What the Inflation Reduction Act Means for the Chattanooga Region
by Michael Walton, Executive Director of green|spaces
Let’s start with a disclaimer: green|spaces is a local sustainability nonprofit and is non-partisan. We have a bi-partisan board and independent leadership. We don’t get any funding from political parties, nor does our organization support political parties or specific politicians. So, with all that said, we felt it was important to inform our audience about how the recently passed Investment Reduction Act (IRA) is likely to impact the Chattanooga region, your family, and the planet.
At the top line, the bill includes $737 billion in new revenue and $437 billion in new spending, with a total deficit reduction of around $300 billion. $369 billion of that new spending is targeted at energy security and emissions reduction. That’s what we’re going to focus on in this post.
First, let’s talk about electric vehicles (EVs from here on out). The IRA includes tax credits for new EVs (up to $7,500) and used EVs (up to $4,000) with some fine print for income and car eligibility. This is big for our region for a couple of reasons.
While $369 billion over 10 years across the country is a considerable number, $13.4 billion, the amount families in just Chattanooga’s metro area will spend on gas over 10 the next years, is also a big number (1). And let’s think about where the vast majority of that money goes: to gas companies in oil-producing states and countries. Very little of it stays in our region (2). Oil prices are also highly volatile, as we’ve seen the past year, and can skyrocket at a moment’s notice if there are conflicts, bad weather, or a myriad of other delicate variables. (Anyone remember how quickly stations ran out of gas when the Colonial Pipeline got hacked?)
Electricity, however, must be generated locally, can even be generated on your roof (more on that later), and is inherently more stable and secure. You definitely can’t fill your car from an oil rig in your backyard, even if you had one. Because of the stable and cheap fuel supply and its inherent efficiency, driving an EV is like having $1.00/gallon gas permanently. Compare below how the price of electricity changes compared to the cost of gas.
So, every family that buys an EV moves about 66% of their share of that $13.4 billion back into their pocket. The remaining 33% goes back into our local economy. It goes to EPB and TVA and into the hands of your neighbors that maintain and power our smart grid at places like the Chickamauga Dam and the Sequoyah Nuclear Plant, neither of which emit carbon.
Beyond the money you can save by operating an EV, a large portion of the money that goes to buy the EV itself is likely to stay in the State of Tennessee. Volkswagen is here in Chattanooga, and Ford, GM, and Nissan all manufacture EVs and EV components across the Volunteer State. The supply chains for those EVs are following right behind with major investments from folks like Novonix. As a cherry on top, the thousands of students that have participated in the Chattanooga Green Prix (coming up Oct 28-29) since 2018 will be at the forefront of this emerging industry.
Now let’s move to another large number. While not quite as big as $13.4 billion, the families in our region alone are likely to spend at least $4.6 billion on energy over the next 10 years (3). Most of that goes toward heating and cooling our homes. The IRA includes a wide range of tax rebates for more efficient homes. From a 30% credit for solar, wind, batteries and other clean energy technologies to a separate 30% credit for efficiency projects like new insulation, windows and/or appliances you can offset a substantial amount of your clean energy investment for your home or business.
There’s also the HOMES Program which sets overall performance goals and provides rebates to help get there: a 20% reduction in energy consumption for a $2,000 rebate, a 35% reduction in energy consumption for $4,000, and you can double that for low-income households. All-in-all, people can get up to $10,000 in potential credits and rebates. This will help build a strong market for graduates from Build it Green, our leadership and workforce development program that focuses on high performance homes teaching insulation, air sealing, safety and more.
It is important to note that these are all incentives and if we want these resources to come to our region, we have to use them.
The US Department of Energy estimates that most homes could save about 30% of their energy with cost-effective improvements that pay for themselves in three years or less, like those our Empower and Build it Green programs teach. These credits and rebates make that payback even better. EPB offers unbiased and free Home Energy Checkups so you can see what energy-savings investments make the most sense for your particular house (spoiler alert: it’s probably not the windows).
So, like the EVs, every family that invests in healthier and more efficient homes will help reduce their share of that $4.6 billion spent on energy keeping those dollars in their pocket and in our regional economy.
Beyond our region, there are also provisions for businesses investing in carbon sequestration, agriculture, wildfire prevention, and ecosystem restoration. It would be worth our while to attract businesses in these sectors to our region and support the ones already here. According to Energy Innovation, “The IRA provisions could also generate enormous public health and jobs benefits, preventing up to 3,900 premature deaths from air pollution in 2030 and creating up to 1.5 million jobs in 2030. These benefits accrue despite an increase of 50 MMT in oil and gas production emissions in 2030 from the new oil and gas leasing requirements. Finally, the IRA could increase GDP by 0.84-0.88 percent in 2030.”
As for the large scale environmental benefits, multiple analyses estimate a 39% reduction in Greenhouse Gas emissions from the IRA compared to 2005 levels. This rate of reduction, paired with similar commitments from other major emitters and along with carbon sequestration, can restore balance to the carbon cycle. That matters to us because heat and flooding are the primary concerns in our region and Chattanooga is the sixth fastest warming city in the country. It’s worth noting that when the whole world focused on eliminating CFCs and other ozone-depleting substances to address the ozone hole, we were successful and it’s been closing ever since. We can do this.
References:
https://rhg.com/research/inflation-reduction-act/?mc_cid=4d121e2059&mc_eid=77f1bf587a
https://datausa.io/profile/geo/chattanooga-tn-ga
Footnotes:
The American Automobile Association estimates the average American driver spends about $3,000 per year on gas. There are approximately 222,885 households in the Chattanooga MSA. There are approximately 2 cars per household. That’s how we get $1.34 billion in estimated expense on gas in our region alone, over 10 years, that gives us $13.4 billion assuming no inflation. So multiply that times whatever benchmark you’d like for inflation and that’s probably a more accurate number. The population figure obviously includes people that live in our region and don’t drive but it also doesn’t include people that drive in the region and aren’t permanent residents. If you have access to more accurate regional spending estimates, please provide them and we will update this blog post.
According to the Union of Concerned Scientists: Out of the more than $22,000 spent on gas over the lifetime of an average vehicle bought in 2011, oil companies rake in about $15,000. Of the remainder, 14 percent of the money spent on gasoline goes to taxes that help pay for roads and transportation services, 10 percent to refining costs, and 8 percent to distribution and marketing. Gas stations average only three to five cents of profit from each gallon of gasoline sold. They make more profit off the bottled water and candy you buy inside than off the fuel you buy outside.
The typical US family spends $2,060 on average per year for home utility bills, according to EnergyStar.gov. There are approximately 222,885 households in the Chattanooga MSA. Over 10 years, and again without adjusting for inflation which would make the number even larger, we end up with $4.6 billion.