Environmental Pros and Cons of the Inflation Reduction Act

On August 16, 2022, President Biden signed the Inflation Reduction Act (IRA) into law. The bill’s purposes are to reduce healthcare costs, reduce emissions associated with energy development, and raise taxes on large corporations. The bill contains many provisions that help in the fight against climate change, making significant investments in clean energy and the reduction of carbon emissions. However, it also includes provisions that continue to support and bolster the fossil fuel industry, maintaining the nation’s reliance on dirty sources of energy. The new bill is estimated to reduce emissions by 40% by 2030, taking the United States’ emission levels to their lowest since Lyndon Johnson was president. President Biden, however, has pledged to cut emissions by 50% by 2030 to keep the United States on track with international climate goals. Such a reduction would require stricter regulations on emissions from power plants, rapid deployment of clean vehicles, and a commitment to the phasing out of fossil fuels such as coal, oil, and gas. The items addressed below are not a comprehensive analysis of the IRA, but highlights related to fossil fuel development, clean energy, and environmental justice.  

Beneficial Provisions 

There are a number of beneficial provisions in the IRA dealing with individuals and communities. For example, the bill allocates $9 billion in clean energy grants and rebates to aid residential households with needed energy upgrades. While this is fantastic and sure to improve residential energy efficiency, many low-income families cannot afford the up-front costs of the upgrades and as such, this will most likely benefit higher income households. In a similar vein, the bill expands tax credits for clean vehicles—a fantastic solution for emissions reduction—but does not include provisions concerning public transportation, which is needed by many individuals and families that cannot afford an electric vehicle or do not have access to charging stations for an electric vehicle. 

Additionally, $550 million is allocated for disadvantaged communities and households to construct projects for clean domestic water supplies. $9.7 billion is allocated to improve the resiliency, reliability, and affordability of rural electric systems. The bill also provides $850 million for mitigating legacy air pollution from natural gas systems, and it creates a permanent tax on coal that is used to support miners with Black Lung Disease. 

Finally, while the bill does have areas for improvement in terms of environmental justice, as discussed below, it does include notable provisions benefitting disadvantaged communities.  These provisions concern new tax credits and the expansion of existing tax credits for emissions-free electricity sources such as wind and solar, investments in clean energy technology in rural areas, and installation of rooftop solar in low-income communities. Funds were also allocated to mitigate pollution and aid quality of life in disadvantaged and underserved communities near major transportation corridors. More specifically, $2.8 billion is set out for environmental and climate justice block grants, which can be used for community led projects in disadvantaged areas. These funds are supported by $200 million outlined for providing technical assistance for such projects.  And $32.5 million is provided to collect data on the disproportionate effects of environmental pollution and climate impacts. 


The largest shortcoming of this bill is the continued support and reliance on fossil fuels and false climate solutions, such as hydrogen production and carbon capture. The bill includes substantial tax credits for the production of “clean” hydrogen, and it is estimated that investments in hydrogen development will triple due to this provision. Hydrogen, however, is generally not produced in a clean manner. Most hydrogen is produced from converting methane into hydrogen, which requires the burning of energy—usually fossil fuels. Even if renewable energy were used for the conversion of hydrogen, that would increase the reliance on fossil fuels for the other forms of energy that renewables are set to replace. 

Carbon capture is another false climate solution that perpetuates the existence of the fossil fuel industry.  Carbon capture allows power plants to capture their carbon emissions upon release, and either use the carbon in the production of other materials or sequester it by injecting it underground. It is used widely in the oil and gas industries, as carbon can be injected into oil fields to extract additional oil. Many advocates of fossil fuels are supportive of carbon capture as a way to produce energy from fossil fuels in a “cleaner” manner. Carbon capture, however, results in the production of more oil and gas, increasing carbon emissions and simply transferring carbon emitted from one area to another. Moreover, the infrastructure required for carbon capture is extensive and expensive, which slows the transition away from fossil fuels by investing more money into them. Renewable power is cheaper than coal power already, and even more so if carbon capture infrastructure is to be used with coal power, making carbon capture not economically advantageous. Under the IRA, facilities using carbon capture will be eligible for tax credits if they break ground by 2032, with the bill allocating $3.23 billion. 

With respect to the fossil fuel industry itself, the IRA includes a provision that mandates new oil and gas lease sales on federal lands, and an obligation to tie solar and wind lease offerings on federal lands to oil and gas leasing. The IRA also reinstates canceled oil and gas lease sales under the Outer Continental Shelf leasing program. While the IRA does impose higher costs on companies that drill on federal lands, through higher minimum royalty rates and royalties on all extracted methane, this increases government reliance on revenue from fossil fuels. Additionally, companies can obtain clean electricity production credits if carbon capture technologies are used for fossil fuel combustion and gasification facilities.  

Phasing out and eventually eliminating the country’s reliance on fossil fuels is a critical step for environmental justice in the climate movement and ensuring a just transition for impacted communities. The weight of the negative effects associated with fossil fuel production is consistently forced onto our most disadvantaged communities, and there is no justification for such a burden. 

The Bottom Line 

The IRA includes historic investments to reduce greenhouse gas emissions, which is critically needed to prevent current and future repercussions of climate change. However, the IRA also provides hand-outs to carbon-emitting industries who have profited for centuries on the backs of workers and communities who bear the burden of water, air, and climate pollution. More action—at federal, state, and local levels—is needed to protect and empower impacted communities and ensure that they are a part of a just transition to a more livable future.