Although it peaked in 2007, the United States has historically been the largest contributor to greenhouse gas emissions, and it remains the second largest emitter after China on an annual basis.
President Joe Biden’s tax and climate bill, which passed the House of Representatives on Friday, would in effect reduce greenhouse gas emissions by 40 percent from 2005 levels by 2030, according to experts.
That would go a long way toward the administration’s goal of cutting emissions by 50-52 percent under Paris Agreement commitments, compared with just a 30 percent reduction under previous policies.
Power and transportation have been the biggest contributors to US emissions, but new Biden policy measures also focus on industry.
Spread over 10 years, the measures will largely be paid for by the corporate sector. A minimum corporate tax rate of 15 percent for companies with annual net income of more than $1 billion is expected to generate more than $300 billion in revenue. An estimated 150 companies will be affected.
Additional funding will come from a 1 percent levy on companies buying back their own shares, effective from 2023. Buybacks have been used to spend the cash piles built up by major US companies, including ExxonMobil. Investment in new areas.
Overall improved tax enforcement is also expected to bring in new revenue, with the Internal Revenue Service also benefiting from $80bn in funding to do so. It will also explore plans to develop a live online filing system.
Additional revenue will come from significant Medicare savings as a result of prescription drug pricing reform that will allow it to negotiate lower payments to drug companies on certain high-cost items.
Assessing the so-called Inflation Reduction Act of 2022, the nonpartisan Congressional Budget Office said it would have a “negligible” impact on inflation in 2022 and 2023.
The law is clear that “any taxpayer or small business with less than $400,000 in taxable income” will have no effect.
Below is a summary of the calculations and what’s in the law:
Climate Action: Industry
methane penalty $900 per metric ton of methane emissions that exceed the federal cap in 2024, rising to $1,500 per metric ton in 2026.
Carbon capture and storage A tax credit of $85 per metric ton, up from $50.
clean energy $30 billion, including tax credits over 10 years, for companies that build solar panels, wind turbines, batteries, geothermal plants and advanced zero-emission nuclear reactors. Replaces short-term wind and solar credits. Investment tax credit now also applies to battery storage and biogas.
About $30bn in grants and loans for utilities To help their transition to clean energy.
About $6 billion in grants and tax credits are available to help the worst polluters in industrial production. Chemical, steel and cement plants, to reduce their emissions.
More than $5 billion in tax credits has been created or extended Hydrogen energy from clean sources, Biofuels and Sustainable aviation fuel. An additional $5.5 billion to expand incentives for biodiesel, renewable diesel and alternative fuels.
Clean product A $10bn investment tax credit to build manufacturing facilities that make electric vehicles and renewable energy technologies.
Green Bank $27bn for a “green bank” to support rooftop solar panels and emissions reduction technologies, especially clean energy projects in disadvantaged communities.
agriculture $20 billion to reduce emissions in the agricultural sector. These include improvements in diet and feed management, and soil carbon to reduce methane emissions from livestock.
the forest Hazardous fuel reduction program on National Forest System land, vegetation management, preservation of old growth forests, old growth forests and mature forests within the National Forest System.
Community support $60bn to support low-income communities and communities of color. Grants for zero-emission technology include credits for solar and wind facilities serving these communities, highway pollution abatement, bus depots and other infrastructure located near disadvantaged communities.
Coal, oil and gas industry support The Interior Department will reinstate a string of oil and gas lease sales rounds that the administration had planned to cancel after a court ruling on environmental grounds.
A commitment to expedite the permitting process for gas pipelines.
Expanded oil and gas leases on public lands and waters are leased to renewable energy providers for solar and wind.
Climate Measures: Households and Individuals
Clean vehicles A tax credit of up to $7,500 for the purchase of new “clean” vehicles, including hydrogen-powered ones instead of electric ones, for those with a maximum annual income of $150,000. A $4,000 credit for used vehicles valued at less than $25,000, for those with a maximum annual income of $75,000.
Another $1 billion to fund zero-emission school buses, heavy-duty trucks, public transit buses and other commercial vehicles.
Retrofitting $9 billion in rebates for Americans to buy and retrofit homes with energy-efficient and electric appliances. These include heat pumps, water heater and boiler upgrades, and biomass stove tax credits:
Up to $1,600 in rebates for home insulation.
Up to $2,500 in rebates for electrical wiring improvements.
Up to $8,000 in rebates for installing heat pumps that can be both hot and cold.
Up to $1,750 in rebates for heat pump water heaters.
Rebate of up to $1,200 per year for household electrification.
jobs Incentives include how much companies pay their workers and credits for producing steel, iron and other components in the US.
Health care measures
Medical reforms It allows Medicare to negotiate the prices of certain drugs, with estimated savings of more than $200bn over 10 years. It will begin with a list of 10 high-cost, single-source drugs in 2026, increasing to 20 drugs by 2029, with a ceiling on negotiated prices.
If drug companies do not comply, they will have to pay up to 95 percent of drug sales tax.
Cap on out-of-pocket expenses The bill would put a $2,000 cap on out-of-pocket prescription drug costs for people on Medicare, effective in 2025. Insulin costs for seniors on Medicare will be capped at $35 per month.
If drug companies raise prices on Medicare faster than the rate of inflation, they must pay rebates back to the government for the difference.
Affordable Care Act expansion Financial aid for those enrolled in ACA plans for three years, extending the program that expires this year and expanding eligibility to allow more middle-income people to receive aid and overall increased amounts.
Black lung support A permanent extension of the tax rate to the Black Lung Disability Trust Fund to finance claims from persons suffering from occupational diseases due to long-term inhalation of dust affecting an estimated 16 percent of coal workers.
Further reading on the US climate and tax package
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