IRA Incentives Hold Big Potential to Cut Building Emissions

IRA Building Energy

(Credit: Pixabay)

by | Aug 31, 2022

IRA Building Energy

(Credit: Pixabay)

The Inflation Reduction Act has the potential to make a big dent in emissions in buildings, through millions of square feet of retrofits in commercial settings, heat pump installations, and state and local programs to improve energy efficiency, according to an analysis by RMI.

RMI says that the programs and incentives provided by the Inflation Reduction Act (IRA), coupled with the last year’s infrastructure bill, could reduce emissions from 33 million metric tons up to 100 million metric tons. That would help the United States get between 10% and 30% of the way to President Biden’s goal of cutting emissions by half through 2050.

The IRA was passed earlier in August 2022 and allocates nearly $370 billion in programs to improve energy efficiency. Part of the goal of the legislation is to cut emissions by 40% through 2030, and several research reports say that the bill combined with additional efforts makes the 50% target attainable.

Buildings are one of the biggest emissions emitters and energy users. They can account for nearly 30% of the energy use in the US, according to the Energy Information Administration. Buildings account for 39% of energy and process-related carbon emissions, according to the International Energy Agency.

Those figures are a big reason buildings play such a key role in the IRA.

According to RMI, approximately 115 million square feet of commercial space will be retrofitted by way of tax credits and rebates. For the IRA to be truly effective at reducing the energy impact of buildings, RMI says the incentives need to be combined with state and local government programs that enhance building improvements.

IRA also says the Biden administration and federal agencies need to take additional action targeted at building efficiencies. As part of the infrastructure bill funding, the Department of Energy has stated it will begin issuing $225 million in funds to state and local governments to increase the implementation of the latest energy codes in buildings.

Heat Pumps are also a big focus of the IRA and overall net-zero targets. The legislation includes $500 million in the Defense Protection Act to increase heat pump use.

RMI says through that and other incentives in the bill, some 7.2 million heat pumps will be installed. The DOE says on average a heat pump saves 3-megawatt hours of energy per year as opposed to using oil.

Heat pumps are an important technology for energy transitions, especially during the highest demand times, which are in the winter months, according to a recent study by several academic institutions. Boston University’s new Center for Computing and Data Sciences is using heat pumps to provide nearly 90% of its heating and cooling needs.

Another area of the IRA that will improve building efficiencies is its target to help underserved communities. RMI says the legislation will help provide 2.4 million in electrification upgrades in low- and medium-income communities, which will help improve energy efficiencies and costs for businesses and residences in those areas.

The tax credits for building energy improvements will begin going into effect at the start of 2023 and last for 10 years. State and local programs could take as long as two years to be available, according to RMI.

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