Democrats’ Climate Bill is a Game-Changer for Slashing Residential Emissions

by Kara Saul-Rinaldi and Skip Wiltshire-Gordon

The Inflation Reduction Act (IRA), signed by President Biden this afternoon, is an historic climate bill, investing nearly $370 billion in an array of clean energy spending measures and tax credits. Some of the most transformative investments from the IRA focus on one of the most challenging sectors to decarbonize – America’s homes.

The U.S. has approximately 142 million housing units nationwide, according to the United States Census Bureau. These residential buildings were responsible for one-fifth of energy-related CO₂ emissions in the U.S. in 2020. Small home performance companies across the country work tirelessly to cut home energy use, silently drawing down carbon emissions while making homes healthier, more comfortable, and more affordable. As homeowners face rising energy prices and climate change-driven extreme heat, home performance upgrades have never been more essential. Still, many households cannot afford the marginal additional costs for energy efficiency and electrification solutions. Supply and workforce shortages have increased the costs of retrofits, pushing energy efficiency out of reach for middle-income consumers.

The energy efficiency and electrification rebates contained in the IRA will change the game for households of all income levels across the country through three critical policy incentives:

1. $4.3 billion for Home Energy Performance-based, Whole-House Rebates (IRA Sec. 50121)
   
2. $200 million for State-based Home Energy Efficiency Contractor Training Grants (IRA Sec. 50123)
   
3. $4.5 billion High-Efficiency Home Rebate Program (IRA Sec. 50122)

These residential retrofit and workforce training rebates and grants, in tandem with expanded tax credits such as the 25C energy efficiency tax credit for existing homes, will improve homeowner access to more affordable residential energy solutions, offsetting inflation concerns and reducing carbon emissions. The HOMES rebate program doubles rebates and covers a larger share of project costs for middle- and low-income homeowners, reducing utility bills for those with the highest energy burdens. The IRA’s point-of-sale electrification rebates are limited to low- and moderate-income households and will further reduce reliance on onsite fossil fuels. The training grant program included in the package will expand training opportunities and educate contractors on providing these deep retrofits and electrification measures -- growing and diversifying the energy efficiency workforce.

In the coming weeks, we will dive deeper into each of these provisions contained in the IRA and spotlight exactly how they aim to help both homeowners and workers in the energy efficiency and clean energy industry. The road to decarbonize our nation’s homes is long – but thanks to the IRA, the way ahead is clear.