It’s winter, which often means higher energy costs–to heat our home, cook meals for our families and charge an electric vehicle to get around. The use of fossil fuels like coal and natural gas also ramps up in winter, warming our planet even faster. On January 10, scientists noted that the last eight years have been the hottest on record–so there’s no time to waste to secure a safer, healthier planet.
What if there was a way to tackle both problems at once–saving money AND helping tackle climate change?
There is! Last fall, Congress passed and President Biden signed the Inflation Reduction Act–unleashing a variety of opportunities for environment-and-savings-minded people like us to save money and get off fossil fuels. Below, we detail what’s available and how you can take advantage of it.
Let’s be clear upfront: the biggest polluters bear the most responsibility for securing a safer, healthier planet. This is their mess and they should do the most to clean it up. But we as consumers can also play a role–by evaluating and reducing how much we use fossil fuels.
When we think about our home and how we go about our day, fossil fuels can play a bigger role than we’d like. You wake up and use a gas stove to make breakfast. You take a hot shower, using natural gas to heat the water. You drive your car to the grocery store–stopping to fill up at a gas station first. And these can all add up to hit your budget hard–especially when there are spikes in gas prices.
That’s what the Inflation Reduction Act is meant to tackle–by offering upfront discounts and tax credits to help make the switch away from fossil fuels while saving you money.
All kinds! Let’s start with commonly known ones. By now, you’ve probably heard of rooftop solar and plug-in electric vehicles. The Inflation Reduction Act helps people afford those more easily. For example, the Inflation Reduction Act offers up to $7,500 off a new plug-in vehicle, and $4,000 off a used vehicle.
The Inflation Reduction Act also offers incentives for many home improvement projects we don’t think about every day, not just for homeowners but for renters as well. For example, going back to your morning shower, water can be heated using a heat pump water heater instead of using fossil fuels. This cutting-edge technology uses electricity to pull heat from the surrounding air–even in colder weather–and transfer it into a hot water tank. Because it transfers heat rather than creating it (as a traditional water heater would), it’s more efficient, leading to hundreds of dollars per year in savings on your utility bill. Heat pumps use no fossil fuels, and do not contribute to dangerous leaks of methane–a potent greenhouse gas–into the atmosphere the way gas water heaters do. Some heat pump water heaters even plug into a regular 120-volt household outlet in your home–requiring no special wiring or panel upgrade!
Through the Inflation Reduction Act, households living on low incomes can get 100% of the cost covered, up to $1,750, while households living on moderate incomes can get 50% of the cost covered, up to $1,750. There is also a federal tax credit capped at 30% of the project cost, or up to $2,000, for people living on all incomes. Many states, like California, and utilities, like the Los Angeles Department of Water and Power, also offer incentives. Stacking these incentives can mean the project is completely paid for!
The Inflation Reduction Act offers incentives for lots of projects! Take battery storage. Power outages can affect everyone. That’s especially the case with weather made more extreme by climate change. When facing a blizzard, intense rainstorm or wildfire, it helps to stay resilient. A battery storage system lets you store energy from the power grid or rooftop solar, and can power anything electric in your home–from lights to microwave to CPAP machine and even a vehicle. Even when there is no power outage, this system saves you money by soaking up excess solar energy on the grid, then discharging it during peak hours, when electricity is expensive–reducing your utility bill over time. And by installing battery storage, we can create microgrids–creating energy independence and decreasing our reliance on the utility to keep our lights on. The Inflation Reduction Act offers a tax credit for 30% of the cost of a battery storage system.
Incentives are available for people of all backgrounds–whether renters or homeowners, those with a large family or small, and living on incomes of all sizes. For example, an individual making $35,000 and living in Seventh Generation’s home state of Burlington, VT, could receive upfront discounts of $9,700 and tax credits of $3,050 for a total savings of $12,750–while also saving an estimated $1,450 per year on their utility bill.
It’s important to note, tax credits are not an ideal form of incentive for everyone. They require people to pay enough in taxes to get a credit back, but with progressive taxation, many community members living on very low incomes pay little to no taxes, so would not be eligible for a credit. They also require time, knowledge and sometimes assistance (like TurboTax or H&R Block) to get the credit, which not everyone has.
Going forward, policymakers should encourage upfront or “point of sale” discounts, especially for under-resourced community members. Fortunately, many of the incentives described above, as well as other opportunities–such as for an electric or induction stove–are upfront incentives. Policymakers should also make sure these incentives go to community members that need them most and cannot afford to electrify their homes without them–especially when there is a limited budget for incentives and it is “first come, first serve.” For example, to get a $7,500 tax credit for a new electric vehicle, an individual filing taxes solo cannot make more than $150,000. These limits should be across all projects.
To help you get started on making the switch, check out Rewiring America’s Savings Calculator! Their team also details how each home improvement works, how it will save you money, and why it is better for the environment. For an example of how families are saving money and helping make the switch from fossil fuels, check out their case study on how the Nguyens, a couple living on $30,000 and renting a home in Atlanta, electrified their home at no cost.