The Inflation Reduction Act makes landmark investments across a host of sectors. We have selected provisions for a deeper dive in this user guide in eight broad categories that all touch on the intersections between good jobs, a stable climate, a clean environment, and a fair and just economy.

Clean Energy Projects that Deliver Good Jobs 

The Inflation Reduction Act delivers strong investments in clean energy that will support and create high-quality, union jobs, particularly in hard-hit communities, while helping reach climate goals. 

The world’s leading scientific organizations have been unambiguous that climate change is a dire and urgent threat and the longer we delay the stronger the action required. Over the last decade, we have witnessed the worsening impacts a changing climate has on our communities. To avoid the catastrophic consequences of climate change, we must ensure rapid greenhouse gas emission reductions—based on the latest science and in line with our fair share—to put the U.S. on a pathway to net zero emissions by 2050. At the same time, we must ensure that the jobs created in the clean economy are high-quality, good-paying union jobs. 

The strengthened and newly established tax credits for clean energy in the Inflation Reduction Act will not only help drastically reduce emissions, but provide high-quality jobs in the clean economy. It extends and establishes clean energy tax credits for onshore and offshore wind, solar, geothermal, direct air capture (DAC), battery storage, carbon capture, clean hydrogen, and existing nuclear. Crucially, the law includes provisions that make it more likely the jobs created by these investments are high-quality jobs here in the United States. The law—for the first time ever—includes high-road labor standards that go hand-in-hand with clean energy deployment. Specifically, to receive the full value of the tax credit, developers will have to pay a prevailing wage and utilize a certain percentage of registered apprentices in the projects.

This is significant when considering—on the whole—high-road and union jobs pay better, have better benefits, and are safer than non-union jobs, as noted in the “Key Labor and Equity Standards” section of this resource. Workers who are members of or are represented by a union earn significantly more than those who are not across all relevant industries and occupations, with especially pronounced benefits for low-wage workers. Taking a deeper dive into specific sectors we see that, on average, union members earn a premium of 15% higher wages than non-union workers in the utilities sector and 45% higher wages in the construction sector. 

By requiring that clean energy investments support these workforce development pathways, this law will help:

• Grow and diversify the middle class;
• Increase diversity in the construction workforce—specifically by bringing more women, veterans, Native Americans, those that have been through the justice system, and people of color into the trades;
  
• Ensure the construction workforce has the skills necessary to build and maintain infrastructure; and
  
• Promote hiring of local citizens to work on infrastructure projects in their communities.

These provisions in the Inflation Reduction Act will also help address the racial and economic inequality in the country through the two separate “bonus” tax credits. The Low-Income Communities Credit provides a bonus tax credit for projects located in communities that have a significant share of the population below the poverty line, and the Energy Communities Credit provides a bonus tax credit for projects located in communities that have seen significant job loss in the fossil fuel economy, or due to the closure of a coal mine or coal-fired power plant, or are host to a brownfield site.

Finally, the clean energy tax credits also include domestic production incentives to stoke demand for U.S. manufacturing of clean energy and clean vehicles. These provisions will: 

• Boost demand for clean electricity manufacturing: The law includes four clean electricity tax credits worth more than $127 billion, each of which establishes—for the first time—a bonus 10% tax credit for projects that use domestically manufactured materials and parts. To qualify for the domestic content bonus, clean electricity developers must use domestically made iron and steel and manufactured components in which U.S. production accounts for roughly half of the value. Non-profit and government entities also must meet these domestic content requirements to take full advantage of a “direct pay” option that makes the tax credits more accessible. The tax credits are expected to propel dramatic growth in clean energy deployment, stimulating parallel growth in U.S. manufacturing of clean technology parts and materials.
  
• Stimulate demand for clean vehicle manufacturing: The law includes a more than $7 billion expansion and update of a tax credit for new clean vehicles, with standards to catalyze North American manufacturing of EVs, fuel cell vehicles, and their components. The credit will reduce the cost of new EVs by up to $7,500, while incentivizing the establishment of a complete and resilient supply chain for essential EV battery components in North America. It also ensures the critical minerals that comprise these batteries are not sourced from countries relying on child and forced labor or countries where supply chain bottlenecks and disruptions threaten the EV transition.

These investments show that we can meet our clean energy deployment and climate goals while also ensuring that workers are paid fair wages, that we support and grow our domestic manufacturing supply chains, and that communities that have traditionally been left behind in our economy experience the gains in clean air, clean water, and the opportunity for a middle-class job.

*This credit begins to phase out in 2034, reducing 25% annually, until 2035, at which point it phases out all together. Further, the credit remains available if U.S. annual greenhouse gas emissions have reduced by 75% by the time the credit phases out.

**Sec. 13101 and 13701 provide a credit per kilowatt hour. The legislation allows for the price to increase to adjust for inflation since 1992. The bill specifies the credit as .03/.15 cents per kWh, however the price adjusted for inflation would be .05/.25 cents per kWh.