Americans Discovering Value of Climate-Oriented Tax Credits

The law passed by Congress in 2022 to promote the transition away from fossil fuels contained far more carrots than sticks–and Americans are gobbling them up.

The statute, called the Inflation Reduction Act, provides tax credits  and other benefits for a wide range of actions that citizens and businesses can take to fight climate change. The five most popular credits during the first year were for solar panels, insulation or air sealing, exterior windows and skylights, exterior doors, and central air conditioners.

More than 3 million American households used the act’s subsidies for homeowners last year, collectively saving more than $8 billion, according to an August 7 report by the U.S. Treasury Department. It was the first detailed snapshot of how these more benefits were used in their first full year, by whom and where. The department called the $8 billion a “significant” number that is higher than initially expected, Nadja Popovich reported in The New York Times..

The bulk of the money, more than $6 billion, helped households install rooftop solar panels, small wind turbines and other renewable energy systems. These credits were most popular in sunny states, including much of the Southwest and Florida.

While those are encouraging numbers for tax credits, of the more than 137 million tax returns the government had processed by late May, some 3.4 million of them — or approximately 2.5 percent — took advantage of at least one of these two subsidies. That’s about 30 percent more people than used similar, though less generous tax credits in 2021, but it means that the vast majority of taxpayers are not participating.

Many experts believe that more taxpayers should be taking advantage of these opportunities. So a nonprofit group, Civic Nation, is launching a "Save on Clean Energy" campaign to educate Americans about the law. Civic Nation’s campaign involves more than 40 groups and messengers,  including United Way, Carrier, Sunrun, the League of Conservation Voters, and a bipartisan group of mayors from around the country. The U.S. Department of Energy is also involved.

The intent is to help spread the word through trusted local messengers such as schools and community-based organizations. “It can't just be, you know, press releases,” Civic Nation CEO Kyle Lierman told Axios. “It has to be a kind of surround sound campaign, where folks are hearing about how they can take advantage of these opportunities on their phones when they read the news, but also at their churches, at the supermarket, at the door."

President Biden's top climate diplomat, John Podesta, who is overseeing the rollout of the IRA's clean energy provisions, considers the Civic Nation partnership a new effort in the energy space, whose goal is to make it clear to people that not only are energy rebates available, but also to show them how to complete the process by listing nearby contractors, for example. "Some of this is a lack of general awareness that these general programs are available," he said, but some is also a question of ‘What does it mean for you?’" 

EVs becoming more affordable

“The E.V. market has hit an inflection point,” Randy Parker, chief executive of Hyundai Motor America, told The New York Times recently. “The early adopters have come. They’ve got their cars. Now you’re starting to see us transition to a mass market.”

His words appeared in a front-page story, which began with this quote from Alex Lawrence, a dealer in Salt Lake City who specializes in used electric cars: “We’re seeing younger people. We are seeing more blue-collar and entry-level white-collar people. The purchase price of the car has suddenly become in reach.”

Americans bought a record 1.2 million EVs in 2023, according to Cox Automotive's Kelley Blue Book. That's equivalent to 7.6 percent of the total U.S. new-vehicle market, up from 5.9 percent in 2022. 

Cox predicts that EVs will account for 10 percent by the end of 2024. “Throw in hybrids and plug-in hybrids,” Axios’ Joann Muller reported, and Cox says "electrified" vehicles could comprise almost 24 percent of new car sales by then.

Prices are falling because of increased competition, lower raw-material costs and more efficient manufacturing, The New York Times’ Jack Ewing wrote. Federal tax credits of up to $7,500 for new electric cars, often augmented by thousands of dollars in state incentives, push prices even lower.

The price of electric cars is plummeting so fast that they’re now almost as cheap as gas-powered cars, The Washington Post’s Nicolas Rivero reported. “Since EVs first hit the market, car buyers have had to pay a steep premium if they wanted a car that ran on batteries instead of a gas engine. Two years ago, they would have paid about $17,000 more on average for a new electric car than for a new gas-powered car. But that gap has been rapidly closing, shrinking to $5,000 last month, according to data from Cox Automotive.”

The long-term trend toward cheaper electric cars is due mainly to falling battery prices. Batteries are nearly 90 percent cheaper today than they were in 2008, according to the U.S. Energy Department.

Tesla, Ford, General Motors and Stellantis, the owner of Jeep, and other carmakers have announced plans for electric vehicles that would sell new for as little as $25,000.

But what if President Biden, who has championed the transition to EVs, loses in November? Will EVs lose, too? “There may be some hiccups in the exact pace and scale of E.V. sales if there are major policy changes, but I wouldn’t expect the E.V. market to flatline,” said Peter Slowik, who leads research on passenger cars at the International Council on Clean Transportation, a research organization. “Most automakers,” he explained to Ewing, “are committed to an all-electric future, and many are planning on a timeline that goes far beyond the next administration.”

Slowik’s group estimates that cars and sport-utility vehicles capable of traveling 400 miles on a full battery will cost less than cars with internal combustion engines in 2030, even before taking into account government subsidies. 

Those calculations do not take into account lower fuel and maintenance costs that strengthen the financial argument for electric vehicles. Electricity is almost always cheaper per mile than gasoline, and battery-powered vehicles don’t need oil changes, engine air filters or spark plugs. For people who drive a lot, electric cars may already be a better deal. At the same time, some automakers are offering strong discounts on E.V. models as an enticement for buyers.

By next year, there will be more than 100 fully electric models for sale in the United States, according to Cars.com, an online sales platform, double the number available last year. “We’re at the point now where anybody that wants an E.V. for a price point can actually get an E.V.,” said Rebecca Lindland, senior director of industry data at Cars Commerce, which operates Cars.com.

Best ways for each of us to fight climate change

Each one of us can take steps to reduce the impact of climate change. From the time we climb out of bed in the morning until turning out the lights at night, we have the power to fight back against this powerful threat.

But individuals’ action “can only go so far,” said Dr Shobha Maharaj, a climate impacts scientist from Trinidad and Tobago. “Deep, rapid cuts in carbon emissions from oil and gas, as well as other sectors such as transport, are needed, which are outside the control of the average individual.” Maharaj is one of 380 who responded to a survey by The Guardian newspaper, which sought the views of every contactable lead author and review editor of reports by the UN’s Intergovernmental Panel on Climate Change since 2018.

Seventy-six percent of these experts stressed the importance of voting for politicians who pledge strong climate measures. “I feel the reason behind the lack of response to date is the nervousness of politicians,” said Professor Bill Collins of the University of Reading in the UK. “Polls suggest voters are actually more willing for governments to take stronger climate action.” 

And the most powerful action governments can take is to put a price on carbon emissions. That will speed the transition to clean energy–while reducing air pollution and other problems caused by the burning of fossil fuels. “The science is there, but the lack of will of politicians worldwide is retarding climate change [action],” said Alexander Milner, a professor at the UK’s University of Birmingham.

The second-most-effective individual action, the experts said, was reducing flying and fossil-fuel powered transport. Flying is the most polluting activity an individual can undertake. Frequent-flying “super emitters,” who represent just one percent of the world’s population, cause half of aviation’s carbon emissions.

Almost 30 percent of the experts said eating less meat was the most effective climate action, while a similar proportion backed cutting emissions from heating or cooling homes. In her new book Not the End of the World, Dr. Hannah Ritchie of the University of Oxford echoes those thoughts. In an extensive interview, she spoke with The New York Times Magazine’s David Marchese about ways people can make a difference: “Eating less meat, in particular beef. For most people in the world, reducing their meat consumption would have a big impact. Reducing food waste. How you travel: walking, cycling, public transport is always best. In terms of household energy, the big thing is heating or cooling. So insulation, installing a heat pump, if you can install solar panels. Those are big things.”

Trading in your gasoline-powered car for an electric car would pay significant dividends for the planet–and probably for your long-term finances–wrote The Washington Post’s Sarah Kaplan. She also noted the value of simply buying fewer things.

While each of us tries to contribute to the solution, can we expect our public officials to do their part? Ritchie tends to be optimistic about that. “[T]he potential is there, and with each year that passes, I think it’s harder for countries to find excuses not to.”

First global carbon tax is coming into view

The first worldwide carbon tax appears to be steaming into view. In late March the United Nations agency that regulates the shipping industry essentially committed to requiring shipping companies to pay a fee for every ton of carbon they emit by burning fuel. 

“I’m very confident that there is going to be an economic pricing mechanism by this time next year,” Arsenio Dominguez, the secretary general of the International Maritime Organization, said. “What form it is going to have and what the name is going to be, I don’t know.”

This step is “potentially world-changing,” Manuela Andreoni and Max Bearak wrote in The New York Times. They reported that there are at least 50,000 cargo ships like the ill-fated Dali, which crashed into Baltimore’s Francis Scott Key Bridge, constantly on the move, transporting the vast majority of the world’s goods. Shipping accounts for roughly 3 percent of global greenhouse gas emissions, slightly more than aviation. 

About 70 countries and states around the world have put a price on carbon, either through taxes or trading mechanisms. But if the IMO finalizes this proposal, it would be the first carbon fee to apply around the globe.

The IMO has been considering carbon pricing and other market-based measures for more than 10 years. The organization said that by adopting the proposal it was simply living up to its pledge, made last year, to decarbonize the entire shipping industry by 2050. Its member countries have agreed that they need to start charging the shipping industry for emissions of heat-trapping gases in 2027.

The organization still must make many decisions about pricing carbon, The Times’ reporters noted. “How would a price be calculated? Would it be a flat fee or part of a trading mechanism between companies? Who would collect the money and distribute it? And which fuels are considered low-carbon?

“Countries are looking at seven different proposals, in which prices range from $20 to $250 per ton of carbon emissions... They hope to decide on all that by next year.”

Such a fee would very likely raise tens of billions of dollars a year. That revenue could accomplish a lot. "The Pacific is pushing for a majority of the revenue to support the most climate vulnerable in responding to climate change," the Marshall Islands' envoy Albon Ishoda said in a Reuters dispatch last summer. 

Economist DominikEnglert and his colleagues from the World Bank suggested in a study that countries should use the money to decarbonize the shipping industry, invest in efficiency measures that could reduce shipping costs for poorer countries and deploy it for broader climate action.

Many of the world’s biggest shipping companies are pushing for a more ambitious carbon price because that would mean they wouldn’t need to pay for the same tax in Europe, The Times explained. Companies ideally want to avoid paying carbon taxes in multiple jurisdictions, which would result in a lot of complex and expensive accounting.

“If I think back three years ago, the IMO was just about the most conservative organization I have ever encountered,” the European Commission's Green Deal chief Frans Timmermans told a side event at last June’s Paris climate finance summit. “And now the atmosphere has completely changed.” 

Efforts to track and reduce methane emissions are taking shape

Oil and gas producers in major oil fields across the United States may be emitting three times as much methane as official estimates, according to research published March 13 in the journal, Nature. It was the latest study to suggest that emissions from the fossil fuel sector may be grossly undercounted.

Methane, a colorless and odorless gas, is the main ingredient in natural gas, which is burned in power plants and factories around the world, as well as in homes. ‘It’s notoriously leaky,’ Hiroko Tabuchi reported in The New York Times. “It seeps from oil and gas drill sites. It escapes from pipelines that carry the gas where it needs to go. And some operators simply release it into the air instead of investing in the infrastructure to capture all of it.”

Methane can warm the planet more than 80 times as much as the same amount of carbon dioxide over a 20-year period, and scientists estimate that human-caused methane emissions are responsible for up to 30 percent of the global warming being experienced today.

In a separate analysis released the same day, the International Energy Agency (IEA) said that methane emissions from the energy sector remained near record highs in 2023. But it also struck a hopeful tone, saying new steps announced in recent months could soon put those emissions in decline. For now, global methane emissions remain “far too high” to meet international climate targets, the IEA said.

The study published in Nature found that methane emission rates varied widely across regions, from 0.75 percent in Pennsylvania to more than 9 percent in parts of New Mexico.

One takeaway from this and previous studies was “just how concentrated emissions are in a very small fraction of sites,” said Evan D. Sherwin, who led the research at Stanford and now works at the Lawrence Berkeley National Laboratory. “That’s the silver lining,” he told The Times. “If we can figure out what’s happening at these small fraction of sites, we’re halfway toward solving the methane problem in oil and gas,” he said. Axios noted that only 0.05 to 1.66% of well sites contribute the majority of well site emissions.

Nearly 200 governments agreed at last year’s global climate talks in Dubai to “substantially” reduce methane emissions by 2030. Major oil and gas companies have also signed onto the Global Methane Pledge to rein in their emissions. Meantime, the Biden administration is moving ahead with rules that require oil and gas producers to detect and fix leaks of methane.

All of the pledges made by countries and companies, implemented in full and on time, would cut methane emissions from fossil fuels by 50 percent by 2030, the IEA’s new analysis found. However, the agency pointed out that most pledges were not yet backed by concrete plans.

Moreover, it’s been hard to track companies’ progress. As Nicolas Rivero wrote in The Washington Post, there are thousands of oil and gas facilities around the world with countless pieces of equipment that can leak or malfunction and release methane. Companies and regulators can measure some emissions by installing methane detectors or using planes or drones to fly sensors over a facility, but the data is incomplete and hard to compare between companies.

Now, a new generation of satellites, led by MethaneSAT, produced by researchers at the Environmental Defense Fund (EDF) and Harvard University, promises to give a more complete picture of the oil and gas industry’s global methane emissions. The satellite launched March 4 on a SpaceX rocket and will begin transmitting data later this year.

MethaneSAT aims to “see” about 80 to 90 percent of global oil and gas production as it does its daily 15 rotations around the Earth. That should cover a significant chunk of human-caused methane emissions. (Other big sources of methane release are landfills and cow burps.)

Another satellite, designed by NASA, a satellite maker called Planet and a greenhouse gas tracking nonprofit called Carbon Mapper, is set to launch this year. Japan will send another emissions-tracking satellite into space this year, and the European Space Agency plans to launch two more in 2026.

“Soon, there will be no place to hide,” Ben Cahill, a climate expert at the Center for Strategic and International Studies, told Rivero. “There’s going to be a lot of public data on methane emissions, so companies will have very strong incentives to figure out the problem and fix it.”