A surprise budget reconciliation agreement between U.S. Sen. Joe Manchin, D-W.Va., and Senate Majority Leader Chuck Schumer, D-N.Y., will open the door to $369 billion in energy security and climate change spending across the next decade, including new and expanded clean energy tax credits.

The bill, called the Inflation Reduction Act of 2022, "would represent the single biggest climate investment in U.S. history" and put the country on track to cut carbon dioxide emissions 40% by 2030, according to a summary of the bill's energy provisions. The Senate will vote on the legislation during the week of Aug. 1 after the chamber parliamentarian completes work on the proposal in the coming days, a release from Schumer's office said.

"By a wide margin, this legislation will be the greatest pro-climate legislation that has ever been passed by Congress," Schumer said. "This legislation fights the climate crisis with the urgency the situation demands."

However, the legislation seeks less climate spending than the defunct Build Back Better Act, which proposed $550 billion in climate investments over 10 years, including over $300 billion in clean energy tax credits.

Bill highlights

The 725-page Inflation Reduction Act seeks to lower gasoline and electricity prices, increase energy security and help consumers afford emissions-cutting technologies.

The proposal contains over $60 billion for onshore clean energy manufacturing in the U.S., including through production and investment tax credits for facilities that produce wind turbines, solar panels and electric vehicles. Included in that total is $500 million in Defense Production Act money for heat pumps and critical minerals processing.

Along with those measures, the bill would provide tax credits for clean electricity sources and energy storage as well as roughly $30 billion in grant and loan programs for states and electric utilities to shift to clean power. The bill also proposes a $27 billion clean energy technology accelerator and a methane emissions reduction program targeting leaks from the production and distribution of natural gas.

The package also seeks over $60 billion for environmental justice priorities, including block grants for climate projects in disadvantaged communities and investments in clean heavy-duty vehicles.

The cost of the climate investments would be offset by $739 billion in new revenues, resulting in a more than $300 billion deficit reduction, the bill summary stated. To help generate revenue, the legislation would impose a 15% corporate alternative minimum tax on the adjusted financial statement income of companies with over $1 billion in profits.

Looking ahead

U.S. President Joe Biden and other top Democrats praised the bill, strengthening its chances of enactment. Biden said he supported the agreement and urged the Senate and the U.S. House of Representatives to move swiftly on the legislation.

In a "Dear Colleague" letter, House Speaker Nancy Pelosi, D-Calif., called the bill "welcome news for House Democrats" and "a victory for America's families and for protecting our planet." But she vowed to "continue to fight for priorities not contained in this legislation," saying that "more must be done on behalf of America's working families and to save the planet."

The new agreement follows months of negotiations between Manchin, a swing voter in the evenly divided Senate, and the Senate's Democratic leadership. Manchin frustrated his Democratic colleagues by joining Senate Republicans in opposing the Build Back Better Act following its passage in the House.

Budget reconciliation bills only need approval from a simple majority of the 100-seat Senate, which could help Democrats overcome resistance from Republicans. Vice President Kamala Harris is able to cast a tie-breaking vote, meaning Democrats could reach the 51-vote threshold even if no GOP senators back the bill.

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