Tax Credits Included in the Inflation Reduction Act Will Create Good Jobs and Transform Communities
The transformational power of the Inflation Reduction Act cannot be overstated. This legislation—passed by Senate and House Democrats and signed into law by President Joe Biden on August 16, 2022—will revitalize U.S. manufacturing, grow clean energy, and support and create good union jobs across the country. It will tackle climate change by reducing emissions up to 42% by 2030 and create the good-paying, union jobs we need to give all workers the opportunity for a middle-class life. The Inflation Reduction Act demonstrates that we can have both good jobs and a clean environment.
ONLY THE FIRST STEP
BUT, as we’ve told you in our User Guide, passing the bill is only step 1. Now begins the work to shape how this money goes out the door: implementation! This is the time where we can ensure these investments maximize benefits for workers and communities. We are at a groundbreaking moment for this legislation as the U.S. Department of Treasury begins work to implement the centerpiece of this law: the new and strengthened clean energy tax credits. These tax credits have the potential to create good jobs for workers and transform communities and the clean economy. Last week, the BlueGreen Alliance responded to the Department of the Treasury and Internal Revenue Service’s recent Requests for Comments. We submitted three sets of comments on:
- Inflation Reduction Act Amendments to the Clean Vehicle Tax Credit,
- Energy Security Tax Credits for Manufacturing under 48C and 45X, and
- Prevailing Wage, Apprenticeship, Domestic Content, and Energy Communities Requirements in the Inflation Reduction Act.
Climate science is unambiguous. We must put America on a pathway to reducing greenhouse gas emissions to net zero by 2050 and ensure we are solidly on that path by 2030 to avoid the catastrophic consequences of climate change. At the same time, we must ensure that the jobs created in the clean economy are high-quality, good-paying union jobs and that they are prioritized in the places that need them most.
Implemented effectively, the strengthened newly established clean energy tax credits will do just that: drastically reduce emissions, while providing high-quality, good-paying union jobs in the clean economy and driving growth in U.S. manufacturing. At the same time, they will increase equity in the transition to a clean economy by maximizing the benefits of this job growth in communities disproportionately impacted by pollution as well as deindustrialization and energy transition. The tax credits will achieve these intersecting goals through several key provisions.
MAKING CLEAN ENERGY JOBS GOOD UNION JOBS
By requiring that clean energy investments support a prevailing wage and workforce development pathways in order to receive the full value of the tax credit, these provisions will:
- Grow and diversify the middle class;
- Increase diversity in the construction and manufacturing workforce;
- Ensure the construction workforce has the skills necessary to build and maintain infrastructure; and
- Promote hiring of local residents to work on infrastructure projects in their communities.
Additionally, the newly established Low-Income Communities and Energy Communities bonus credits will help address racial and economic inequality by incentivizing locating projects in communities that have a substantial share of the population below the poverty line and communities that have seen significant job loss in the fossil fuel economy. Properly targeting these credits will help ensure that communities that have mostly experienced economic pain in the shift to clean energy now share fully in the economic gain.
Finally, the law’s manufacturing and clean vehicle tax credits are critical for building a reliable and equitable U.S. supply chain for the clean economy. The Inflation Reduction Act provides the largest investment in clean manufacturing in decades, offering a historic opportunity to support good union jobs, climate action, and a more just economy. The investments will reduce our reliance on production overseas that is often marred by labor abuses, higher levels of pollution, and shipping bottlenecks and in doing so counter the racial and economic inequality fed by manufacturing job losses. And they will be a game-changer for cutting industrial emissions—a leading source of climate and air pollution—while onshoring clean technology manufacturing.
With its final assembly, critical mineral, and battery content requirements, the Clean Vehicle Tax Credit incentivizes automakers to build a robust, US-based electric vehicle supply chain with which the U.S. can re-emerge as a global leader in the auto manufacturing sector. Meanwhile, the 45X and 48C tax credits offer a supply-side push for clean technology manufacturing and reduced industrial emissions, which pairs well with the demand-side pull of the Clean Vehicle Tax Credit and the domestic content bonus for the clean energy tax credits.
Taken together, these provisions represent a careful balancing act in the Inflation Reduction Act and an attention in the bill to aligning multiple goals: speeding clean energy deployment, supporting and creating good union jobs, growing domestic manufacturing, and targeting investments in disadvantaged communities. Continuing to prioritize and align these goals and outcomes through the implementation process must be a priority for the Treasury Department. The provisions can work in concert to support industries in fully taking advantage of these tax credits, both within the tax provisions (e.g., the supply-side tax credits working to bring the domestic content preferences into reach) as well as with provisions being implemented by other agencies (e.g., manufacturing investments at the U.S. Department of Energy).
GETTING IT RIGHT IS VITAL FOR US ALL
These investments are win-win. By getting the details right, we can meet our clean energy deployment and climate goals while creating good union jobs, growing domestic manufacturing, delivering public health and environmental benefits, and creating a cleaner, stronger, and more equitable economy for all.
To learn more about the Inflation Reduction Act, go to our resource center.