Unpacking the Manchin Climate Deal

What the Climate Deal Could Mean for Clean Energy and You

Last week, Sen. Joe Manchin of West Virginia struck a surprise congressional budget deal with Senate Majority Leader Chuck Schumer.

While the Inflation Reduction Act of 2022 is a health and climate package, including a bunch of tax credits and rebates, it also includes nearly $370 billion in new spending for tackling climate change - a historically large investment of its kind.

There are plenty of hurdles left before the legislation can officially be signed into law, but assuming it's passed, what exactly would this mean for homeowners and energy consumers?

Here's a breakdown of how this could help people save money while living more sustainably:

Electric Vehicles

If EVs weren't already appealing to you, you might have a change of heart if this climate deal goes through. The proposal includes consumer tax credits for new or used EVs. This would be especially helpful since the money would be applied for the first time at the point of sale, lowering monthly payments.

Plus, while the existing federal tax credit for EVs excludes models from major manufacturers that have already sold at least 200,000 of them, this bill gets rid of that altogether. The new tax credit would instead impose a price cap on new EVs - less than $80,000 for bigger vehicles like SUVs and trucks and less than $55,000 for smaller cars.

As exciting as this is, tax credits or other incentives for electric bikes are unfortunately not included in the legislation. But looking at things on a broader scale, the bill does include $3 billion in funding for neighborhood access and equity grants - which could be used to build and repair bike lanes, trails and sidewalks, benefiting riders as well.

Home Electrification

Among the many incentives included in this climate bill is the $4.28 billion High-Efficiency Electric Home Rebate Program to help low-income homeowners electrify their homes.

This, along with the other tax credits and loans included in the bill, would help homeowners save money through the installation of electric appliances like energy-efficient retrofits, heat pumps, rooftop solar, home batteries, electric water heaters and other building improvements.

Not only can these be powered by renewable energy, but homeowners and renters would be able to move away from the inflation of fossil fuels, allowing them to save into the future with more stable bills.

The home electrification tax credits, which are necessary to help reduce costs for homeowners and families, would last for 10 years. Meaning that as these technologies get cheaper over time, the relative portion of their costs covered by the credits would increase.

The climate deal would ultimately result in lower energy bills, reduced health risks from burning fossil fuels indoors and higher property values for owners - not to mention it would be a major source of combating climate change and the climate crisis.

According to Resources for the Future, the use of fossil fuels in buildings accounts for almost 13% of U.S. greenhouse gas emissions. Without the electrification of homes, our climate goals seem unrealistic.

Solar

Solar has taken the world by storm thanks to existing federal tax credits, but with that set to expire for homeowners in 2023, what happens next?

One of the most impactful proposals in the climate deal is to extend the Investment Tax Credit long-term.

If the legislation gets passed, the 30% tax credit for the installation of residential solar panels would be revived, with the bill calling for a 10-year extension of the credit. After that, the credit would decline to 26% in 2033 and 22% in 2034.

Under the Residential Clean Energy Credit, residential battery systems would also be eligible for a tax credit. This would be a major breakthrough for people who want to become energy independent and disconnect from the energy grid.

The bill would certainly help lower barriers to solar energy access. Through community solar programs and local solar development, the climate deal would unlock access to clean energy for millions of low-income families.

By rewarding those who reduce their carbon footprint and emissions with tax credits and generous incentives, this climate bill will make switching to clean energy easier, more affordable and more habitual.

Targeting the Climate Crisis

If the climate deal, which is expected to be passed by the House today, becomes an actuality, the U.S. will be in a better position to tackle climate change. With this kind of federal expenditure, individuals and businesses will be more likely to take action and invest in home electrification and rooftop solar.

Where the ambitious goal of slashing U.S. emissions in half by 2030 seemed impossible before, this legislation could get the wheels turning toward making that goal a reality.