A new report by State Comptroller Thomas P. DiNapoli details New York’s financial impact from the 2022 Inflation Reduction Act (IRA), including close to $2 billion in funds for environmental and energy purposes that could help lower costs to consumers during New York’s transition to clean energy. DiNapoli warns there is now significant uncertainty about whether this funding will continue after a new executive order issued by President Trump.
“The possible policy changes in Washington could lead to delays or cuts to the remaining IRA funds and tax credits,” DiNapoli said. “Given the strong interest in improving affordability for consumers, small businesses, farmers, and nonprofits, preserving the IRA’s grant and tax credit programs should be a priority. If the programs are allowed to continue, New York could receive significant additional funding for critical environmental and clean energy projects.”
IRA Grants
Energy, clean air and conservation programs funded through the IRA provide over $142 billion through federal programs managed by several U.S. agencies. New York state agencies and authorities, municipalities, businesses and nonprofit organizations have been awarded nearly $2 billion in grants to date.
New York state agencies and authorities have been awarded grants totaling more than $1.3 billion from IRA programs for a range of specific greenhouse gas reducing activities and funds to support incentive programs; however, only a small amount of this funding has been received. Since the programs these grants support are currently financed almost exclusively through charges on the electric and gas bills of the state’s utility customers, these grants could offset a portion of these charges and help to make the clean energy transition more affordable for consumers.
New York municipalities have been awarded at least $365.8 million for a variety of projects to reduce greenhouse gas emissions and other pollution and build resilience to climate change. For example, New Rochelle, Buffalo, and New York City received a combined $236.4 million in commitments for projects to redress harm to communities from highway projects that physically split up neighborhoods and increased pollution from vehicles.
New York nonprofit organizations have been awarded at least $125 million in IRA funds, including grants to assist communities in identifying sources of air pollution and engaging with regulators to address them and programs to address local climate change and pollution impacts.
The IRA has awarded at least $155 million in grants to farms and businesses in New York state. This includes funding through the U.S. Department of Agriculture’s Rural Energy for America Program, which supports renewable energy development and efficiency upgrades at farms and rural businesses.
Tax Credits
There are over 20 new or modified clean energy and clean vehicle tax credits available through the IRA. IRA tax credits cover a variety of activities including manufacturing of advanced biofuels, purchase of clean vehicles, energy efficiency retrofits of homes and commercial buildings, advanced manufacturing investment and production, clean electricity production and investment, carbon capture and storage and other activities that will reduce emissions of pollutants that cause climate change and other air pollution problems.
The Internal Revenue Service has published information on the number of tax filers who claimed just two of these credits, the IRA Residential Clean Energy (RCEC) and Energy Efficient Home Improvement (EEHI) tax credits, which incentivize purchases of residential clean energy equipment and residential energy efficiency improvements. Out of all states, New York ranked 28th in the share of tax filers claiming these credits, with 2.2% of filers claiming these credits. If these credits remain in effect through 2032 as currently scheduled, and the share of filers and average tax credit claimed by New York filers remains the same, state residents could benefit from at least $3.4 billion over the life of the program. Additional benefits would accrue over the last two years of the RCEC, which is currently in effect until 2034. Considering that these are just two of the tax credit programs available, the IRA tax credit programs have the potential to provide significant advantages to New Yorkers.
On Jan. 20, President Trump issued an executive order titled “Unleashing American Energy,” which under a section designated “Terminating the Green New Deal,” directs all agencies to pause payments for IRA grant funds. In addition, the repeal of IRA tax credits has been identified as a possible way to pay for reauthorization or expansion of provisions of the 2017 Tax Cuts and Jobs Act, bringing significant uncertainty regarding future funding.
Analysis
Economic Policy and Insights: Impact of the Inflation Reduction Act on New York