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Seven Key Provisions in the Climate Deal

The climate and tax deal announced Wednesday by Senate Democrats would pump hundreds of billions of dollars into programs designed to accelerate the country’s transition from a largely fossil-fuel-based economy to cleaner energy sources.

The legislation, called the Inflation Reduction Act of 2022, is a far cry from the ambitious multi-trillion domestic policy and tax bill that President Biden was aiming for, and which Democrats in Congress have spent more than a year working on to succeed.

What remains is a scaled-down but still significant package born of a compromise between West Virginia Democratic Senator Joe Manchin III and Senate Majority Leader Chuck Schumer, the New York Democrat.

Here’s a quick look at what’s in the bill, which Democrats hope to defeat as early as next week to defeat the Republican opposition in the Senate.

The deal would provide billions of dollars in tax credits over 10 years for companies building new sources of zero-emission electricity, such as wind turbines, solar panels, battery storage, geothermal plants or advanced nuclear reactors. Previously, Congress had offered short-term loans for wind and solar energy that often expired after a year or two. The credits in the new bill will cover any carbon-free technology and would last at least ten years, giving businesses more certainty.

The bill also extends a tax credit for companies that capture and bury carbon dioxide from natural gas plants or other industrial facilities before the gas escapes into the atmosphere and warms the planet — a technology rarely used today due to its high cost. It would also provide tax breaks to keep existing nuclear power plants running. More than 13 reactors have been shut down across the country since 2013, and emissions often rise when they do, as they tend to be replaced by fossil fuels. It would also provide grants and tax credits to states and electric utilities to reduce carbon dioxide emissions.

The deal extends a popular consumer tax credit to $7,500 for the purchase of new electric vehicles, and offers a $4,000 credit for used electric vehicles for the first time.

Only people who earn $150,000 a year or less (or $300,000 for joint filers) are eligible for the new car credit and those who earn up to $75,000 (or $150,000 for joint filers) on used cars. The program would run through the end of 2032. The credits would be available for new cars priced up to $55,000 and new pickup trucks, SUVs, and vans priced up to $80,000. Another $1 billion in the bill would provide funding for zero-emission school buses, heavy-duty trucks, public transit buses and other commercial vehicles.

The bill aims to cut energy costs by investing $9 billion in rebates for Americans who buy and retrofit their homes with energy-efficient and electrical appliances. It also includes a decade of consumer tax credits that would lower the cost of heat pumps, rooftop solar, water heaters and electric HVAC, or electric heating, ventilation and air conditioning technologies.

The package earmarks $60 billion for clean energy production in the US, including $30 billion in production tax credits for solar panels, wind turbines, batteries and critical mineral processing and $10 billion in investment tax credits to build manufacturing facilities that make electric vehicles and renewable energy technologies.

These provisions are intended to halt and reverse the migration of clean energy production abroad to countries such as China. The bill would also invest $500 million through the Defense Production Act for heat pumps and critical mineral processing.

The bill would also set aside $27 billion for a “green bank” aimed at establishing clean energy projects, particularly in underserved communities.

The bill would also impose a fee for excess methane leaking from oil and gas wells, pipelines and other infrastructure. Methane is a particularly potent greenhouse gas: Although it disappears faster than carbon dioxide, it is many times more potent when it comes to warming the atmosphere. Polluters would pay a fine of $900 per tonne of methane emissions exceeding federal limits in 2024, rising to $1,500 per tonne by 2026.

The bill would invest more than $60 billion to support low-income and communities of color disproportionately burdened by the environmental and public health impacts of climate change. This includes grants for zero-emission technology and vehicles, as well as money to mitigate the negative effects of highways, bus depots and other transportation facilities, as well as construction projects near underserved communities.

An additional $20 billion would be earmarked for programs to reduce emissions from cows and other livestock, as well as farmland and rice production. According to the government, agriculture generates about 11 percent of the greenhouse gases emitted by the United States. The bill would also fund grants to support forest conservation, the development of fire-resistant forests and more urban tree planting, along with the conservation and restoration of coastal habitats.

Brad Plumer reporting contributed.

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