How the Inflation Reduction Act Could Still Fail

The big idea behind the Inflation Reduction Act, the historic U.S. climate package that became law one year ago this week, is simple: To beat fossil fuels, make the clean stuff cheaper.

The law is already working, in certain ways. There have been hundreds of announcements for new electric vehicles factories, solar and wind manufacturing plants, and clean generation facilities since the IRA passed, for example.

But the premise is also fundamentally flawed. Cost is only one piece of the puzzle. With the “green premium” on clean technologies out of the way, for now, a barrage of other obstacles to deploying them will be pushed to the fore.

“The moment we're in now is a decidedly much more diffuse set of challenges,” Sam Ricketts, the co-founder of a new climate consulting firm called S2 Strategies, told me.

There’s a public awareness challenge and a public opposition challenge, workforce shortages and supply chain issues, and a litany of other impediments that could prevent the IRA from fulfilling the Biden administration’s lofty promises of carbon reductions, job creation, and economic growth. There may not even be much of a chance to try if Republicans take over the White House in 2025.

Passing the IRA required lots of compromise, resulting in an insufficient, though still powerful set of tools to slow global warming. Now, progress requires figuring out how to maneuver around the law’s weaknesses in order to harness its strengths. “That brings different challenges than just finding 51 votes and 218 votes,” said Ricketts.

Let’s look at what lies ahead.

A potential Republican takeover

Not one Republican voted in favor of the IRA when it passed last year. Now, with a majority in the House, Republicans have already made multiple attempts to chip away at the law. Every major Republican presidential candidate, including frontrunner Donald Trump, has bashed it on the campaign trail. And a strategy document released by the Heritage Foundation, an influential conservative think tank, advises the next administration in the White House to support its repeal.

“It's not going to be a question of, are they going to repeal it?” Lori Lodes, executive director of Climate Power, a strategic communications group, told me. “It's going to be, what are they going to repeal?”

It also wouldn’t take repeal to damage the IRA. Without control of Congress, a conservative administration would not have infinite leeway to roll back the law, but it could certainly muck up the IRA’s implementation. A new president could ask his Treasury Department to revise the rules governing clean energy tax credits, making them harder to claim, or direct the Department of Energy to slow-walk or withhold loans and grants.

Ask any backer of the IRA about its potential demise and they will point to the same cause for optimism: The vast majority of investments spurred by the law are flowing into red states, and many Republican governors have embraced it. By 2025, the IRA’s programs could be so successful that it will be much harder for a future administration to roll them back.

Community opposition

The more of something you build, the easier and cheaper it becomes to build more, or so the conventional wisdom goes. When it comes to building wind and solar, though, this concept of “economies of scale” doesn’t totally track. The best locations — those with the most sun and wind — are the most economical and get developed first. As do the spots with the least resistance from neighbors. The more you build, the harder it gets to find viable places to build more.

While the IRA made renewables much more cost-competitive with natural gas power plants, that won’t matter if communities block projects from getting built. Columbia University’s climate law center recently found that there has been a 35% increase in local ordinances that restrict renewables in the last year alone.

Some states, like New York, are actively working to resolve these project siting challenges by weakening local authority over permitting. But others, like Ohio, have given local authorities full power to veto renewables.

Not enough grid

Perhaps the most immediate obstacle to cutting emissions in the U.S. right now is that there aren’t enough power lines to deliver clean energy. Solar and wind projects currently wait four to five years to get permission to connect to the electric grid. New transmission lines can take upwards of a decade to build, because of a complex permitting process as well community opposition.

“It's not even just about unlocking the potential of renewables,” Tom Rowlands-Rees, the head of North America research for the clean energy analysis firm BloombergNEF, told reporters this week. The IRA will kickstart long-term growth in electricity demand as people swap their gas cars for EVs and install heat pumps. “Whatever you believe the ideal generation mix is in an energy transition, there just needs to be more grid, full stop.”

Solutions include giving the Federal Energy Regulatory Commission authority over where to build new power lines and deciding who should pay for them, which congressional Democrats are eager to do. The Biden administration also recently proposed making the Department of Energy a lead coordinating agency in permitting these projects and streamlining various federal approvals.

Public awareness

The discourse around the IRA will make or break the law. Right now, less than a third of Americans even know what it is. That’s a problem for Biden’s re-election campaign. It’s also an obstacle to getting the money out the door.

“The way we sort of think about it is the Inflation Reduction Act created an electric bank account for every household in America,” said Ari Matusiak, CEO of the electrification advocacy group Rewiring America. “But people need to know that it's available for them.”

Beyond the issue of awareness, the law is sprawling and confusing. State and local officials will need support navigating grants and designing programs. Consumers will need help sorting through the various tax breaks and rebates to help them pay for solar panels and heat pumps. Rewiring America is among a number of groups working on national campaigns and tools to help with this.

There’s also the challenge of building up the workforce and educating contractors about these solutions, many of whom have been hesitant to embrace heat pumps, under the wrong impression that they “don’t work in cold climates.”

That kind of misinformation is sure to be another obstacle. Will the American public embrace electrification? Or will it become a victim of the culture wars, as has already been foreshadowed by the fight over gas stoves earlier this year.

It was never going to be enough

Many different research groups have analyzed the IRA, and while their models and findings vary, they all reach the same conclusion. Even in a best-case scenario, the IRA will not get the U.S. all the way toward fulfilling its commitment under the Paris Agreement to cut emissions in half by 2030 and to net-zero by 2050.

BloombergNEF, for example, finds that regulations on the power sector and heavy industry are essential. “Whatever comes next can't just take the form of more incentives,” said Rowlands-Rees. “We're at the point where we're pretty much maxed out on that.”

For other sectors, the IRA’s subsidies are too small. Electrifying all of the appliances in a home can cost tens of thousands of dollars. A $2,000 tax credit is unlikely to be enough for many families to make the switch, even if it’s supplemented with additional rebates.

For communities living in the shadow of fossil fuel facilities, the law could even prove counterproductive. After all, its compromises included continued oil and gas leasing and incentives for carbon capture and storage, which can extend the life of polluting plants.

“We have to do more. It's really a proof of concept,” said Lodes of Climate Power. “And if there is not that public support, if there is not that political will, then we won't be able to take the additional actions that we need to.”

Read more about the Inflation Reduction Act’s one-year anniversary:

Why the Inflation Reduction Act Remains Astonishing