The United States is historically the largest contributor to greenhouse gas emissions despite peaking in 2007, and it remains the second largest emitter behind China on an annual basis.
The effect of President Joe Biden’s Tax and Climate Bill, which passed the House of Representatives on Friday, would reduce greenhouse gas emissions by 40% from 2005 levels d by 2030, according to experts.
This would go a long way towards meeting the administration’s goal of a 50-52% reduction in emissions as part of its commitment in the Paris Agreement and compares to a reduction of just 30% under policies. previous.
Electricity and transportation have been the biggest contributors to U.S. emissions, but Biden’s new policy moves also reinforce the focus on industry.
Spread over 10 years, the measures are to be financed largely by the business sector. More than $300 billion in revenue is expected from a minimum tax rate of 15% for companies with net income over $1 billion a year. About 150 companies would be affected.
Additional funding will come from a 1% levy imposed when companies buy back their own shares, starting in 2023. The buybacks have been used to spend the piles of cash built up by some of America’s biggest companies, including ExxonMobil, rather than to use the funds to invest in new areas.
Overall improvements in tax enforcement are also expected to generate new revenue, with the Internal Revenue Service also receiving $80 billion in funding to do so. It will also study plans to develop an online direct deposit system.
Additional revenue would come from significant savings to Medicare from prescription drug pricing reform that will allow it to negotiate lower payments to drug companies on certain big-ticket items.
Assessing the so-called Inflation Reduction Act of 2022, the nonpartisan Congressional Budget Office says it will have a “negligible” effect on inflation in 2022 and 2023.
The legislation is explicit that there will be no impact on “any taxpayer or small business with taxable income of less than $400,000”.
Below is a summary of the calculations and content of the legislation:
Climate measurements: Industry
Methane Penalty $900 per metric ton of methane emissions that exceed federal limits in 2024, rising to $1,500 per metric ton in 2026.
Carbon capture and storage Tax credit of $85 per metric ton, instead of $50.
Clean energy $30 billion for companies building solar panels, wind turbines, batteries, geothermal power plants and advanced zero-emissions nuclear reactors, including 10-year tax credits. Replaces short-term wind and solar loans. The investment tax credit now also applies to battery storage and biogas.
About $30 billion in grants and loans for utilities to facilitate their transition to clean energy.
Nearly $6 billion in grants and tax credits are available to help some of the worst manufacturing polluters, including chemical, steel and cement factories to reduce their emissions.
More than $5 billion in tax credits created or extended for hydrogen energy from clean sources, biofuels and sustainable aviation fuels. An additional $5.5 billion for expanding incentives for biodiesel, renewable diesel and alternative fuels.
Own manufacturing $10 billion in investment tax credits to build manufacturing facilities for electric vehicles and renewable energy technologies.
green bank $27 billion for a “green bank” to support clean energy projects, such as rooftop solar panels and emission reduction technologies, especially in disadvantaged communities.
Agriculture $20 billion to reduce emissions in the agricultural sector. This includes managing diet and feed to reduce methane emissions from livestock and improving soil carbon.
Forestry Hazardous fuel reduction programs on National Forest System lands, vegetation management, protection of old growth forests, inventory of old growth and mature forests within the National Forest System.
Community support $60 billion to support low-income communities and communities of color. Includes grants for zero-emission technology, credits for solar and wind installations in operation in these communities, pollution mitigation for highways, bus depots and other infrastructure located near disadvantaged communities.
Support for the coal, oil and gas industry The Interior Department is to reinstate a series of oil and gas concession sales towers that the administration announced plans to cancel after a court ruling on environmental grounds.
Commitment to expedite the pipeline licensing process.
Extension of oil and gas leases on public lands and waters when renewable energy providers receive leases for solar and wind power.
Climate measures: Households and individuals
Clean vehicles Tax credit of up to $7,500 for the purchase of new “clean” vehicles, including hydrogen rather than electric, for those with a maximum annual income of $150,000. A $4,000 credit for used vehicles priced under $25,000, for those with a maximum annual income of $75,000.
Another $1 billion to fund zero-emission school buses, heavy trucks, transit buses and other commercial vehicles.
Renovation $9 billion in rebates for Americans who buy and renovate homes with electrical and energy-efficient appliances. This includes heat pumps, water heater and boiler upgrades, and biomass stove tax credits:
Rebates of up to $1,600 for home insulation.
Rebates of up to $2,500 for electrical wiring upgrades.
Rebate of up to $8,000 for the installation of heat pumps that can both heat and cool.
Discounts of up to $1,750 for a heat pump water heater.
Rebates of up to $1,200 per year for residential electrification.
Works Incentives that include bonuses for companies based on the amount they pay their workers and credits for manufacturing steel, iron and other components in the United States.
Health insurance reforms These allow Medicare to negotiate prices for certain drugs, with savings estimated at more than $200 billion over 10 years. It would start with a list of 10 expensive single-source drugs in 2026, growing to 20 drugs by 2029, with a cap on the negotiated price.
Pharmaceutical companies are liable for a tax of up to 95% of drug sales if they fail to comply.
Limit on personal expenses The bill caps prescription drug costs for people on Medicare at $2,000, starting in 2025. Insulin costs will be capped at $35 per month for seniors on Medicare.
If drug companies raise Medicare prices faster than the rate of inflation, they must reimburse the difference to the government.
Affordable Care Act extension Financial assistance for those enrolled in ACA plans for three years, extending the program expiring this year and expanding eligibility to allow more middle-income people to receive assistance and an increased overall amount.
black lung assistance A permanent extension of the tax rate to fund the Black Lung Disability Trust Fund to fund claims for people with the occupational disease, caused by long-term dust inhalation which affects approximately 16% of coal workers.
To find out more about the US climate and tax package
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