2022 stands as Inflation Reduction Act The single largest piece of legislation Addressing climate change in US history.
About $370 billion is in the IRA for programs like tax credits for more efficient appliances, building new battery plants and subsidies for renewable energy. And it’s new construction and a rumble trigger manufacturing For things like solar panels. It has also created hundreds of thousands of new jobs.
But two years later, most of that money remains unspent.
The biggest investment for the clean energy transition — not yet translated into actual hardware like heat pumps or wind turbines. Despite allocating more than $7.5 billion to building electric vehicle chargers, for example, only a A handful have been built. About 40 percent of large IRA plans hit delay, according to Financial Times.
There were many factors behind the White House’s loss to Democrats, but a particular source of frustration for the White House was that President Joe Biden received little credit for IRA spending, which Most were Targeting Republican-led districts And environmental activists were formed to meet the goals, viz Prioritizing the underprivileged population. Part of why the slow rollout The IRA is barely registered with votersEven among them Concerned about climate change.
Now President-elect Donald Trump says he wants to Refund unspent money And congressional Democrats are getting upset. in recent times the letterDozens of senators and representatives have written to the White House asking President Joe Biden to get more money from the IRA as well as other legislation such as the Bipartisan Infrastructure Act.
“[T]There are many more good projects, good jobs and good savings,” they wrote. “To avoid future politicization or manipulation of climate programs, we urge your organizations to deliver on climate and clean energy programs. Ask for quick action.”
In turn, the White House is scrambling to get programs like that Clean Energy Loan Guarantee There are also some families outside the door Scrambling to take advantage of incentives For heat pumps, home air conditioning, and energy-efficient appliances before the new administration takes office.
All this shows that despite political will and time pressure, spending money can actually be quite difficult. Many state and local governments are finding that federal funds attach more strings than they expected. Meanwhile, ordinary people are running into obstacles like paperwork and supply chain snarl while trying to take advantage of tax credits and discounts.
In the waning days of the Biden administration, the White House can still increase its climate investments, but the question is whether they can get to work on time and whether the next president can roll them back.
Why is it so difficult to spend so much government money?
A major challenge in spending most federal funds on programs like IRAs is that the money doesn’t go directly to suppliers of building materials, EV chargers, batteries or home insulation. Rather, the funds are channeled to state and local authorities who then disburse the money.
That added step creates a lot of complications. First, many local officials are not set up to receive a lot of cash at once. It requires strict accounting and record-keeping, so before they use the money, recipients have to invest in staff and equipment to track it. Then when the money arrives in the bank account, local officials have to decide where to spend it. This means seeking proposals, asking for competitive bids, and giving communities enough time to weigh in. Even for “shovel-ready” projects, they often have to contend with last-minute hurdles like inflation, rising financing costs from supply chain snarls. and litigation that could halt ground-breaking.
Local governments also have their own incentives. While Biden’s White House has sought to juice up the clean energy economy as quickly as possible, often state and local governments want to expand funding. “There’s always a sense that if money is spent too quickly, people can get used to it, even addicted to it, and then when it runs out officials have to raise taxes to make up the difference,” said Donald KettleEmeritus Professor at the University of Maryland School of Public Policy who studies government spending.
The delay results in how funding is obtained, whether it is a grant, loan, loan guarantee or tax credit. The tax credit adds an inherent gap because you don’t get the cash benefit until you file your taxes.
There are some counterexamples, though. Many of the covid-19 pandemic spending measures, like the Paycheck Protection Program, got money into people’s hands faster. These programs were relatively easy to administer. Stimulus checks automatically went to people based on their tax records, for example, but the programs also lacked strong watchdogs, leading to Misdemeanor And forgery. Billions of dollars went to PPP Companies owned by celebrities and was spent Hotels, jewelry and luxury cars.
“We always have this tradeoff between how many safeguards we want to put in place to prevent misuse of money and how aggressively we want to get money out by stimulating economic growth,” Kettle said. “Every time we do something like this, we tend to set that balance somewhere else.”
For the average person, getting IRA funds has also proven challenging. Many EV buyers, for example, have been frustrated by dealers who don’t know about all the tax credits and discounts that can lower sticker prices. Often, buyers teach sellers about sweets. Homeowners also struggle to find installers for heat pumps. Production cuts and shipping delays have made it difficult to buy more energy-efficient appliances.
There are factors at play beyond Biden’s direct control. Changes in global demand and uncertainty about the outcome of the presidential election have led to some companies Stop executing IRA-funded projects. And those who want to roll out often have to go through a tedious, sometimes years-long permitting process to break ground.
Trump probably won’t be able to stop the IRA completely
Trump has never had a favorable view of clean technology and wants to cut spending and “waste” across government. Even Trump’s pick to run a new department of government efficiency, Elon Musk, CEO of one of the largest electric vehicle companies, said he In favor of bringing back the EV tax credit. But Trump can’t do much to roll back any money already spent and prevent earmarked money from going out the door. The fact remains that Congress is primarily in charge of spending money, and it will take another act of Congress to undo the IRA.
Trump and his allies, however, have expressed the view that the president has the power to freeze funding. It is a legally questionable mechanism by which the president can prevent money already authorized by Congress from being spent in the future.
“The court basically sided with Congress,” Kettle said. “Whether or not the court will be more accommodating this time around is anyone’s guess.”
Any changes to the tax credits would likely not be effective in the current tax cycle and would have to go through the budget process. It is noteworthy that Trump extends tax credits For renewables, energy efficiency, and carbon capture in its first term.
Trump’s remaining funds may be slow to move, and if his second turn in office is as chaotic as his first, it may not even be a deliberate choice. But he may pay a political price for cutting clean energy funding. Although Biden and Vice President Kamala Harris haven’t seen much benefit from legislation like the IRA at the ballot box, it will be harder to reverse them as the programs mature.
“The political rationale was correct but the rollout for various programs was too hasty to reap electoral benefits so quickly,” Steven Vanderheydenwho studies environmental politics at the University of Colorado, wrote in an email. “While I think the Biden team could have done a better job communicating the value of this effort, ultimately I think they didn’t have enough time in the recent election to be a real game-changer.”
When Trump takes office, IRA investments will only become more entrenched.
Republicans may be ideologically opposed to such programs, but about As a result, 60 percent of the jobs Districts whose representatives voted against it. About 80 percent of the investment is in Republican-led states. The political uncertainty that hampered clean energy spending before the election has now been resolved, and there may be appetite for more projects.
So Trump can try to cut more new money from the IRA, but it will be harder to stop what’s already going on.
