6 ways the Inflation Reduction Act affects Iowans

When President Joe Biden signed the Inflation Reduction Act into law last week, he unrolled a 273-page bill seeking to reduce greenhouse gas emissions, lower prescription drug prices and pay down the deficit, among other provisions.

“There’s a lot to unpack in this bill,” said Steve Guyer, the Iowa Environmental Council’s energy and climate policy specialist. The council is a coalition of dozens of organizations working toward environmental goals.

In The Gazette’s first round of exploring what the new legislation means to Iowa, we’re focusing on six ways you’ll see changes surrounding energy, climate and farming.

Solar energy

Although residential solar projects are becoming more mainstream in Iowa, they can cost anywhere from $19,000 to $40,000, said Scott Prohaska, executive vice president of Iowa-based 1 Source Solar.

The Inflation Reduction Act will help alleviate those costs with a 30 percent federal tax credit for residential, commercial and agricultural solar projects for the next 10 years. It boosts an existing 26 percent tax credit that was scheduled to drop to 22 percent next year.

“As we’re trying to incentivize sustainability and renewable energy, it’s crucial to allow people the opportunity to do so,” Prohaska said.

The bill may also allow some tax-exempt entities — like churches, nonprofits and local governments — to receive compensation. Bonus credits will be offered to projects in low-income or tribal communities.

Electric vehicles

The new federal legislation provides a $7,500 tax credit to buy a new electric vehicle and a $4,000 credit, or 30 percent of the car’s price, for a used EV.

“If you go buy that car now and you’ll get 30 percent of that value back, that price looks a lot better,” said Ryan Light, manager at Jetset Automotive, in Cedar Rapids, which focuses on pre-owned high-performance cars.

In Light’s experience, most Eastern Iowans still aren’t sold on EVs because of fears there won’t be enough charging stations for longer trips. The state is working on that.

The federal tax credit also has limitations — such as qualifying cars must be assembled in North America, the credits are available only to people below certain income levels and some luxury EVs are too expensive to qualify for the credit aimed at getting more middle-income Americans to go electric.

The U.S. Department of Energy put out a list this week of 31 cars that meet the assembly requirements.

Conservation agriculture

Only about 60 percent of Iowa farmers who applied to the Environmental Quality Incentives Program last year got funding to pay for half of farm conservation practices, such as growing cover crops.

“We always end up turning people away,” said Jorgen Rose, habitat and policy viability manager for Practical Farmers of Iowa.

The Inflation Reduction Act nationally provides $19.5 billion for agricultural conservation, including $8.45 billion more for EQIP.

Cover crops, which soak up excess nutrients and reduce erosion during the offseason, grow on just 4.2 percent of Iowa’s agricultural acres. More federal cost-share money could mean more farmers trying cover crops, Rose said.

The Conservation Stewardship Program, also underfunded compared with demand, would get $3.25 billion more nationwide under the new legislation.

Ethanol

Iowa is the country’s top corn producer, said Iowa Corn Growers Association president Lance Lillibridge, and has become its top ethanol producer as well.

The Inflation Reduction Act supplies $500 million for nationwide biofuel infrastructure like blending and storage equipment. This will help expand consumer access to E15 and E85 fuels currently not offered at four out of five gas stations in Iowa, Lillibridge said.

A new state law enacted this year requires most Iowa gas stations to offer the E15 blend of ethanol in at least one pump by 2026.

The act also creates several biofuels tax credits and extends an existing credit through 2024.

The U.S. Department of Agriculture’s Rural Energy for America Program, which provides funding to agricultural and rural entities for renewable energy including biofuels, will receive $1.7 billion nationally and increase its grant matching up to 50 percent of eligible costs.

“All of it is to drive growth in the renewable energy industry, and that is critical to Iowa,” said Theresa Greenfield, Iowa’s USDA Rural Development state director. “Jobs, jobs, jobs for rural Iowa.”

Energy efficiency

A 2018 state law stripped Iowa’s energy-efficiency programs that alleviated system upgrade costs for consumers, leaving many opportunities for increased efficiency in the state’s homes and businesses.

The Inflation Reduction Act encourages more energy efficiency in Iowa — and beyond — by elevating existing home energy improvement credits from a $500 lifetime limit to a $1,200 annual limit.

“This is a huge improvement and certainly offers a lot of opportunities for individuals,” said Guyer, of the Iowa Environmental Council.

It also establishes high-efficiency electric home rebates with a $14,000 cap that could cover efficient electric appliances like stoves and water heaters. The rebates are aimed toward qualifying low- and middle-income individuals, Guyer said.

“That’s substantial for a lot of Iowa’s residents,” he said.

CO2 sequestration

Three carbon dioxide pipelines would cross parts of Iowa if the Iowa Utilities Board approves proposals to gather CO2 from ethanol plants and store it underground in Illinois and North Dakota.

The Inflation Reduction Act would increase federal tax credits for CO2 sequestration from $50 to $85 per metric ton.

The proposed 350-mile Wolf Carbon Solutions pipeline that would go from ADM plants in Cedar Rapids and Clinton to southern Illinois could get $850 million in tax credits for sequestering 10 million metric tons a year as opposed to $600 million under the previous credit.

Charles Stanier, a UI professor of chemical and biochemical engineering, predicts the tax credit boost will persuade more industries to look at storing CO2 underground.

“If you’re already emitting the CO2 and don’t have any other options to emit that, by all means, stick it underground,” Stanier said.

But Stanier does not support building pipelines to sequester CO2 from ethanol because he sees the future of that biofuel being short, given the push to electric vehicles.

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