What’s in the Inflation Reduction Act for Appalachia?

By Dana Kuhnline

What’s in the Inflation Reduction Act for Appalachia?

The Inflation Reduction Act of 2022 is the most significant climate bill in United States history, putting us on a much needed path to reduce greenhouse gas emissions. But what’s in it for Appalachia?  The new reconciliation deal provides climate, energy, and tax reform funds for Appalachia and other coal-country communities. The package provides $369 billion in climate and energy spending, includes $10 billion to support rural communities’ transition to renewable energy, and permanently extends the Black Lung Excise Tax – this important tax supports the Black Lung Disability Trust Fund which provides miners with medical care and a modest living stipend. 

This bill is being described as the biggest package in history to address climate change. This means it is a very, very big bill that we can’t possibly cover in one blog post. 

Let’s start with a few specifics here about what’s in this bill. First, you can read the full bill here (though we don’t really recommend that, we do recommend searching the document to read more about key provisions). 

Senate Democrats also released a Tax Summary and a Prescription Drugs Summary, and an Energy Security and Climate Change Investments Summary, if you want to hear what they are highlighting about the bill. 

What are the big picture potential impacts? 

This useful analysis from Energy Innovation provides modeling to help us understand how the wide variety of the policies included in the bill are predicted to lead to an estimated greenhouse gas emissions of 40% below 2005 levels. Their findings are replicated in a preliminary analysis by the Rhodium Group.  A few noteworthy conclusions of the Energy Innovation model: 

  • For every ton of emissions increases generated by IRA oil and gas provisions, at least 24 tons of emissions are avoided by the other provisions.
  • The IRA would benefit public health, for example: preventing up to 3,900 premature deaths from air pollution. 
  • The bill could create up to 1.5 million jobs in 2030; these jobs would be concentrated in the manufacturing, construction, and service industries
  • This should translate to 150,000 or more in Ohio, West Virginia, Pennsylvania and Kentucky, which make up nearly 10 percent of the US population and should receive a larger share of the investments than that.

Obviously these benefits are hard to predict, and as we have seen time and again, if Appalachian advocates don’t push strongly to ensure that these benefits come to our underserved communities, we won’t see the benefits at the local level. 

But what’s in it for Appalachia?

While we can’t yet provide state by state breakdowns about what communities can expect, we can talk a bit about how this bill fits into the broader priorities we outlined for the region in our Blueprint several years back. We created that document with feedback from hundreds of individuals and organizations across Central Appalachia and have used those principles and priorities to drive our vision for the region since. 

Let’s start with health care 

There are  critical health care measures for working Appalachian families included in this bill – it would lower prescription drug prices and health insurance costs for millions of Americans. Here are a few pieces of the package that will make a real difference for regular people:

  • Negotiation of Lower Drug Prices for Seniors and inflation caps for prescription drugs: Medicare will begin negotiating lower drug prices for seniors and people with disabilities. The bill also caps increases in prescription drug prices to the rate of inflation. These provisions are expected to save private plans and the Medicare program billions of dollars.
  • Annual cap of prescription drug costs: Seniors’ out-of-pocket costs for prescription drugs covered by Medicare Part D will be capped at $2,000 a year, benefitting an estimated 1.4 million enrollees annually. This cap, in addition to free vaccines, should be an enormous benefit to Seniors. 
  • Preventing a Premium Spike for ACA Enrollees: The bill prevents premium increases for more than 10 million people for the next three years by extending the enhanced premium tax credits for people with Affordable Care Act marketplace coverage. The enhanced credits provided by the American Rescue Plan Act significantly reduce premiums for marketplace enrollees with low/middle incomes and cap premiums at 8.5% of income for all enrollees. Without this new bill, the current policy will expire at the end of 2022.

What about the tax provisions? 

While the bulk of this bill is designated to climate and energy policy changes, it pays for those measures by making our tax system more fair.  Some of the big measures here include: 

  • Makes taxes more fair: The bill imposes a 15% Minimum Corporate Tax on Corporations with Profits Exceeding $1 Billion. This provision would make sure that the largest corporations pay a minimum tax of 15% on their net profits. This alone would raise an estimated $313 billion.  The bill also fixes a loophole that allows wealthy hedge fund managers to pay a lower tax rate on their income than average working families.
  • Makes taxes more honest: The bill invests $80 Billion to strengthen IRS enforcement. The provision is expected to increase IRS collections by $203 billion – the provision would not be used to increase taxes on any taxpayer with taxable income below $400,000.

Maximize Good Union Jobs 

One of the key tenets of our Blueprint is that federal policymakers should attach requirements to public funds to maximize creation of good union jobs and require greater diversity and inclusion in our future workforce, as well as require things to be made in the United States – preferably in communities hardest hit by our nation’s energy and economic shifts. 

We can’t underscore the importance of prevailing wage and apprenticeship requirements enough. These measures are essential if we want to strengthen the region’s economy from the ground up, ensure that high road companies are doing the work in a fair and equitable way, and keep as many dollars of federal investments in our community as possible. Here are some of the ways those values show up in the Inflation Reduction Act: 

  • The bill has provisions that strengthen prevailing wage, apprenticeship and domestic content standards throughout. For example the tax credits to renewable energy are one of the largest parts of the bill. We were heartened to see these credits are tied to prevailing wage and domestic content requirements.  To be eligible for full credit amount, entities must prove that they are fulfilling prevailing wage and apprenticeship requirements in the bill. 
  • Bonus credits are available in some areas for projects that meet prevailing wage and apprenticeship requirements, domestic content requirements, as well as location of facilities in energy communities or low-income communities.
  • These measures are essential to help ensure the clean energy transition is built by a unionized workforce and through a domestic supply chain. Apprenticeships are essential to bring the new careers that could be created with this package within reach of low-income, underrepresented communities, and to ensure access to union jobs for Black, Indigenous, women and low-wage workers. 

What about investments in manufacturing? 

Another key component of our Blueprint for Appalachia is a recommendation to grow manufacturing by making it cleaner and more efficient while also making Appalachia a hub for electric vehicle production. We were pleased to see measures that would prioritize this important work. 

  • This op ed outlines some of the positive details in the Inflation Reduction Act for Appalachian manufacturing, including bonus incentives in the package that prioritize the use of domestic products and the development of clean energy projects in communities where mines and power plants have been shuttered.  
  • The package sets aside financing and credits to promote electric vehicle manufacturing. It calls for $2 billion in grants to help convert existing auto manufacturing factories into ones that make electric vehicles and $20 billion of loans for new clean vehicle manufacturing facilities. We worked with our partners at the Roosevelt Project to promote a study highlighting the need for these types of policies in our region. 
  • The package includes a five-year, $60 billion production tax credit for companies involved in clean energy manufacturing.
  • $10 billion would be dedicated to build clean technology manufacturing facilities.
  • The package gives EPA more than $1.5 billion to help companies reduce methane emissions, such as providing technical assistance to improve greenhouse gas reporting, shut-in wells and deploying methane-reduction equipment and processes.
  • The legislation includes $500 million in funding to support Biden’s invoking of the Defense Production Act to produce heat pumps and spur critical minerals processing projects
  • Clean Energy Sustainability Accelerator: This investment will create a $27 billion green investment fund with a focus on deployment of clean energy with 40 percent of investments targeted to disadvantaged communities. 

Increased use of clean energy and energy efficiency

The headlines describing the bill highlight investments of $369 billion over the decade in climate change infrastructure and jobs. 

One of the biggest components of that $369 billion is clean energy is, as stated above, through renewable energy tax incentives. This interesting study by RMI discusses some of the potential positive impacts of this tax credit strategy (note – this study does not discuss the Inflation Reduction Act specifically).  As can be expected in a bill led by Senator Manchin, these tax incentives will also benefit the development of hydrogen and nuclear. 

According to Rhodium, the investments included in the Inflation Reduction Act of 2022 would help cut families’ household energy costs by an average of $500 a year.

The $30 billion for a production tax credit for wind and solar includes important labor provisions for prevailing wage and apprenticeships.

  • Especially important to Kentucky, Tennessee and other places with rural electric co-ops, The Inflation Reduction Act of 2022 will invest $14 billion in rural electric cooperatives and fund loans for rural communities powered by electric co-ops to invest in renewable energy.
  • The agreement also includes the 10-year extensions of existing credits for wind and solar, as well as new provisions for heat pumps, rooftop solar and standalone energy storage, like batteries. These credits would make efficient HVAC systems and water heaters more affordable.
  • A $7,500 rebate for new vehicles and a $4,500 tax credit for used ones. 
  • Some public transit advocates are disappointed there aren’t more measures for electrifying public transportation, instead focusing on a more car focused future. There are some public vehicle electrification supports. The Postal Service would receive $3 billion to purchase EVs to update its 230,000-vehicle fleet. Another $1 billion in grants would fund updated school and transit buses along with garbage trucks. 
  • $9 billion in consumer home energy rebate programs, focused on low- income consumers, to electrify home appliances and for energy-efficient retrofits.
  • $1 billion grant program to make affordable housing more energy efficient.

Agricultural and Natural Infrastructure Investments 

One of the key tenets of our blueprint is to reforest the region, restore wetlands, promote regenerative agriculture and eco-tourism while simultaneously absorbing greenhouse gases with natural landscapes. A huge part of our goals in this arena were to advocate for a revival of the Civilian Conservation Corps. 

We were disappointed to learn that the CCC was not included in the announced framework. However, there were proposed investments in natural resiliency. Measures such as the environmental justice block grant, an energy efficiency training program, and other conservation, wildfire prevention, and public lands accounts could help bring our nation closer towards some of the goals we hoped to achieve through a revival of the CCC.  For example, these federal investments have the potential to bring our region closer to carbon neutral by natural carbon sequestration that happens through sustainable, regenerative agriculture and healthier soils and forests. 

These policies are tremendously important for Appalachia and rural areas across the country, and outlined in this article with a bit more detail.

  • The bill reports a total of $40 billion in federal investments in agriculture priorities, including investments in agriculture, forestry and rural communities. 
  • The bill includes $21 billion in climate smart agriculture and other overtaxed USDA conservation programs. These popular programs are not able to keep up with demand, and these new investments would increase the impact.  Strategies like crop rotating, erosion control, and other restorative ecology approaches will give farmers the tools and information they need to support rural communities, reduce emissions, and positively benefit soil, water, and wildlife. Appalachia communities can only benefit from these actions with healthier air, water, food, and many sacred natural resources in Appalachia can be protected. These measures create natural ways to absorb carbon, and make communities more resilient to climate change. 
  • The deal funds $5 billion for forest resiliency by fighting wildfires and boosting carbon sequestration via forestry projects. The money from this fund will also be used to plant trees in urban communities.
  • The bill also includes $2.6 billion in grants to conserve and restore coastal habitats and protect communities that depend on those habitats.

Invest in the communities hardest hit by our energy and economic shifts 

As we often say at ReImagine Appalachia, you have to tend to the edges of a frayed quilt, or the whole blanket will fall apart. If we don’t lift up those communities that have been historically underinvested in, and then hit first and worst by impacts such as racism, the storms made worse by  climate change, and the downturn of the coal industry, then we undermine any hope for lasting improvements in our region. 

There will always be more to be done in this arena – including fighting hard after the bill is passed to make sure that benefits touted in the bill actually make it to historically underserved populations – but there are some good programs for organizers to be hopeful about. The package includes a reported $60 billion for environmental justice, with the goal of sending new investments to communities long exposed to greater levels of pollution than wealthier and often whiter areas. A few of those provisions include: 

  • The Environmental and Climate Justice Block Grants, funded at $3 billion, invest in community-led projects in disadvantaged communities and community capacity-building centers to address disproportionate environmental and public health harms related to pollution and climate change.
  • The Neighborhood Access and Equity Grants, funded at $3 billion, support neighborhood equity, safety, and affordable transportation access with competitive grants to reconnect communities divided by existing infrastructure barriers, mitigate negative impacts of transportation facilities or construction projects on disadvantaged or underserved communities, and support equitable transportation planning and community engagement activities.
  • Grants to Reduce Air Pollution at Ports, funded at $3 billion, support the purchase and installation of zero-emission equipment and technology at ports.
  • The Department of Housing and Urban Development would also receive $1 billion to improve the climate resilience and electrification projects in public housing. 
  • Some of the previously mentioned programs that focus on disadvantaged and low-income communities are also important to environmental justice, like the technology accelerator and consumer home energy rebate programs. In addition, many of the clean energy tax credits include either a bonus or set-aside structure to drive investments and economic development in disadvantaged communities.

What’s controversial in the bill? 

ReImagine Appalachia is still sifting through the details on the bill and don’t have a formal stance on any of the measures listed below, however, we’re detailing them here for partners who may be looking to see where there is some dissonance around this proposal. 

Chief among them are measures that require the federal government to auction off more public lands and waters for oil drilling. For the next 10 years, the Inflation Reduction Act would prohibit any offshore wind lease sales unless the DOI has held at least one offshore oil and gas lease sale within a year before the wind lease sale. The oil and gas lease sale must be at least 60,000,000 acres (this section can be found on page 644 of the bill text).

There are also concerns that the criteria for what counts as environmental justice investments is problematically broad and will result in more boom and bust industries without deep roots in the region once again profiting off struggling communities without giving back.

The second aspects we have heard concern about are surrounding a reported promise between Senator Manchin and Democratic leaders for a new bill, which will not be connected to the Reconciliation bill, that would speed up the process of issuing permits for energy infrastructure. Community advocates are concerned these changes could tilt the permitting process even more out of the control of the local communities that may be impacted by proposed projects. 

Have more details you’re excited to see in the bill – or not so excited about? Be in touch.