Our CEO's take on the proposed Inflation Reduction Act of 2022 A major step forward in the race to decarbonize American homes

Here’s why the Inflation Reduction Act of 2022 has the potential to accelerate decarbonization of the residential sector and be transformative for households and businesses.

Lauren Salz
Lauren Salz Co-founder and CEO, Sealed

Here’s why the Inflation Reduction Act of 2022 has the potential to accelerate decarbonization of the residential sector and be transformative for households and businesses.

It has been a historic week for the climate, businesses that focus on decarbonization, and American households.

The recently announced Inflation Reduction Act of 2022 proposes a $369 billion investment into transitioning America’s economy to clean and efficient energy use through new programs, fees on pollution, and a robust package of tax credits. If enacted, it will be the most robust climate action ever taken by the United States federal government.

America’s 124 million residential buildings produce approximately 20% of the country’s greenhouse gas emissions – our homes emit more carbon than the entire country of Germany. Decarbonizing homes requires a multi-faceted approach that addresses overall energy efficiency, appliance electrification, and power generation: Efficiency upgrades, like weatherization and heat pumps, can cut residential climate pollution by more than 50%, and replacing other fossil-fueled appliances (like stoves and clothes dryers) with electric options powered by zero carbon electricity can completely eliminate climate pollution from existing homes.

All of this home decarbonization work can be accomplished today with off-the-shelf technologies, but the main barrier has been sparking market demand and ensuring affordable pathways for households to act. The Inflation Reduction Act of 2022 provides this much-needed spark by providing financial support to help American households stop energy waste and electrify their homes while simultaneously delivering smart programs to empower businesses to respond to this demand. 

The bill’s impact on the residential building sector has the potential to be truly transformative for participating households, the private market, and the county’s efforts to decarbonize the residential sector. Here’s how:

  • Focus on holistic decarbonization. For the first time in 50 years America is taking residential energy efficiency seriously again. Past federal incentives and rebates have cherry-picked individual solutions (e.g. renewables, electric vehicles) which alone cannot decarbonize the economy. The proposed programs incorporate the full trifecta of solutions to decarbonize the economy: renewable energy, energy efficiency, and electrification.
  • Long term visibility. The 10-year horizon of the tax credit creates operational certainty which will encourage businesses to invest in the market that are anticipating returns over a longer time frame.
  • Continual availability. The annual renewal of tax credit eligibility enables households to continually invest in all of the steps necessary to decarbonize their homes, at a pace that is healthy for their budget appetite, and creates sustained business opportunities for market actors.
  • Sustainable incentive levels. The levels proposed for cash rebates to households for various improvements and appliances are generous enough to amplify demand and kickstart the market, but not so high as to risk a sugar rush and crash when incentive availability declines.
  • Market-wide consistency. The clear consistent structure of the incentives makes it possible for businesses to create scalable infrastructure to meet demand nationwide for most American households regardless of socioeconomic status.
  • Equitable access. The cash incentives, tax credits, and investments in a domestic clean energy supply chain will all contribute towards driving down the costs to households to participate in home decarbonization. The bill also earmarks funding specifically for low and moderate income households, ensuring they have the opportunity to access upgrades that make their homes cleaner for the planet, as well as healthier and more comfortable.
  • Rewards for actual impact. The dedicated performance-based program will reward businesses for maximizing energy reduction. The more energy reduction, the more financial benefit. Businesses that drive the most impact will be empowered and accelerated in a way that static incentives cannot ensure.
  • Investments in deployment. The bill includes billions in funding to drive the rapid deployment of zero-emission technologies utilizing mission-aligned project finance, private capital, and other innovative financing mechanisms. This will help ensure that upfront costs are not a barrier to household decarbonization.

This bill demonstrates an exciting opportunity for individual American households to drive the decarbonization of our economy. Businesses like Sealed that have long recognized the market for home efficiency and electrification – despite decades of federal inaction – are ready to lead the ramp up efforts. 

Rewiring America predicts these programs will drive the electrification of over 1 million American households in the years ahead. Sealed is excited to make 1 million look like a small number.

July 29, 2022