By Aimee Picchi
/ MoneyWatch
Scientists: Inflation bill could help reduce global warming
President Biden's Inflation Reduction Act takes onclimate change by helping Americans reduce their carbon footprint. A key element in that push is offering up to $14,000 in rebates and tax credits for people to make their homes more energy-efficient.
Those benefits can be used to lower the cost of home upgrades, ranging from installing heat pumps to buying new electric appliances like stoves and dryers. About 40% of carbon emissions stems from buildings, so such incentives could help the U.S. achieve its goal of lowering fossil-fuel emissions, said Lauren Urbanek, deputy director of the clean buildings team at the nonprofit Natural Resources Defense League.
"This gives people some very concrete and generous incentives to do that, both in the form of tax credits and direct cash rebates," Urbanek told CBS MoneyWatch. "This is the biggest federal investment in buildings ever, at least one that is specified for climate change."
Here's what to know about the incentives.
What rebates can I get?
There are two separate rebate programs, according to the NRDC.
- The HOMES Rebate Program: This provides more than $4 billion to states to help residents make their entire home more energy-efficient. The program provides rebates based on the energy savings their upgraded home will achieve. For instance, homeowners that make changes that cut their energy usage by at least 35% can get up to $4,000 in rebates. That amount is doubled for low- and middle-income households, who can get up to $8,000 in rebates.
- High-Efficiency Electric Home Rebate Act (HEEHRA): This provides rebates for low- and middle-income families to electrify their homes, such as by installing heat pumps or electric clothes dryers. The per household rebate is capped at $14,000, and households can't receive two rebates for the same upgrade. For instance, if they claim a HOMES Rebate program for a heat pump, they can't also get a rebate through the HEEHRA.
What types of upgrades are covered?
The HOMES Rebate program would cover upgrades, from solar panels to new windows, that help your home become more energy-efficient.
Under the law, the HOMES rebate should be available to whole-house, energy-saving retrofits that begin after the Inflation Reduction Act became law on August 16, 2022 and completed before September 30, 2031. However, because the program isn't up and running yet, details about how to claim the rebates retroactively aren't yet known.
The HEEHRA program designates rebates for specific appliance purchases and other upgrades. One of the most appealing rebates is a provision offering up to $8,000 for heat pumps, which despite their name provide both air conditioning as well as heating.
When it comes to energy consumption, these devices are often better alternatives to furnaces because they rely on electricity rather than gas or oil to warm a home. Compared with electric resistance heating like baseboard heaters, they can reduce electricity use by about 50%, according to the Department of Energy.
Ranging from $4,000 to more than $7,000 each, heat pumps can cost a pretty penny. The two rebate programs may help offset part or even all of the cost of these devices for many consumers.
Here are the caps on rebates for other upgrades made via the HEEHRA program:
- $1,750 for a heat pump water heater
- $8,000 for a heat pump for space heating and cooling
- $840 for electric stoves, cooktops, ranges, ovens and electric heat pump clothes dryers
- $4,000 for an electric load service center upgrade
- $1,600 for insulation, air sealing and ventilation
- $2,500 for electric wiring
There's a $14,000 cap on the dollar amount of rebates offered under the program. For instance, low-income homeowners can get up to 100% of electrification projects covered — up to the cap of $14,000 in rebates — while middle-income consumers can get up to 50% of their costs covered by the rebates (also up to that $14,000 cap).
To qualify for HEEHRA, you'll have to make 150% or less of the area median income as determined by the Department of Housing and Urban Development.
However, it's unclear whether any HEEHRA rebates will be retroactive given that these will be set up as point-of-sale discounts. The Inflation Reduction Act notes that the funds will be available through September 30, 2031.
What types of tax credits can I get?
Tax credits are different from rebates because consumers receive them when they file their taxes. Rebates, on the other hand, are often applied when someone buys an item. The HEEHRA rebates are slated to be available at the point-of-sale, such as when a consumer buys a heat pump through a home supply store.
The Inflation Reduction Act expands a homeowner efficiency tax credit, called the Energy Efficient Home Improvement Credit. This covers up to 30% of the cost of energy upgrades, with a cap of $1,200 per year.
This tax credit was previously available to homeowners, but it was a lifetime credit, meaning you could claim it only once. But the IRA makes the credit an annual incentive, which means that homeowners could claim the credit for upgrading windows one year and buying a heat pump the next.
How can I enroll in these programs?
You can't claim the rebates or tax credits just yet, Urbanek noted.
"We are probably still a number of months for the programs to be live," she said, adding that the HOMES rebate program will be operated by states, which are likely working on implementing their plans now.
Likewise, the point-of-sale rebates aren't yet available to consumers, but stores should have details later this year, according to trade publication Clean Technica.
The programs are likely to have different rules about
What should I do now to prepare?
There are two steps homeowners can take now to get ready, experts say. First, schedule an energy audit of your home, which typically costs about $400 and which can offer guidance on how to make your home more efficient,according to Home Advisor.
Second, start talking with contractors to line them up for projects when the rebates and tax credit become available, Urbanek noted.
"Educating yourself about the types of equipment and what might be necessary for your own house can give people an idea of how to act as soon as this is available," she said.
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- Climate Change
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As a seasoned expert in environmental policy and climate change initiatives, I've closely followed President Biden's Inflation Reduction Act and its potential impact on reducing global warming. The comprehensive approach outlined in the legislation demonstrates a profound understanding of the interconnectedness between economic policies and environmental sustainability.
The key aspect of the Inflation Reduction Act that I find particularly noteworthy is its focus on incentivizing Americans to make their homes more energy-efficient. Lauren Urbanek, the deputy director of the clean buildings team at the nonprofit Natural Resources Defense League, rightly points out the significance of this initiative. With about 40% of carbon emissions originating from buildings, targeting residential energy efficiency is a strategic move to achieve the U.S.'s emission reduction goals.
The legislation introduces two rebate programs designed to encourage homeowners to adopt sustainable practices:
-
HOMES Rebate Program:
- Allocates over $4 billion to states to enhance overall home energy efficiency.
- Provides rebates based on the energy savings resulting from home upgrades.
- Homeowners achieving at least a 35% reduction in energy usage can receive up to $4,000 in rebates, with a doubling of this amount for low- and middle-income households, allowing them to claim up to $8,000.
-
High-Efficiency Electric Home Rebate Act (HEEHRA):
- Offers rebates for low- and middle-income families to electrify their homes, including installing heat pumps or electric appliances.
- Imposes a cap of $14,000 per household, and households cannot receive two rebates for the same upgrade.
The types of upgrades covered by these programs range from solar panels to new windows under the HOMES Rebate Program. The HEEHRA program focuses on specific appliance purchases and upgrades, including heat pumps, electric stoves, cooktops, ranges, ovens, and electric heat pump clothes dryers.
Notably, the Inflation Reduction Act extends the Energy Efficient Home Improvement Credit, allowing homeowners to claim up to 30% of the cost of energy upgrades annually, with a cap of $1,200 per year. This change represents a significant enhancement compared to the previous lifetime credit, providing a continuous incentive for homeowners to invest in energy-efficient improvements.
While these programs and tax credits are promising, it's important to highlight that they are not yet operational. Lauren Urbanek advises that it will likely take several months for the programs to go live. Homeowners are encouraged to prepare by scheduling an energy audit and engaging with contractors to be ready for projects when the rebates and tax credits become available.
In conclusion, the Inflation Reduction Act demonstrates a forward-thinking approach to addressing climate change by integrating economic measures with environmental goals. The emphasis on residential energy efficiency through substantial rebates and tax credits aligns with contemporary strategies for achieving a sustainable and low-carbon future.