Listen on your favorite streaming app.
On August 16, 2022, President Joe Biden signed into law the Inflation Reduction Act (IRA). It was the largest of three bills signed over the course of 10 months that together make up the United States’ largest investment in addressing climate change… well, ever.
Dr. Liz Reynolds, lecturer in MIT's Department of Urban Studies and Planning and former Special Assistant to the President for Manufacturing and Economic Development at the National Economic Council at the White House, joins the TILclimate podcast to help us see the big picture of what these bills are trying to accomplish.
LHF: Hello, this is Today I Learned: Climate, I’m your host Laur Hesse Fisher with the MIT Environmental Solutions Initiative.
Our fifth season is coming to you this fall, with brand new weekly episodes on methane, wildfires, building out clean energy, and a whole lot more. But this episode is coming to you a little early—because for climate heads like me, today is a pretty notable anniversary.
Joe Biden: Okay… there you go.
Chuck Schumer: It’s now law.
LHF: One year ago today, on August 16, 2022, President Joe Biden signed into law the Inflation Reduction Act, or IRA. It was the largest of three bills signed over the course of 10 months, that together make up the United States’ largest investment in addressing climate change… well, ever.
Besides the IRA, we’re talking about the Infrastructure Investment and Jobs Act—which we’ll call the infrastructure bill—and the CHIPS and Science Act, which we’ll call CHIP and Science. And while none of these three laws is devoted entirely to climate, together they commit the US to investing almost half a trillion dollars in slowing and adapting to climate change.
But even for me—and as you can imagine, I’m a climate nerd—these laws have so many different moving parts that it is hard to see the big picture of what they’re trying to accomplish. So for our first live show this past April, I found someone to help me sort it all out.
LR: My name is Liz Reynolds. I'm a lecturer in MIT's Department of Urban Studies and Planning. I think most important for this conversation, until last fall, I was Special Assistant to the President for Manufacturing and Economic Development at the National Economic Council at the White House.
LHF: Dr. Reynolds was advising the White House on manufacturing policy at the time these bills were being negotiated and passed. So she offered to give us an up-close look at the climate strategy behind all this legislation – and that starts with something called “industrial policy.”
LR: In the simplest terms, industrial policy is the use of tools by the public sector to incent investment by the private sector in particular technologies, or industries that we deem as important for the country's national and economic security.
LHF: When these bills were being negotiated, there were a number of things that policymakers saw as being important for that security:
LR: The country desperately needed investment in infrastructure. Roads, bridges, airports, ports, water, broadband as well. We've been talking about an infrastructure bill for a long time in this country. We have to rebuild a lot of what has sort of deteriorated over the decades.
LHF: Another issue on policymakers’ minds was becoming more independent from other countries for key resources and technologies.
LR: The reality that, again, has been laid bare by the last few years, which is the dependency of this country for critical minerals, technologies or products, rare earths, on other parts of the world. And in China, specifically. China has spent enormous amounts of money to basically flood the market with their products and wipe out competition.
LHF: You might remember the shortage of semiconductors during the pandemic, for instance. But we’re also talking about materials for solar panels and batteries.
And that brings us to another national security issue: climate change, and stopping the U.S.’s climate emissions. And all of these issues are related: to make a big transition to clean energy, we need to build a lot of infrastructure, and to stay economically strong, we want to not be too dependent on other countries.
LR: What does that take? That takes manufacturing. It takes supply chains. It takes construction capacity. It takes talent.
LHF: And that’s the essence of industrial policy: the government kickstarting the market so that we can tackle these big national concerns.
So let’s look at the three laws we’re talking about in a little more detail.
LR: The first that we should focus on is the bipartisan infrastructure bill, which was passed in November of 2021. And that is a significant investment in our physical infrastructure. It also had a lot of investment for our energy infrastructure.
For example, are you going to buy an electric vehicle if you aren't sure that you've got chargers along the route to get you from one place to the other? We've got billions of dollars going out to states to build out that electric vehicle charging. It's about helping build the infrastructure that can help us actually make the transition in a lot of these key areas.
LHF: There’s also money in this law to upgrade public transit vehicles like buses to be less polluting, and to build out the electric grid to carry more electricity from solar and wind farms.
Okay, that’s the infrastructure bill… the second law is the CHIPS and Science Act. The CHIPS part includes money for manufacturing semiconductors, which we currently rely heavily on other countries for.
LR: The important part of that I think to this broader conversation, is the Science Act part. Which was an authorization of close to $200 billion on building and investing in our R&D capabilities in the US. We actually, for the first time, have named 10-plus technologies that really we think are critical to the country's future. Those include from artificial intelligence to advanced manufacturing. And advanced energy efficiency as well as in material science.
LHF: So the climate pieces of this are mostly looking ahead to technologies that aren’t ready for primetime, but that we might need in the future. A good example is new ways of making steel without the incredible amount of climate pollution it produces—there’s money here for that research.
That brings us to the IRA, the biggest of these laws and the only one passed by the Democratic Party alone. It contains about $370 billion in climate spending.
LR: The IRA is the most significant investment the country has made in terms of addressing climate change. Three quarters of that is through tax credits, which are about trying to incent the private sector to invest in the technologies that will help us meet our climate goals over time. It also includes significant investment in long-term loans for companies that are trying to scale their technologies in the country, and build out facilities.
LHF: A key thing to think about here is the concept of supply and demand. The loans help with the supply of climate technology—say, if a company wants to build a new factory for making solar panels and needs some cash to get started. And the tax credits help with the demand side—like, if you’re buying a car, now it will be a lot cheaper to buy an electric one. Or if you own a home and your furnace dies, you’ll get some help putting in an electric heat pump instead. There’s potentially a lot of money for consumers here, especially if you’re a homeowner, so I encourage you to check our show notes on this episode for information on what tax credits you can use yourself.
But then there are also tax credits for bigger buyers—like the big energy projects that buy solar panels and wind turbines and actually make electricity with them.
LR: In the last decade, we have really made enormous strides in our renewable energy capabilities. What you want to see is the development of these new technologies. The IRA is agnostic as to which technology you're going to get that tax credit for. If you can prove that you're generating clean energy with zero emissions, you have access to these tax credits. It's trying to say give everyone an opportunity to build into their development timelines and their forecasting, et cetera, use of these tax credits over the next decade.
LHF: I just want to repeat this: the tax credits are partly about getting us to buy climate-friendly technologies today, but they’re even more about pushing manufacturers to plan for more climate-friendly technologies tomorrow—including some that might not be competitive yet. If you think your geothermal energy plant, for example, will be turning the heat under the earth’s surface into cheap, clean electricity ten years from now—well, the IRA has built-in tax credits that will still be available in ten years, waiting for your technology to mature.
Now, in addition to all these tax credits and loans, the laws also make some organizational changes inside government.
LR: There's a new Office of Demonstration at the Department of Energy with $20-plus billion, focused on taking technologies out of the lab. A lot of people would say that the Department of Energy has historically been really about R&D. Developing technology to a point where hopefully the private sector picks up and runs with it. Now we're really putting money behind demonstrating those technologies at scale, which the private sector, without some de-risking of that technology, isn't going to do.
LHF: What these laws don’t do, is impose a lot of new rules. A lot of our past climate efforts have tried to work through regulation—the government saying, for instance, car manufacturers need to make the cars they sell more fuel efficient. This strategy—not so much.
LR: It is absolutely the case that these bills are very much leaning into more carrots than sticks. Because what we hope to do is invest more in these new technologies. Invest in the innovation, invest in the deployment and the adoption.
And in that process, we actually reduce their cost. We make them more accessible. Hopefully not just in this country, but around the world, and they start to have a positive spillover effect for carbon emissions around the world.
LHF: All right, so the last of these laws was passed a year ago today; we released this episode August 2023. So —how’s it going? Are the laws having an impact?
LR: I think the most important evidence is really in the announcements that have been made by the private sector, about investments in the US, whether it's in EV, electric vehicles, batteries, solar. Whether it's in manufacturing, advanced manufacturing areas.
LHF: According to the American Clean Power Association, there have been more investments have been made in clean energy manufacturing in the year since the Inflation Reduction Act was passed than in the previous seven years put together.
So to just take batteries as an example: In Arizona, LG Energy is building a $5.5 billion battery plant; in Georgia, Hyundai is spending about $5 billion; there’s $3.5 billion from Redwood Materials in South Carolina, and another $3.5 billion from Ford in Michigan,. And that’s just a sampling.
But that’s just one piece of this whole climate strategy. Getting private companies to invest is one thing—but a lot of the money flows instead through states and cities and towns.
But the places that need industrial jobs the most are already struggling and may not have the resources to, say, prepare all the needed paperwork and plans to compete for federal funding.
LR: And that's always been a challenge, is how do we actually make sure that the places that need it the most get the assistance? The point here is to very much try and get particularly into communities that have been left behind, or that have been affected negatively by climate-related events.
LHF: Another issue is timescale. The federal government wants this money to be spent fast – but our governance systems don’t often work that quickly – and often for good reasons.
LR: You want to build a new EV battery factory, you're going to have to go through certain permitting processes. And you're going to have to go through a sort of environmental provisions that states have. This takes time. A lot of warranted criticism has come to what happens at the city and state level, to try and get new projects approved. All the friction that exists in terms of building new infrastructure, right? It doesn't happen overnight.
LHF: This is going to come into conflict with a federal government that wants to build a lot of new industries and infrastructure very fast.
LR: Time is essential here. You can't wait a decade for some of these projects to happen. So I think people are experimenting, can you fast track things? Can we find ways to improve processes while still respecting some of the concerns we've had over time?
LHF: This is where people and organizations are putting in a lot of effort right now: working with local and state governments to access these funds, and find ways to build new transmission lines and solar farms and factories in concert with the communities that will host them. And maybe even to change the whole review process to get to yes faster. We’ll talk a bit more about that in a future episode this season.
LR: I would just emphasize that we're all part of making this transition happen. This is a transformational moment. It sounds technical and it sounds caught up in legislation and dollars and tax credits. But in the end, we're moving toward a different place. We're going to see, I think, a profound transformation and a real opportunity to put the country on a new trajectory. A trajectory that is addressing our climate concerns, addressing our national economic security.
But I would just want people to understand that we're all invested in making this a success.
LHF: Including you. Because whether this is the climate strategy you would have chosen or not, our country has now made a big commitment to it—and if you’ve ever wanted to get involved in climate policy in your own town, well, the money’s now out there. Whether it gets spent responsibly, and quickly, and makes a real dent in our carbon emissions—that’s kind of up to all of us.
That’s our show for today. But look forward to this fall, when we’ll be back with season 5 and a whole lot of new climate topics we’re excited to demystify for you.
As always, you can check out our show notes for more information on the climate legislation we covered today. We also have an Educator Guide that explores local impacts and connections between these three pieces of legislation. You can find both at tilclimate.mit.edu.
TILclimate is produced by the MIT Environmental Solutions Initiative at the Massachusetts Institute of Technology. David Lishansky is our Editor and Producer. Aaron Krol is our Scriptwriter and Associate Producer — and did our artwork. Ilana Hirschfeld is our Production Assistant. Michelle Harris is our fact-checker. Sylvia Scharf is our Climate Education Specialist. The music is by Blue Dot Sessions. And I’m your Host and Producer, Laur Hesse Fisher.
A big thank you to Dr. Liz Reynolds for speaking with us, and thank you for listening.
- Read more about Dr. Reynolds: https://dusp.mit.edu/people/elisabeth-reynolds
- Take a deeper dive into the details of the three bills featured in this episode with fact sheets from the White House:
- “In the simplest terms, industrial policy is the use of tools by the public sector to incent investment by the private sector in particular technologies, or industries that we deem as important for the country's national and economic security.”
- Through the IRA, homeowners can gain access to a number of tax credits that help lower energy costs and the cost of installing clean energy technologies in your home. The White House created a primer to help you understand your eligibility for those credits: https://www.whitehouse.gov/cleanenergy/
- The IRA also includes tax credits for bigger buyers. Read the US EPA’s Summary of Inflation Reduction Act provisions related to renewable energy
- For an overview of climate change, check out our climate primer: Climate Science and Climate Risk (by Prof. Kerry Emanuel and the MIT Environmental Solutions Initiative).
- Our educator guides that go along with each of our episodes make it easier to teach climate change, earth science, and energy topics in the classroom. Take a look at our newest educator guide on America's big year of climate action.
- For more episodes of TILclimate by the MIT Environmental Solutions Initiative, visit tilclimate.mit.edu
We fact-check our episodes. Click here to download our list of sources.
Three major federal bills were signed into law in 2021 and 2022, which together make up the largest investment in addressing climate change in US history. Students explore the differences and interactions of the three laws, investigate local impacts, and design their own climate-related bill.