Reduction Carbon Footprints with the Inflation Reduction Act of 2022
Today the US Senate voted 51 to 50 to approve legislation headlined to fight inflation. However, the majority of the multi-hundred page bill is dedicated to climate action, the energy transition, and setting the foundation for a price on carbon dioxide. It also validates many assumptions and features we embedded in CarbonEco.trade.
We analyzed the law and found the following items of interest. They total $334 billion over 2022 through 2031, which is over $35 billion dollars annually. The components include funding for consumers, businesses, tribal, state, and local governments and consists of a combination of tax credits, loans, and grants. The core themes are energy efficiency, conservation, reforestation, production of new renewable energy, decarbonization of existing fuels, conversion of the transportation sector to lower-carbon fuels, and a number of clean air and carbon sequestration initiatives. The list below shows the financial value of the themes.
Clean hydrogen, $5B
Clean Power and Reduced Carbon Emissions, $51B
Carbon Sequestration, $3B
Biodiesel, $5B
Nuclear, $30B
Residential Clean Energy, $22B
Modification for Energy Efficiency, $14B
Clean Vehicles, $14B
Manufacturing Upgrades, $36B
Clean Power, $61B
Clean Fuel, $3B
Conservation, $16B
Rural Power Infrastructure, $10B
Reforestation, $4B
Home efficiency, training, rebates, $9B
DOE Loans, $15B
Clean Air, $36B
How does this affect or inspire voluntary carbon markets? The bill raises the value of carbon offsets for tax credit purposes to $85/ton via the Section 45Q Program. It also lowers the volume requirement and creates even more incentives for direct air capture (DAC). It also subsidizes “clean hydrogen” production at $3/kg assuming at least 80% CO2 removal in the production process.
One significant new change is that, starting in 2023, taxpayers will be able to transfer most clean energy tax credits to unrelated parties for cash. The cash consideration would not be taxable to the transferor and would not be deductible by the transferee. This creates a legal foundation for voluntary carbon tax credit trading. It is sure to broaden the awareness of and help legitimize these kinds of markets.
CarbonEco launched with its pricing set to grow from $50/ton to $80/ton and to provide premium pricing to carbon offsets that qualify for Section 45Q or any other certification program like Verra, GOLD, or REDD+. We also built a market where individuals can sell and buy their carbon dioxide-avoiding and -absorbing habits and assets each year.
Some argue that offsets are an easy way out. We agree with a code of conduct that requires everyone to assess their carbon footprint first, take meaningful steps to decarbonize over the things you have most control, and to offset the remainder. We do not condone ideas like de-population or to de-industrialization. Rather, like species have done for eons, we must focus on adaptation, which begins with paying for what we value.
CarbonEco.trade is the fastest way to get carbon neutral. We enable people all over the world to buy and sell their carbon dioxide-avoiding and absorbing habits and assets in a voluntary carbon market. Pragmatism will ultimately prevail. We just need volunteers to go first.
