What’s in the Inflation Reduction Act — for renewable fuels?

July 28, 2022 |

The Ultraviolets (by which I mean the left side of the political spectrum) and some enthusiasts for renewables that come from other parts of the politcal spectrum are rejoicing over news that Senators Schumer and Manchin reached an agreement on the Inflation Reduction Act. President Biden said, “With this agreement, we will improve our energy security and tackle the climate crisis – by providing tax credits and investments for energy projects.   This will create thousands of new jobs and help lower energy costs in the future.”

But, what’s in it specifically, and what’s there for renewable fuels?

Here are the details from the US Senate with markers to indicate items of definite or possible industry interest. More on the bill here.

Summary of the Energy Security and Climate Change Investments in the Inflation Reduction Act of 2022 

Both high energy costs, and the growing impacts of climate change, pose a significant burden to every American. The historic investments included in the Inflation Reduction Act of 2022 will bring down consumer energy costs, increase American energy security, while substantially reducing greenhouse gas emissions. 

The combined investments in the FY2022 Budget Reconciliation bill would put the U.S. on a path to roughly 40% emissions reduction by 2030, and would represent the single biggest climate investment in U.S. history, by far. 

The Inflation Reduction Act: 

1. Lowers energy costs for Americans through policies that will lower prices at the pump and on electricity bills, help consumers afford technologies that will lower emissions and energy prices, and reduce costs that would otherwise be passed on to them. 

2. Increases American energy security through policies to support energy reliability and cleaner production coupled with historic investments in American clean energy manufacturing to lessen our reliance on China, ensuring that the transition to a clean economy creates millions of American manufacturing jobs, and is powered by American-made clean technologies. 

3. Invests in decarbonizing all sectors of the economy through targeted federal support of innovative climate solutions. 

4. Focuses investments into disadvantaged communities to ensure that communities that are too-often left behind will share in the benefits of the transition to a clean economy. 

5. Supports resilient rural communities by investing in farmers and forestland owners to be part of growing climate solutions, and by ensuring rural and communities are able to better adapt to a rapidly changing climate. 

American Energy Security and Domestic Manufacturing 

This bill will support energy reliability and cleaner energy production coupled with investments in American clean energy manufacturing. It includes over $60 billion to on-shore clean energy manufacturing in the U.S. across the supply chain of clean energy and transportation technologies. These manufacturing incentives will help alleviate inflation and reduce the risk of future price shocks by bringing down the cost of clean energy and clean vehicles and relieving supply chain bottlenecks. 

  • Production tax credits to accelerate U.S. manufacturing of solar panels, wind turbines, batteries, and critical minerals processing, estimated to invest $30 billion. 
  • $10 billion investment tax credit to build clean technology manufacturing facilities, like facilities that make electric vehicles, wind turbines and solar panels 
  • $500 million in the Defense Production Act for heat pumps and critical minerals processing 
  • $2 billion in grants to retool existing auto manufacturing facilities to manufacture clean vehicles, ensuring that auto manufacturing jobs stay in the communities that depend on them. 
  • Up to $20 billion in loans to build new clean vehicle manufacturing facilities across the country. 
  • $2 billion for National Labs to accelerate breakthrough energy research. 

Decarbonize the Economy 

The investments in this bill will reduce emissions in every sector of the economy, reducing emissions from electricity production, transportation, industrial manufacturing, buildings, and agriculture. 

  • Tax credits for clean sources of electricity and energy storage and roughly $30 billion in targeted grant and loan programs for states and electric utilities to accelerate the transition to clean electricity. 
  • Tax credits and grants for clean fuels and clean commercial vehicles to reduce emissions from all parts of the transportation sector. 
  • Grants and tax credits to reduce emissions from industrial manufacturing processes, including almost $6 billion for a new Advanced Industrial Facilities Deployment Program to reduce emissions from the largest industrial emitters like chemical, steel and cement plants. 
  • Over $9 billion for Federal procurement of American-made clean technologies to create a stable market for clean products, including $3 billion for the U.S. Postal Service to purchase zero-emission vehicles. 
  • $27 billion clean energy technology accelerator to support deployment of technologies to reduce emissions, especially in disadvantaged communities. 
  • A Methane Emissions Reduction Program to reduce the leaks from the production and distribution of natural gas. 

Farmers, Forestland Owners and Resilient Rural Communities 

This bill will make investments to ensure that rural communities are at the forefront of climate solutions. The investments affirm the central role of agricultural producers and forest landowners in our climate solutions by investing in climate-smart agriculture, forest restoration and land conservation. It also makes investments in clean energy development in rural communities. 

  • More than $20 billion to support climate-smart agriculture practices. 
  • $5 billion in grants to support healthy, fire resilient forests, forest conservation and urban tree planting. 
  • Tax credits and grants to support the domestic production of biofuels, and to build the infrastructure needed for sustainable aviation fuel and other biofuels. 
  • $2.6 billion in grants to conserve and restore coastal habitats and protect communities that depend on those habitats. 

Reaction from the stakeholders

Michael McAdams, President of the Advanced Biofuels Association: “The Advanced Biofuels Association (ABFA) is pleased that the new Senate Inflation Reduction Act will provide extensions for renewable diesel and clean fuel production tax credits, as well as create a sustainable aviation fuel credit, which are essential to reducing greenhouse gas emissions from our nation’s highest emitting sector – transportation. Our low-carbon liquid fuels, which by law must exceed 50 percent emissions reductions, but frequently exceed 80 percent, are vital to propel the US into a cleaner, energy-independent future. We encourage Congress to support this historic legislation that will create much needed certainty for the production of the American-made, low-cost, low-carbon fuels of the future.”

Growth Energy CEO Emily Skor. “It’s very encouraging to see Senate negotiators continue to recognize key priorities we’ve pushed forward over the last year, including SAF, infrastructure, and other incentives aimed at maximizing the biofuel industry’s contributions to a low-carbon future. For the U.S. to meet its climate goals, we must quickly expand the volume of low-carbon biofuels available across the entire transportation sector – on the ground, in the air, and at sea. These provisions can jump-start that climate progress, while delivering more savings at the pump, greater long-term energy security, and a welcome economic boon to rural communities. We know from experience that this process is far from done, and we continue to review other details of the proposal, but we look forward to continuing our work with champions in the House and Senate to ensure our priorities are reflected in any final package.”

US President Joe Biden: “This afternoon, I spoke with Senators Schumer and Manchin and offered my support for the agreement they have reached on a bill to fight inflation and lower costs for American families.  With this agreement, we have a chance to make prescription drugs cheaper by allowing Medicare to negotiate lower prices and we can lower health insurance costs for 13 million Americans, by an average of $800 a year, for families covered under the Affordable Care Act.  We will improve our energy security and tackle the climate crisis – by providing tax credits and investments for energy projects.   This will create thousands of new jobs and help lower energy costs in the future. This bill will reduce the deficit beyond the record setting $1.7 trillion in deficit reduction we have already achieved this year, which will help fight inflation as well.  And we will pay for all of this by requiring big corporations to pay their fair share of taxes, with no tax increases at all for families making under $400,000 a year.This is the action the American people have been waiting for.  This addresses the problems of today – high health care costs and overall inflation – as well as investments in our energy security for the future.  I will have more to say on this later.  For now, I want to thank Senator Schumer and Senator Manchin for the extraordinary effort that it took to reach this result.  If enacted, this legislation will be historic, and I urge the Senate to move on this bill as soon as possible, and for the House to follow as well.”

Joe Britton, Executive Director of the Zero Emission Transportation Association: The Inflation Reduction Act of 2022 will make an unprecedented investment in our clean energy infrastructure and zero-emission transportation system. This bill’s passage will create millions of good-paying American jobs in the clean transportation industry, drastically cut consumer energy and transportation costs, and boost public health by decreasing carbon emissions and other pollution. America owes a great deal of gratitude to all those who worked to negotiate this bill.”

“The bill will ensure that America builds the core technologies of the 21st century here at home, and it will allow us to win the global clean transportation race. We encourage all U.S. Senators and Representatives to support this bill, and we hope that it is quickly passed into law.”

Oliver Peoples, CEO, Yield10: “This bill is very positive for Yield10 given our focus on commercializing the oilseed Camelina as a winter cover crop to support demand for decarbonizing feedstocks oil for RD and aviation biofuels. The funding support for climate-smart agriculture practices will incent more growers to plant new cover crops by reducing risk in the near term. Over time, the winter Camelina varieties we are commercializing as a cash cover crop will enable growers to gain value from carbon reduction and generate additional revenue by increasing production of biofuel feedstock and protein during a time of year when the land would otherwise be fallow.

The technology accelerator funds and focus on investment into and building resilient rural communities is also very positive. It remains to be seen as we will have opportunities to tap into the accelerator funds. However, a number of regions where we are working to secure grower contracts have the land and biofuel facilities in place but lack seed crushing infrastructure, here again this bill has the potential to provide support to de-risk those investments.

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