How is the bill expected to affect the economy? 

Because the Inflation Reduction Act encourages the manufacture of clean technology in the US and will also boost the production of renewable energy, the Biden administration says it will create green jobs. 

Why are some environmentalists upset or concerned by the bill?

While the Inflation Reduction Act will create a historic investment in renewable energy, it also opens up more federal lands to oil and gas development. This provision of the bill was included to win support from the Senate's all-important swing vote, Sen. Joe Manchin, a moderate Democrat from West Virginia. 

Specifically, the bill would restart the lease sales for drilling on government lands in Alaska and the Gulf of Mexico. Also, for the next decade, the US government will be required to make 2 million acres of public land and 60 million acres of federal waters available for oil and gas leases each year. 

Ahead of Sunday's Senate vote, more than 350 conservation and community groups, called these provisions in the bill "handouts to the fossil fuel industry." 

Sen. Bernie Sanders, a Democrat from Vermont, called these provisions in the bill a "huge giveaway to the fossil fuel industry." In spite of his opposition to these provisions in the bill, Sanders ultimately voted for it. 

What's next?

The bill will now be sent to President Biden, who's expected to sign it into law next week.