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With a signature from President Joe Biden on Tuesday, congressional Democrats’ $369 billion package of spending to fight climate change became law — and federal officials say it won’t be long before Colorado and other states start to see the benefits.
“We will see some impacts immediately,” Michael Regan, administrator of the Environmental Protection Agency, said in a call with reporters Wednesday. “A good example is the tax credits for new electric vehicles — once the president signed the dotted line, that tax credit was made available for new vehicles all across the country.”
The new federal EV tax credit of up to $7,500 per vehicle — subject to an array of requirements and restrictions — is one of many incentives for clean energy contained in Democrats’ Inflation Reduction Act, a scaled-down bill passed as a compromise with Sen. Joe Manchin of West Virginia that also includes corporate tax hikes and health care provisions.
Other tax credits and investments in the bill will help boost wind- and solar-powered electricity generation, carbon capture and storage, clean-heating technologies like heat pumps and more — all with the aim of reducing the emission of heat-trapping greenhouse gases into the atmosphere.
“We’re certainly very excited,” Will Toor, executive director of the Colorado Energy Office, said in an interview. “While it’s going to take a while to fully understand what the implications are going to be, it really feels like it’s going to accelerate and supercharge a lot of our efforts to move towards decarbonization.”
Under Toor, the Energy Office has coordinated efforts by Gov. Jared Polis’ administration to meet the emissions-reduction targets set by legislation enacted in 2019, including a 50% statewide cut by 2030. The agency will be responsible for overseeing and distributing funds for some of the Inflation Reduction Act’s clean-energy programs, like its $9 billion in rebates for home energy improvements.
“That will be something like $150 to $180 million that we’ll be able to use to support residential adoption of energy efficiency and home electrification,” said Toor.
The rebates will combine with new federal tax credits for electric heat pumps, rooftop solar and other household clean-energy technologies, as well as state-level incentives passed by the General Assembly this year, to enable more homes and commercial buildings to move away from natural gas as a heating fuel, advocates say.
From day one, President Biden made it clear that America would resume its position as the global leader on climate change … This law does that.
– Michael Regan, administrator of the EPA
“You put that all together, and there’s really going to be an opportunity to start moving towards much wider-scale adoption of heat pumps in both commercial and residential properties,” Toor added.
A fact sheet released by the White House on Wednesday projected that over 120,000 additional Colorado households will opt to install rooftop solar panels as a result of the bill’s incentives. Its grants to help local governments adopt the newest energy-efficient building codes, officials claimed, would help the average new homeowner in Colorado save $423 per year on their utility bills.
“From day one, President Biden made it clear that America would resume its position as the global leader on climate change,” Regan said. “This law does that.”
$8 billion in federal investment
At an event held last week to promote the adoption of electric school buses, Polis highlighted the importance of federal incentives for emerging clean-energy technologies, which can send a powerful, nationwide market signal where more limited state-level programs can’t.
“The state program alone wasn’t enough to drive manufacturers to prepare to gear up the manufacturing of electric buses,” he said. “The EPA program is, because they know the demand will be there nationally.”
Toor said the new federal climate law will “shift the economics” for the deployment of new technologies, especially when it comes to less-developed sectors like electric trucks, buses and other heavy-duty vehicles.
“That’s an arena where we can do a lot to push demand in the state, but we need the supply. The federal action on heavy-duty vehicles is really going to help bring that supply,” Toor said. “I think that one’s going to be pretty transformational.”
Substantial new tax credits for wind and solar power could also further drive down emissions in Colorado’s electricity sector. Since Polis took office in 2019, his administration has secured commitments from the state’s top utilities to reduce emissions by about 85% by 2030. Toor said the additional credits could help utilities meet those targets as they begin their procurement processes, incentivizing new wind and solar projects rather than natural gas generation and potentially leading to steeper emissions cuts in future electric resource plans filed with the Public Utilities Commission.
In all, the industry group Advanced Energy Economy estimates that Colorado will receive about $8 billion in federal investment from the IRA, adding an estimated $53 billion in economic activity.
Administration officials have long expressed cautious optimism that the state was on track to meet the targets in its 2019 emissions law, despite skepticism from some of the law’s proponents about Polis’ approach to getting there. Now, with billions of dollars in federal help on its way, officials are more confident than ever that Colorado will be able to meet or exceed the goals it’s set for itself, starting with a 26% statewide emissions cut by 2025.
“To combine the effects of the IRA and all of the policies that we’ve adopted in Colorado … we’ll be trying to figure out how those intersect, and what trajectory we are now on,” Toor said. “We’re going to be very interested to try to understand that more quantitatively.”
Editor’s note: This story first appeared in Colorado Newsline, which is part of States Newsroom, a network of news bureaus supported by grants and a coalition of donors as a 501c(3) public charity. Colorado Newsline maintains editorial independence. Contact Editor Quentin Young for questions: email@example.com. Follow Colorado Newsline on Facebook and Twitter.