Climate Takes Center Stage With Inflation Reduction Act, USDA Grant Programs in 2022

Source: By Chris Clayton, Progressive Farmer • Posted: Monday, January 2, 2023

President Joe Biden speaking at an ethanol plant near Menlo, Iowa, back in April. The president had made the case that Congress needed to pass a spending bill that would drive more incentives for renewable energy jobs in the U.S. (DTN file photo by Chris Clayton)
President Joe Biden speaking at an ethanol plant near Menlo, Iowa, back in April. The president had made the case that Congress needed to pass a spending bill that would drive more incentives for renewable energy jobs in the U.S. (DTN file photo by Chris Clayton)

Editor’s Note:

Each year, DTN publishes our choices for the top 10 ag news stories of the year, as selected by DTN analysts, editors and reporters. This year, we’re counting them down from Dec. 19 to Dec. 30. On Jan. 1, we will list some of the runners-up for this year. Today, we continue the countdown with No. 6: The Inflation Reduction Act, passed in August, includes a historic investment of $369 billion for climate initiatives, including about $19.5 billion for USDA conservation programs meant to champion climate-smart practices.

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OMAHA (DTN) — After more than a year and a half of negotiating with members of his own party, President Joe Biden got his signature climate legislation when Congress approved the $739 billion Inflation Reduction Act back in August.

The act includes a historic investment of $369 billion for climate initiatives, including about $19.5 billion for USDA conservation programs meant to champion climate-smart practices. The climate provisions in the law are expected to help lower greenhouse-gas emissions in the U.S. economy 40% below 2005 levels by 2050.

For a long stretch it appeared a bill meant to incentivize renewable energy could not clear Congress because of infighting among Democrats, especially in the Senate where Democrats could not afford to lose any votes. After months of talks, the bill finally passed both chambers of Congress along party lines as Republicans pointed to high inflation facing Americans and used the bill as a campaign talking point against Democrats.

CLIMATE-SMART AG

The IRA is the biggest climate act in the country’s history, but USDA also moved in 2022 to jumpstart climate-smart incentives for farmers. After initially announcing plans for a $1 billion grant program, the Partnership for Climate-Smart Commodities, Agriculture Secretary Tom Vilsack expanded that funding last fall to top $3.1 billion. USDA has announced more than 140 climate-smart project grants. The goal of those programs is to help incentivize farmers and ranchers to lower emissions and sequester carbon in the soil.

“This is a really, really important day for American agriculture,” Vilsack said in September. “I just hope people understand the significance of what we’re doing here.”

All told, the Partnership for Climate-Smart Commodities will involve more than 60,000 farmers and 25 million acres. USDA projects the project will amount to more than 60 million metric tons of carbon dioxide or equivalent sequestered. That’s about the same as removing 12 million vehicles from the road for a year.

IRA DETAILS

Americans will start to see tax credits for heat pumps, rooftop solar panels and electric cars. The tax credits for EVs could go as high as $7,500, though more likely will average about $4,000. Companies will also get tax credits to install more EV charging stations nationally.

While biofuel groups continued to raise concerns over the Biden administration’s fixation with electric vehicles, the Inflation Reduction Act also is a big deal for the renewable fuels industry. The law extended tax credits for biodiesel and also created a new renewable fuels infrastructure grant program. The law also opens up biofuels to create Sustainable Aviation Fuel (SAF) through new tax incentives. The SAF tax credits, in the short-term, could run as high as $1.75 a gallon. A new Clean Fuel Production Credits will run from 2025 to 2027.

“When it comes to ethanol and other renewable fuels, this bill represents the most significant federal commitment to low-carbon biofuels since the Renewable Fuel Standard was expanded by Congress in 2007,” said Geoff Cooper, president and CEO of the Renewable Fuels Association when the bill passed Congress in August.

Talking about projects that will work on sustainable aviation fuels, Vilsack recalled earlier this month a conversation with the president of United Airlines who was pushing for such fuels to help airlines reduce their emissions.

“America needs an opportunity to create leadership in a lower carbon-based fuel,” Vilsack said at an event at Tuskegee University in Alabama.

The IRA supports the biogas industry through a system of tax credits and will drive more biogas production from food waste as well as manure from cattle, chickens, hogs, as well as wastewater.

USDA PROGRAMS IN IRA

Among the top spending items for USDA, the Environmental Quality Incentives Program (EQIP) will receive $8.45 billion; the Regional Conservation Partnership Program (RCPP) receives $4.95 billion; the Conservation Stewardship Program (CSP) receives $3.25 billion; and the Agricultural Conservation Easement Program (ACEP) receives $1.4 billion.

Another $1 billion will go to the Natural Resources Conservation Service (NRCS) for technical assistance to producers. USDA will also receive $300 million to quantify carbon sequestration and emissions on farms.

At least $4 billion in the act goes to deal with drought relief in the Colorado River Basin.

Renewable energy programs through USDA overall will receive $13.3 billion. Rural electric cooperatives will receive $9.7 billion for loans to build out renewable energy infrastructure with specific language on “zero-emission systems” and carbon capture programs.

At least $5 billion will be used for forest management, including about $2.15 billion for funding to reduce dead wood and other vegetation that would be fuel for forest fires. Another $2.75 billion will go toward urban areas and other non-federal forests to develop incentives such as carbon sequestration in those areas.

Another $1 billion goes for loans for electric generation from renewable energy resources for rural and nonrural power companies. This includes solar, wind, hydropower, biomass, or geothermal. The federal government would cover up to 50% of the loans for such projects.

Companies championing carbon pipelines were also rewarded in the legislation. The 45Q tax credit for industrial carbon sequestration will be extended for projects that begin construction before 2033. The tax credits were also increased from $50 a ton to $85 a ton.

OTHER IMPACTS

The Congressional Budget Office (CBO) estimated the IRA would reduce deficit spending by $237 billion over the next 10 years.

The impact of the IRA is being felt in Europe as well as the U.S. The Financial Times reported in mid-December that European leaders are now forced to match the U.S. subsidies for green energy as well. European leaders have complained that the IRA created an unfair competitive advantage that was causing European countries to invest more heavily in the U.S.

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To see the other top stories of the year:

No. 10: “Farmland Values Smash Records in 2022, Undeterred by Interest Rate Hikes,” https://www.dtnpf.com/…

No. 9: ” Machinery Shortages Continued in 2022,” https://www.dtnpf.com/…

No. 8: “Big Year for Ag in Supreme Court Cases on Prop 12, Clean Water Act, Roundup,” https://www.dtnpf.com/…

No. 7: ” Mississippi and Ohio Rivers Hit Rock Bottom in Fall 2022,” https://www.dtnpf.com/…

“Revisiting the Year’s Big Stories,” https://www.dtnpf.com/…

You can find No. 5 in DTN’s top 10 list on Dec. 26.

Chris Clayton can be reached at Chris.Clayton@dtn.com

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