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5 things every U.S city should know about the Inflation Reduction Act

Karolina Eklöw Mon, 15 August 2022

The U.S. has passed the Inflation Reduction Act – the biggest climate step ever taken by the federal government. It bundles an investment of $369b to prioritize climate planning, reduce energy costs & cut emissions over the short- and long-term. Last week the House of Representatives passed the bill and actors can begin reaping its benefits for climate action. 

What does this mean for cities? 

More money for on-going projects

This bill gives cities access to additional federal funding, allowing them to do more with projects already underway. It unlocks additional dollars for climate-friendly city programs  – like incentivizing home retrofitting to purchasing electric vehicles, building more affordable housing to investments in local businesses, and updating climate-resilient infrastructure. The package includes, amongst other things, $30b for wind, solar and batteries, $20b to cut agriculture emissions, $10b for new clean tech facilities, $500m for heat pumps. 


Greater impact for electrification efforts

Often, cities don’t control their energy grid. This means that the impact of electrification efforts are limited in places with a dirty grid. This bill aims to make the energy grid clean across the U.S. With an updated grid, cities will theoretically be able to run on clean energy without lifting a finger. This means that the transition to electric vehicles, retrofitting, and all of the other efforts across cities will – automatically – be more impactful. 


Climate justice investments

It is not a coincidence that this bill was supported by a key coalition of Mayors, NGOs, labor organizations and industries. It unlocks critical investments – around $60b  – for disadvantaged & vulnerable communities impacted by the climate crisis. It specifically includes Environmental Justice Block Grants and Neighborhood Access Equity Grants which enable cities to tackle both climate, equity and justice in a way that is appropriate to local communities. 


Legal streamlining opportunities

There’s more. If a city finds that the Inflation Reduction Act does not cover the specific projects a city is looking to establish, there are other legal instruments to consider. Both the American Rescue Plan Act and the Infrastructure Investment and Jobs Act (IIJA) have climate funding available for cities. Dollars in both legislations should be spent on low carbon projects and can be combined with incentives in the Inflation Reduction Act. The combination of these is a goldmine for cities looking to supercharge their climate ambitions. 


Climate planning for the long-term 

The Inflation Reduction Act is an opportunity for cities to invest in their own future. The bill has allotted a budget specifically for climate planning. It is estimated to raise $451 billion in new tax revenue over the next decade and aims to provide a steady funding stream for efforts underway in cities across the country. So far, cities have struggled to find the budget for climate planning and prioritized projects with a short implementation date. But this change means that cities will have the resources to invest in rigorous climate planning too. 


This new law is ultimately a chance for U.S cities to be both pragmatic and strategic about climate. More concerted action for cities across the U.S is made reality, and the bill already seems to have made a dent in the climate conversation in Washington D.C.