As I have often pointed out, the Inflation Reduction Act (AKA the Biden Climate Act) is primarily a basket of carrots that are meant to motivate people to do something that would reduce emissions. That something might be buying an EV, installing energy efficiency equipment in a home, or electrifying something in that home.
One of the problems with any kind of incentive program, especially with energy efficiency, is the date when an action taken qualifies for a rebate.
President Biden signed the IRA into Law on August 16, 2022. One might think that this date would be a significant date in determining the eligibility of emission-reducing actions that are subject to incentive in that law.
Maybe… Maybe not.
The foundation of our policy system in the U.S. is that the Legislative branch makes the laws and, in most cases, the Executive branch implements them. This often involves regulation, but it can also happen via rules and guidance that are issued. It works that way because of general recognition that an Agency in the Executive Branch has more technical and subject-specific knowledge to be able to take the legislation and add the necessary detail to it to make it into a program. (Note: you may remember that in a Post not long ago I talked about the Chevron Doctrine, which creates this deference to the Agencies, and how some are hoping the Supreme Court will soon remove the power of the Agencies in this regard)
In the case of energy programs, the system for how energy efficiency rebates ultimately get in the hands of consumers has been the job of the State Energy Offices that States were required to create or designate back in the 1970’s (largely in response to the Oil Embargo of that decade). In some states this entity is called the State Energy Office, but it may go by another name in others.
One might think that the date that the President signs a Bill would be the signal to people to go out and do something that earns a rebate. But if you think about it for a moment, and using energy efficiency as an example, there are usually a vast number of products out there of a given type, with varying levels of energy efficiency. Government shouldn’t give a rebate on products or actions that don’t yield the results the law is intended to create. But what if the thing installed based on that policy signal does qualify based on its technical specs?
What you want to achieve with a rebate is usually one of two things. The first is to lower the price of something such that people move more quickly to buy and install it than they otherwise would. From a climate standpoint, the earlier a unit of energy is saved the better since that means more overall emissions avoided. The other thing is to help people with less ability to pay make an energy efficiency choice when they replace or purchase something.
With energy rebates that are initiated via federal legislation, the first step is for the Department of Energy (DOE) to develop and issue guidance to the State Energy Offices on how they should design and administer the programs that they will run. With that guidance received, the Energy Office then develops a plan that is submitted to DOE for its approval. Once approval is received, the State entity can begin interfacing with a consumer about the rebate.
As noted, the President signed the law on August 16, 2022. But it was not until this past July 2023 (one year later) that the Administration issued its guidance document on how the States should proceed. That guidance is being interpreted to mean that not all installations of heat pumps, etc. may be eligible for a rebate. In other words, someone who acted quickly based on the President signing the IRA into law my find that they are not eligible for a rebate.
This possibility has spurred a letter from 60 members of Congress to DOE saying that people who installed something after the signing date should get a rebate, roughly based on what I laid out above. The response from the Department has apparently been: why should we provide an incentive to someone who has already done something without needing the incentive?
In an interesting twist, major efficiency and environmental groups have apparently said they are in favor of the DOE approach. I am assuming that they are thinking that any pot of money is limited and that the rebate money should be used on a future-action basis in order to get as much total consumer action as possible.
But isn't an early unit of CO2 avoided better than one avoided later?
I get a lot of questions from people that go something like this: “how are we doing in fixing climate change? I also get many folks who overplay (in my opinion) some piece of good news about technology developments, new clean energy deployments, etc. My response to each type of person is the same: “we are doing a lot of good things to reduce emissions, but these things are not being done big enough or fast enough to get us the emissions we need by the date we need them”.
As I wrote in a Blog Post last year on “Doing it Faster”, speed is so important right now. We are facing an inconvenient timeline for emissions reductions. It is inconvenient in that on our actions are being taken on the same timetable/timeline we always have done them on. That won’t cut it now in the climate situation we are in.
We can’t take climate actions on a “business-as-usual” or "bureaucracy-as-usual" basis. We must take them on a timeline, and in the right magnitude, that matches the timeline necessary for avoiding temperature targets and tipping points. In that context, we want consumers to act as fast as possible to reduce emissions. That may mean a different kind of timeline and process for efficiency rebates.
From what I know, we gave out a heck of a lot of money in the Stimulus Program who may not have needed it and who now don’t have to pay it back. We should not be tightening the purse strings on incentives for climate action just as we are finally passing out money for that.
I installed my heat pumps in March of this year (2023). I have assumed that I would qualify for the federal incentive (just as I have already qualified for the State and Utility rebate that I qualified for). But if I don’t qualify, I will be alright. Other people, however, may not be, and they counted on the rebate to make their numbers work.
We can’t implore people to take emission-reducing actions by promoting incentives and then tell them afterwards that they acted too fast.
We need to act on a timeline for emission reductions that matches the emission reduction timeline that scientists are telling us is necessary. If that timeline is an inconvenient timeline, it doesn’t matter. We are in a new place, and one we have not been in before. We need to act according, which is not what we are currently doing. It's time to do things faster, and jump over the invisible barrier of inconvenience.