The Inflation Reduction Act will reduce household energy insecurity—but it could do more

Group of activists for climate justice and racial justice marching the streets of New York City

On Tuesday, President Joe Biden signed the Inflation Reduction Act (IRA) into law. The IRA is a set of appropriations and regulations to provide relief to Americans struggling with rising prices and start moving the country away from the fossil fuels contributing to global climate change. 

Climate and energy stakeholders are now debating the law’s outcomes. The IRA includes potentially significant benefits for household energy bills and housing quality, as well as for community equity—presuming its implementation starts by remembering that historical environmental burdens and housing disparities in our communities are also wired into our energy use, especially our ongoing reliance on fossil fuels. 

In 2020, 27% of U.S. households experienced behaviors associated with energy insecurity. From forgoing food or medicine to pay for energy costs, to leaving their home at an unhealthy temperature, or simply not using heating or air conditioning equipment, these households have gone to unacceptable lengths to keep the lights on.  

Share of U.S. households experiencing dimensions of household energy insecurity, 2020Household fossil fuel use reflects the same underlying social inequities. For example, in 2020, almost 58% of households experiencing behavior associated with energy insecurity used primary heating equipment such as a central air furnace or a built-in room heater, which rely on fossil-based fuels such as natural gas, fuel oil, kerosene, or propane. Additionally, 37% of these households lived in homes with single-pane windows, and 35% have poor or no insulation. 

Figure 2 displays the wide disparities in energy insecurity by income, race, and housing status. Most notable is that families with incomes less than the national average have a 30% rate of energy insecurity, compared to 14% for wealthier households. Native American and Black households suffer these conditions at almost twice the rates of their white counterparts (52% versus 20%), with Latino or Hispanic households trailing just behind (47%). Similarly disproportionate burdens exist for households with children, renters, and families living in mobile homes or apartment buildings.  

Share of households experiencing any household energy insecurity, 2020

The last Household Pulse Survey from the Census Bureau confirms that rates for all energy hardships are higher now than the 2020 observations used above, and likely increasing in the near future, especially for renters. Energy costs have soared in the last two years, and the moratoria on utility shutoffs that many states imposed during the pandemic have expired. 

The question now becomes: Can the Inflation Reduction Act eradicate these energy inequities before they get worse? 

What the IRA does for disadvantaged communities 

The Inflation Reduction Act is the largest explicit investment for mitigating climate change in federal history. Indeed, by most models, the IRA reduces our current greenhouse gas (GHG) emissions by 38% to 40% from 2005 levels—providing a significant (though partial) leap toward the Biden administration’s goal of a 50% reduction by 2030 and net zero emissions by 2050. 

The bulk of expected emissions reductions will come from the bill’s funding and regulatory provisions for decarbonizing transportation and industrial energy uses, as well as the direct transition of our energy production and transmission to cleaner and more renewable sources. But the IRA also commits $9 billion in residential tax credits, rebates, and other investments for building new electric and energy-efficient homes, replacing fossil-fuel-reliant systems in existing homes with electric equivalents, and training a workforce for the jobs required to do so. 

These policies shift households’ upfront costs for technologies such as heat pumps, air conditioning, and induction stoves to payments that families can use immediately—effectively lowering the costs of these technologies which, in turn, will save households an average of $1,800 per year. These shifts in payments are also equitable, both directly (with significant incentive increases for disadvantaged communities and households making less than 150% of the area median income) and indirectly, by making these incentives more accessible to lower-income households in the form of direct rebates while wealthier households can access more appropriately targeted tax credits. 

With U.S. homes accounting for 6% of the nation’s GHG emissions (or, more accurately, 20% when also accounting for the production and distribution of electricity that is consumed by homes), these electrification and energy efficiency upgrades will help us make a huge dent in reduction targets. 

Aside from these household savings, the IRA provides resources for a range of other community benefits, including: pollution monitoring and reduction, monitoring environmental disparities, clean energy investments in disadvantaged communities, and engagement in environmental and community development improvements. 

What the IRA doesn’t do for disadvantaged communities 

Despite the IRA’s admirable actions noted above, many have emphasized that there are several things that the law doesn’t do—particularly in response to the environmental justice community’s concerns about ongoing allowances and permit streamlining to the fossil fuel industry for continued extraction, as well as to other industries whose pollutants may pose new harms. 

Additionally, the law does not invest in public transit, affordable housing, community-owned energy production, or other equitable interventions in our built environment that activists had hoped for, especially given their omission in last year’s Infrastructure Investment and Jobs Act (IIJA). And the IRA’s rebates do not cover the entire cost of the technologies needed to reduce energy insecurity—a critical dimension for the lowest-income households that cannot afford any upfront costs and may not reap the benefits of the IIJA’s weatherization expansion.  

In short, the IRA simply does not accomplish all the expectations of the policy and advocacy people that helped pass it, and more is needed. 

What the IRA could do 

Despite the IRA’s faults when it comes to household and community equity, advocates can hold the administration’s feet to the fire when it comes to implementing the law. In particular, program rules for implementing the tax rebates can more aggressively require targeted outreach and engagement to low-income communities. Administering agencies such as the Department of Energy could provide the needed resources to local community groups, who can serve as critical intermediaries for helping residents apply for these benefits. These agencies can also find the gap funding necessary to ensure that a maximum number of households benefit from the system upgrades, and that property owners are monitored to ensure that any benefits they receive do not result in rent increases or displacement. In short, they can leverage power in the sheer number of homes occupied by energy insecure and historically disadvantaged households. 

Likewise, observers can ensure that new program rules for funds going to environmental justice and community development efforts require prioritizing the communities that may suffer from the pollutants that the IRA doesn’t address. For example, tribal nations and rural communities near federally leased oilfields and urban neighborhoods abutting polluting manufacturing facilities have already suffered for decades. These resources could be channeled for capacity building across a range of environmental, engineering, and legal channels to aid the places most at risk of further extraction and exploitation. Further, both policymakers and stakeholders should maintain vigilance to ensure that our decarbonization outcomes remain true to the models that helped justify the law.  

Channeling criticism of the IRA into such vigilance provides a second benefit: creating the policy space for the next step in climate and energy legislation. Ironically, much of the credit for the IRA’s passage is due to many of the groups that are now critical of it. These groups created the grassroots movement that allowed for legislative visions like the Green New Deal and Build Back Better to surface; their criticism of the IRA can ensure that this space remains open. 

Ultimately, just as the IRA will get the country only part of the way toward the goal of net zero emissions, it also only gets up part way toward larger societal goals of equitable and just investments in climate and energy. There is much work left to be done to ensure that every household in the nation can keep the lights on.