Two years ago this week, President Joe Biden signed the Inflation Reduction Act, the largest investment in clean energy and climate mitigation in American history. It contained roughly two dozen new or expanded tax credits that will — if the forecasts bear out — provide hundreds of billions of dollars in funding over the next decade. The administration is now rushing to finalize those provisions before the November election.
Perhaps no official has been more central to setting up those tax credits than
Wally Adeyemo, the deputy secretary of the U.S. Treasury Department. He is also the Treasury’s No. 2 official and chief operating officer. Adeyemo has led the agency’s effort to implement the climate law, overseeing a group of tax lawyers and political appointees who are critical to the legislation’s ultimate success. He joins Shift Key this week to help us kick off our second season and talk about how the effort to implement the climate law is going, what could stand in its way, and why he wants some kind of permitting reform.
Shift Key is hosted by Robinson Meyer, the founding executive editor of Heatmap, and Jesse Jenkins, a professor of energy systems engineering at Princeton University.
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Here is an excerpt from our conversation:
Robinson Meyer: So obviously, one of the huge risks for investors is that the IRA is repealed, in part or in full, in the next Congress. And we know, just as a fact, that Congress is going to have to do something on taxes. Next Congress, the Trump tax cuts are expiring, there’s going to be, there’s interest in doing something with a child tax credit. It’s going to really come down to who has control of the two chambers.
How are you thinking about, as a Democratic administration, protecting the IRA going into a very ambiguous 2025 environment, and how are companies who you talk to thinking through that quite large political risk around the threat of repeal next year?
Wally Adeyemo: So maybe I’ll break it down into two different types of tax credits, the business tax credits and the consumer-oriented tax credits. When it comes to business tax credits, as you both know from following this for a while, those don’t usually go away. Because ultimately, what happens is that, for these businesses, they do a fairly good job of making clear to members how those tax credits are tied to jobs that end up being in their districts.
One of the things that I’m proudest of is, when you look at the dispersion of projects tied to the IRA throughout the country, it puts us in a place where a number of people who voted for — and even, in some cases, many who didn’t vote for — the IRA now have significant projects being funded by the IRA happening in their districts, that they’re hiring people based on IRA-related projects, and it’s driving real economic activity. So when it comes to these business tax credits, my sense is that there’s going to be a case for keeping them, independent from the climate goals, which they’re helping to achieve because of the fact that they’re creating jobs in these districts that are helping to power those local economies.
On the consumer tax credits — and just today, I think we’re speaking on August 7, we put out a report about more than 3 million Americans claiming a set of consumer-oriented credits to help install things like solar panels on their homes, and heat pumps. And on these credits — they existed before the IRA. And frankly, what we did with the IRA was, we further incentivized people and created some flexibility within these credits.
These credits existed in the last administration. They’ve existed during the Obama administration. So the reality is that for some of these consumer-oriented credits and some of the business-oriented credits, they had both existed in Republican administrations. There have been Republicans who have supported them. For example, when you think about the wind credits, there have been a number of senators from the Midwest, both Democrats and Republicans, who have been huge advocates for them because they matter to their district.
So from my standpoint, the most important thing we can do to preserve the IRA is to make sure that we get these rules done as quickly as possible, so that not only businesses but individuals start to rely on them. They help, from my standpoint, address the climate crisis that we face. But from the standpoint of consumers, they help lower their cost. And the report we put out today showed that for some consumers installing a heat pump, for example, it lowered the cost of utilities by up to $3,000 a year. The more that happens, the more people who take advantage of it, the more likely that those tax credits are going to remain. And I think that’s also true for the business tax credit. So that’s the strategy, and I think that it’s one that’s been borne out by other business and consumer tax credits in the past.
This episode of Shift Key is sponsored by …
Watershed’s climate data engine helps companies measure and reduce their emissions, turning the data they already have into an audit-ready carbon footprint backed by the latest climate science. Get the sustainability data you need in weeks, not months. Learn more at watershed.com.
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Music for Shift Key is by Adam Kromelow.
