What does the Inflation Reduction Act mean for Vermont's climate ambitions?

President Joe Biden signed the Inflation Reduction Act, or IRA, into law this month. The nearly 800-page bill funds efforts to tackle climate change, lower prescription drug costs, and—as the name implies—blunt the effects of soaring inflation.

This hour, we'll talk with the director of the state's new Climate Action Office about what the new law means for Vermont's climate initiatives—and Vermonters' wallets.

Our guest is:

• Jane Lazorchak, the Global Warming Solutions Act project director for the Vermont Agency of Natural Resources and director of the state’s new Climate Action Office

Mikaela Lefrak: Before we dive into the Inflation Reduction Act, could you remind our listeners what the state's emissions goals are? As I understand it, there's supposed to be an 80% reduction of greenhouse gas emissions below 1990 levels by 2050. What does that mean?

Jane Lazorchak: Vermont's had emissions goals on the books for more than a decade, almost two decades. But with the passage of the Global Warming Solutions Act [in Vermont] in the fall of 2020, we actually turned our goals into statutory requirements.

You referenced the farthest out and the most ambitious of those requirements—80% below 1990 levels by 2050—but Vermont has some intermediate and fast-approaching emissions reductions goals. The first of which is 2025, where we're expected to cut our climate pollution 26% below 2005 levels. That baseline year [of 2005] is actually different from the baseline year that you referenced, of 2050. That year comes into play for the first time with the next emissions reductions target, which is for 2030, which requires Vermont to cut our climate pollution 40% below our 1990 levels.

And what that means: 2005 was our largest year for climate pollution in Vermont. So, we're already on a pretty safe—I don't want to say a sure thing—but a safe trajectory. That we are feeling good that we can meet our 2025 emissions reduction targets, because our pollution is already, through market forces, driving downward. But that 2030 level actually means that we need to cut our pollution roughly in half by 2030. And that's pretty much in line with President [Biden's] goals. And we feel that that is going to need a lot more intervention, and changes around our policies and requirements in Vermont, to get us on a competent track to meeting those emissions reduction goals.

Let’s talk about some of those national interventions and policy changes, specifically with the IRA. What's your reaction to it, big picture, before we start getting into some of the nitty gritty details? When you think about what needs to happen nationally to fight climate change, is this going to get us there?

Well, we certainly are in a much better position to get there with the passage of the IRA!

We're really excited about what it means. A small state like Vermont, we really need the federal leverage, and our partnerships, at a federal level and regionally as well. Will it get us all the way? Well, not 100%. But what it means is that we're still going to need greater federal action, executive action and continued leadership from states like Vermont. And Vermont is really well-positioned—with the recent passage of our Climate Action Plan at the end of 2021—to utilize these unprecedented federal resources to invest in climate change action.

Emissions from cars and trucks and other forms of transportation are the leading cause of greenhouse gas emissions in Vermont. I believe they account for nearly 40% of emissions in the state. What exactly does the IRA mean for Vermont emissions when it comes to transportation?

You're right, Vermont's emissions profile, the largest sector is from transportation, and that is in line nationally.

There are new grant programs that we've never seen before [in the IRA], things like getting at how we invest in materials that we use in our transportation sector, through programs that they have set up called the “low carbon transportation materials.” Thinking about how we source concrete, and embodied carbon. Thinking about how we connect and create communities and invest in our transportation infrastructure in an equitable way, through a neighborhood access and equity program. And it's really just going to help Vermont Agency of Transportation in building more sustainable and equitable infrastructure across the state.

It’s really, though, first and foremost about these economic incentives that are going to help us continue to invest in our transformation to clean transportation. So, how do we incentivize Vermonters to purchase electric vehicles? How do we make them affordable and make this transition possible for all Vermonters? And how do we continue to support EV infrastructure, which Vermont—I will tout our horn—we are the number one state per capita investing in EV infrastructure right now, with the most EV charging, but we have a long way to go to have Vermonters feeling confident that they can buy EVs and they can support their transportation needs through driving electric.

Incentives that Vermont has already prioritized, with incentives around used electric vehicles, we can now complement those programs that we were already prioritizing in Vermont with federal tax credits for things like used EVs, as well as feel confident that the federal tax credit for new EVs is still going to be there.

Anecdotally, it does feel like we're at this tipping point where more and more people are starting to seriously consider buying an all-electric vehicle. It can be complicated to figure out which cars you can get a federal tax credit on and which one you used to be able to [get the credit on] versus which ones you can now. Can you give some advice for somebody who is considering getting a new or used electric vehicle in Vermont and is trying to figure out what they can afford, and how the inflation Reduction Act might affect the bottom line of that purchase?

We have a long way to go in continuing to educate Vermonters about the benefits of electric vehicles. There are serious upfront hurdles to purchasing them that many Vermonters cannot get past. However, if we can support that upfront cost through effective EV incentives—and more, we can help get people to purchase them—so that they can then understand that long term maintenance and ownership of these vehicles is tremendously lower than internal combustion engine vehicles.

Right now, the maximum federal tax credit that you'll be able to receive will be $7,500 on a new vehicle. There are a lot of strings associated with that. And many of those things changed the day that the bill was signed. So, the challenges associated with them, for now, feel complicated. And will continue to feel complicated, as manufacturers strive to meet the requirements of the IRA. But it's going to take some time to get there. And luckily, we have programs in Vermont like Drive Electric, and Mileage Smart, Capstone [Community Action] agencies, which help out there and can continue to provide education and opportunities for Vermonters to understand how to maximize that $7,500 credit

One of the changes that I think you're nodding at is, there are new requirements [in the IRA around the $7,500 credit] around where the vehicle is manufactured, right? Inside the US versus outside the US?

Correct, the vehicles need to be assembled in the United States. So, vehicles like Volkswagen. That’s a great example [of an EV] you could have bought the day before the IRA [was signed], but can no longer be bought with that credit. But we expect that to shift quickly with Volkswagen and other manufacturers.

And of course, there's also components [or the IRA] around the minerals that are put in the batteries, and where we source those materials from. Over time, they have to get more and more sourced within the United States. In addition, the income requirements [for buyers of EVs] and the [manufacturer’s suggested retail price] have changed for EVs incentives. So, you are eligible to qualify [for the incentive] if you are a single household making $150,000 annually or less—which is quite a higher cap—or filing jointly for $300,000. So it's quite a higher cap. As well, the MSRP for EVs had to be $40,000 or less. Now, the MSRP for eligible vehicles is $55,000 for regular vehicles, and electric SUVs are $80,000.

One last note there on electric vehicle purchases: correct me if I'm wrong here but I think it's also now easier to qualify for a federal tax incentive to buy a used electric vehicle. And here in Vermont, the majority of car purchases are for used vehicle, so that that might be of particular interest to Vermonters.

Yes. So, in Vermont, we currently have an state incentive program that provided an incentive on used electric vehicles, but there was no complimentary program at the federal level. And now with the IRA, you can qualify for as much as $4,000 towards direct incentive on a used EV.

Let's take a shift here, away from transportation to heating homes and buildings. About a third of Vermont's greenhouse gas emissions come from just heating homes and buildings here. What exactly does the IRA mean for Vermont emissions from heating?

This is a much harder sector to transform. Especially in Vermont. We have a really old housing stock, with not a lot of new housing coming online. So, not a lot of opportunity for us. And it's very hard to think about how we retrofit and change over that housing stock to support cleaner energy in our homes. And really, this is a sector that not only is difficult, but also has the most opportunity here, because it is really challenging for low-income Vermonters, who pay a disproportionate amount of their income to home heating. And it is very volatile, which we can certainly see in the market as we head into winter this year.

So, the vast majority of climate pollution in this sector comes from inefficient fossil-fuel burning appliances. The IRA provides opportunities to transition this sector, through electrification, where we think about how we provide tax credits, rebates and investments in economic opportunity and revitalization for low-income and moderate-income Vermonters to take advantage of.

There's really some exciting new opportunities through the “high efficiency home electric home rebate program”—which is a new program—that is really going to enable low- and moderate-income Vermonters to “go electric” in their home, and really think about whole-home transformation.

So when people are coming to your house and they're talking to you about how to retrofit, how to also fuel switch to things like high efficiency heat pumps, the IRA is expected to provide full cost for many low income Vermonters, and even moderate-income Vermonters, for that heat pump installation.

I just want to drive that home, because that's a big point there. So, the IRA could cover all installation costs for heat pumps if your family's income falls below a certain line. Does it also involve any incentives for purchasing the heat pump itself?

Yes. So, low-income Vermonters will qualify for whole-home switch over to electrification and heat pumps. It will also provide direct incentives and rebates on appliances and purchases for heat pumps for moderate-income Vermonters

There's also incentives there for solar panels as well. Can you explain those? Are those for individuals to know about, who might be interested in purchasing solar panels? Or are those kind of on a larger scale, in terms of generating power for the state at large?

There are incentives for Vermont home owners for solar, as well as businesses. Vermont is in a really good position with our electricity sector. This is one of the sectors that we don't trend with, nationally. We have a relatively clean electricity sector in Vermont, and really, what we want to be thinking about is, how to grow our electricity sector.

And then, almost even more importantly, is thinking about as we transform transportation and the way we heat our homes, to thinking about electricity … grid resilience and reliability of our electricity sector is going to be that much more important, because we're all going to be relying on electricity for so many critical components of our day-to-day lives.

So, thinking about how we scale up electricity through the incentives, for both of Vermonters to provide in-home, at-your-house solar, as well as businesses and community solar projects. There are a lot of credits in the IRA for businesses and private investment and solar, and then opportunities for those rebates to be realized through having communities buy into those solar projects.

I want to make sure that this conversation about the inflation Reduction Act and climate change touches on the issue of equity. Do you know how the IRA will advance environmental justice in Vermont?

The impacts of pollution and climate change do not fall on all communities equally. And really, we know that Black, indigenous and people of color, and low-income communities specifically, have suffered and really continue to suffer the most from climate change impacts.

The IRA—I’ve heard it equated to the largest investment in climate change—I’ve also heard it equated to the largest investment in environmental justice. How that plays out through engagement and involvement with Vermonters is really going to be critical. And we're fortunate that it dovetails with the passage of the environmental justice bill in Vermont, where we're thinking a lot about how to operationalize this across state government, and with Vermonters now.

Specifically, though, the IRA reaffirms President Biden's Justice40 initiative. That directs state agencies to prioritize 40% of investments from federal funds in disadvantaged communities. And then it goes further specifically to think about environmental justice block grants, air pollution monitoring in disadvantaged communities, and further support how we screen and prioritize environmental justice in communities.

Vermonters are really in tune to this and will hold us accountable to ensure that the IRA is, in fact, an environmental justice bill. I feel that

One area we haven't talked about very much yet is the role of agriculture in Vermont's economy and the role it plays in in the state's emissions. Can you tell us a bit about what programs are included in the IRA that might be of particular interest to Vermont farmers?

Vermont's agricultural sector makes up 16% of our emissions in Vermont around climate pollution. We also know that, while we have to think about how we cut our climate pollution from our agricultural sector, we view agriculture—as well as our natural and working landscape in Vermont—as one of Vermont's greatest assets to helping us fight climate change.

The IRA makes big investments—really big investments—in programs that Vermont has capitalized in for years that enhance not only cutting climate pollution, but also the quality of life here in Vermont, and have so many co-benefits like clean water, recreational opportunities, biodiversity, conservation, and more.

Some of those programs that Vermont has been really resourceful at for years is the Environmental Quality Incentive Program, that comes through the Natural Resource Conservation Service. There's an additional $20 billion put towards this program in the IRA focused specifically on how to reduce emissions from Vermont farms, improve soil carbon and storage, and sequester carbon pollution

One of the things we haven't talked about with Vermont's Global Warming Solutions Act and our climate action plan is, not only do we have to cut climate pollution, but we as a state have to be net zero by 2050.

Other programs in the IRA also include historic investments in programs like the forest legacy program, which helps us conserve private working forests in Vermont. It was actually the first conservation easement in the country for forest legacy, which is pretty much the most successful forest conservation program in the country, actually, in the Northeast Kingdom of Vermont in the 1990s. So, we know that we can confidently seize the opportunity of additional funding and really think about how to protect our working landscape in Vermont.

And the final thing I'll say about the IRA and investments in our natural and working lands, is understanding that cutting climate pollution from natural and working lands is important, but also investing in sequestration and carbon storage is critical to how we track our emissions in Vermont. And Vermont is already thinking about how to more effectively track emissions associated with our ag lands.

So, it's not just about cutting acres and cutting cows, but really about whole-farm investments that Vermonters are already making and through agriculture. How can we track all those co-benefits, and ensure Vermont farmers are getting the appropriate credit through our emissions inventory? We're already studying that, and the IRA says, “you are on the right track, Vermont! We think this is so important nationally,” and there's a national effort through the IRA to think about how we track emissions from agriculture specifically. And Vermont feels like, “yay, we were already thinking about this, and now we can be in line with how the Environmental Protection Agency does it and our neighboring states.”

Broadcast at noon on Wednesday, Aug. 31, 2022 at noon; rebroadcast at 7 p.m.

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