The largest climate spending package in U.S. history aims to change how Minnesotans drive, heat and cool our homes, grow our food and manage our forests.
The Inflation Reduction Act passed by Congress last week puts $373 billion toward the climate crisis. Despite concessions to fossil fuel companies, the legislation is projected to cut climate emissions nationally by up to 40% from 2005 levels by 2030, moving the country toward the White House goal of net-zero greenhouse gas emissions by mid-century.
“It’s a hugely impactful bill and it touches nearly every part of the clean energy economy,” said Brendan Jordan, vice president at the Great Plains Institute in Minneapolis.
The bill funds dozens of programs and provides a range of tax credits and other incentives to cut greenhouse gases. Here are five changes that Minnesotans will likely see.
More EVs on the road
Congress created a slew of incentives for electric cars, SUVs and pickups as well as medium and heavy-duty trucks, plus charging equipment. For car buyers, the bill revised an existing federal tax credit of up to $7,500 on certain new electric vehicles and plug-in hybrids.
Plus, it eliminated the cap on manufacturers that limited incentives to the first 200,000 electric vehicles sold. That should mean a bigger supply.
However, a host of new qualifiers have been criticized as so restrictive they will disqualify most new electric vehicles, at least for a period of time while automakers adjust. For example, to get the full tax credit, a certain share of the critical minerals in the battery must come from a country with which the U.S. has a free trade agreement or from recycling done in North America, and a certain share of the battery components have to be made or assembled in North America.
A new federal tax credit for buying a used electric vehicle or plug-in hybrid does not have the same sourcing requirements. Buyers with qualifying incomes would get a tax credit for up to $4,000 on the purchase of a used electric vehicle costing up to $25,000. Both credits also aren’t available to higher income taxpayers.
Pavel Ihnatovich,owner of GS Motors in Hopkins, which deals in used electric vehicles, said the $25,000 limit is too low given how prices have surged. But Joshua Houdek, senior program manager for transportation at the Sierra Club Minnesota North Star chapter, said he doesn’t see the $25,000 price limit as a problem.
Houdek said he thinks the incentives, coupled with Minnesota’s Clean Car requirement that automakers provide more electric vehicles to sell in the state, and Xcel Energy’s $300 million electric vehicle plan that involves installing 730 new fast-charging stations across the state, will speed Minnesota’s shift to electric.
“I think we’re at a tipping point,” Houdek said.
The measure also directs $3 billion to electrify the U.S. Postal Service delivery fleet, meaning those white mail trucks idling at the curb are going electric.
Help for the trees
The package will spend about $5 billion bolstering forests and tree canopies throughout the nation, some of which will come to Minnesota. National forests will get more resources to conduct prescribed burns, cut fire breaks and fund other projects aimed at reducing the wildfires that have engulfed much of the western and northern woods in recent years.
The nearly $3 billion directed to states and non-government entities could be used for a still-undetermined variety of tree projects, including rebuilding the urban forest to replacing ash trees lost to an invasive insect, or developing a market for “innovative wood products.”
“It looks like there will be opportunities in Minnesota, whether it’s for reforestation, wildfires or urban forestry,” said Amy Kay Kerber, forestry legislative affairs and outreach supervisor for the state Department of Natural Resources. “At this point we just don’t know yet how large or small or significant that will be for Minnesota.”
Ann Mulholland, director of the Nature Conservancy in Minnesota and the Dakotas, predicted the spending will “jump start” natural climate solutions in the state that alone could offset billions of tons of carbon. Now Minnesota needs to step up and match the federal money with investments in state programs, she said.
Goodbye, gas water heater
A suite of rebates and tax credits will make it cheaper for Minnesotans to retrofit their homes to cut fossil fuel use.
Homeowners could get $8,000 toward the cost of installing a heat pump for home climate control; $1,750 for a heat-pump-fed water heater; $840 for both electric clothes dryers and electric stoves; and $1,600 for insulation.
Heat pumps draw thermal energy from outside air, the ground or water and push it inside a house in the winter; in the summer, they do the reverse. They’ve been more popular so far in rural Minnesota, as an alternative to propane heating systems.
Some of the rebates are for upgrades to accommodate higher electricity usage, such as $4,000 for larger breaker boxes or $2,500 for wiring.
“It’s the type of thing that isn’t necessarily sexy, but it’s going to be really, really important for this energy transition,” said Joe Dammel, of the St. Paul-based nonprofit Fresh Energy.
The different household income limits for the new rebates could exclude some interested customers, said Richard Graves, director of the Center for Sustainable Building Research at the University of Minnesota.
“This is the kind of stuff we need to be scaling as fast as we possibly can, and I’m just worried that might slow things down a little bit,” Graves said.
More solar panels, wind farms
The act extends production and investment tax credits for wind and solar energy projects for 10 years and expands them to cover batteries for stand-alone energy storage.
The same 30% tax credit was extended for consumers to add residential rooftop solar, said Logan O’Grady, executive director of the Minnesota Solar Energy Industries Association. O’Grady estimated the package of incentives will create around 5,000 jobs in the state over the next decade.
There is huge demand for renewable energy from states, utilities and corporate users trying to hit their greenhouse gas reduction goals, said Beth Soholt, executive director of the St. Paul-based Clean Grid Alliance, a wind and solar trade group.
The incentives come as Midcontinent Independent System Operator, which operates the Midwest’s grid, plans a major transmission line expansion to shore up grid reliability. That is a powerful combination that will spur jobs and economic development, Soholt said.
“The next two to 10 years are going to be transformational in Minnesota and surrounding states,” she said.
Funds for soil, wetlands
The bill includes $40 billion for so-called “climate-smart” agricultural programs, including $18 billion more for a quartet of popular, currently oversubscribed conservation programs.
The Agricultural Conservation Easement Program pays producers or Native American tribes fair market value to retire marginal lands — for decades or even indefinitely — that contain wetlands or grasslands. With the new bill, the program would see an infusion of $1.4 billion — more than enough to dramatically expand its current coverage of over 5 million acres.
The act would also drop over $3 billion into the Conservation Stewardship Program, which pays farmers to keep more carbon in the soil through practices such as no-till or cover crops. Another $8 billion will go into the USDA’s Environmental Quality Incentives Program (often called EQIP), which encourages farmers to experiment with conservation practices. One such practice — prescribed grazing, where livestock remove forage, often in sensitive areas — has been found to improve water quality and further improve rangeland health.
“We don’t need to reinvent the wheel,” said Stu Lourey, government relations director for the Minnesota Farmers Union. “We need to invest in what we know is working.”