The US Inflation Reduction Act

The US Inflation Reduction Act

Earlier this month, US President, Joe Biden, signed a monumental bill. On the 16th of August 2022 Biden signed the Inflation Reduction Act of 2022. The law pledges US$369 billion which will be used for climate investment over the coming decade.

What does it mean?

This bill covers more than just climate change, including changes to prescription drug prices and reducing the deficit. However, the bill has a strong focus on domestic energy production and the promotion of clean energy. Of the total $737 billion pledged by the government, around half has been dedicated to energy and climate change resolution. This law symbolises the largest investment into climate change in the US history.

Across the United States history there have been many laws passed around the climate, most of which were passed during the ‘Environmental Decade’, prior to 1980. This law is significant. It is the most ambitious legislation passed in the US.

The impacts of the act

Scientists believe that the act could cut emissions up to 40% below 2005 greenhouse-gas levels by 2030. This change would bring the US closer to its pledge, made by Biden in 2021, to reduce emissions by 50%. Currently the US is on track to meet 24-35%, so this legislation will support an improved reduction in emissions.

The funds will be split into five areas to support the goals set out in the legislation.


The first step is to lower consumer energy costs. $9 billion of the delegated funds will be split across home energy rebate programs. This includes tax credits to support homes running on clean energy, as well as encouraging the purchase of green vehicles. Not only will this be beneficial for the green energy movement, but scientists predict that households will save an average of $500 a year on energy as they switch to renewables.


Recent global events have encouraged governments to produce their own power, and this section of the legislation focuses on domestic power production. $30 billion will be distributed in tax credits to bolster the manufacturing of green products, such as solar panels. On top of the $30 billion for product manufacturing, an additional $10 billion will be spent on tax credit for clean energy technology manufacturing.


Tax credits and grants will be shared amongst companies to encourage the transition to clean energy.


This segment of the legislation is specifically for those impacted by climate change and pollution. $3 million will be invested in disadvantaged communities who are affected by public health harms – pollution and climate change.

COMMUNITIES AND FORESTLAND:$20 billion has been dedicated to investment of climate-smart agriculture, with a further $2.6 billion side-lined to protect and restore coastal habitats.