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Meeting the Moment on Climate Through the American Household

Proposed Adjustments to the Build Back Better Act

By Alex Laskey, Ari Matusiak, Sam Calisch, Rachael Grace, and Leah Stokes

October 22, 2021

Congress is negotiating historic legislation that will invest in our families, build our communities and address the climate crisis. When it comes to the scale of the moment before us, there is simply no time left for half-measures and “next time” ambition. We must come together as a country, mobilize the scale of resources necessary to unlock the next generation of American prosperity, and secure our future for generations to come.

On climate, the Intergovernmental Panel on Climate Change Sixth Assessment Report (IPCC AR6) proclaimed a “Code Red for Humanity,” describing climate change as irreversible and happening so rapidly that even immediate and large-scale human interventions will not prevent catastrophic impacts. For us to have a chance of staying within 1.5 °C warming, President Biden has committed us to reducing our emissions by 50 - 52 percent by 2030 from 2005 levels and achieving zero emissions by 2050.

The only way to hit those targets is to electrify our economy.

American households play a central role in our path to zero, and the corresponding investment that is required. It turns out that 42 percent of our energy-related emissions come from decisions we make around our kitchen tables: what cars we drive, how we heat our air and water, cook our food and dry our clothes. There are one billion machines that must be replaced or installed across 121 million households over the next 25 years. Each one of them must be clean and electric. It does not need to happen all at once, but it does need to happen—one machine at a time.

This is encouraging news, particularly when 103 million households, or 85 percent, at minimum, could save money on utility bills if the front end cost of these electric machines were the same as the machines they replace. And, indeed, households can save money in every county and Congressional District in America. However, while there are investments booked for electric vehicles, rooftop and community solar and storage, the current climate plan debated in Congress does not fully embrace the opportunity to make our homes healthier and more affordable and leverage them as a core strategy for getting us on track with our climate targets. According to a just-released Rhodium report, “nearly all” of the actions embedded in the proposed plan related to buildings “are designed to foster energy savings, not emission reductions. New policy solutions are needed… or else risk further fossil lock-in and a harder task of decarbonizing buildings down the road.”

Proposed Adjustments to the Build Back Better Act

Without the Clean Electricity Performance Program or a carbon tax, the Build Back Better Act (BBB) needs to include additional climate investments or we will not meet President Biden’s goal to cut carbon pollution in half this decade. We need larger investments in our building sector to deliver a climate package that takes on the crisis in every sector, at scale. The reason is twofold: 1) the amount of emissions determined by our kitchen table decisions requires it; and 2) the accelerating impact of electrifying our end-use machines will result in required investments in clean electric supply.

It is time to treat the American household as the keystone of our climate infrastructure. Rewiring America proposes expanding the level of investment within the BBB in three key ways to drive incremental emissions reductions:

  • Front-end consumer electrification and weatherization rebates or grants for low-and moderate-income (LMI) households.
  • Individual- and business-facing tax credits to incentivize the rest of the market.
  • Subsidized, low-cost financing, lowering monthly payments for all.

All told, these modifications -- outlined in Table 1 -- would benefit approximately 50 million households and reduce emissions by 110 MMT annually by 2030 (1).

These programs -- along with others in the BBB -- work together to catalyze the market transition we need, appropriately putting the American household at the center of our policy response because it provides so much opportunity for emissions reductions that are beneficial to comfort, health, family budgets, and our economy. Rebates are essential to equalize the front-end cost of the purchase and installation of efficient electric machines for LMI households who cannot utilize traditionally designed tax credits. Consumer-facing tax credits are an efficient tool for incentivizing the rest of the market to purchase these machines at the time of replacement. Together, these households create a demand signal for these products, spurring production, creating industrial scale and bringing down costs. We have already seen rebates and tax credits drive down the cost and increase the scale of rooftop solar, storage and EVs. We need to do it again for electric appliances.

With the BBB creating market demand for electrification, we must also incentivize contractors to learn how to install these machines and distributors to stock them so they are always available for customers. In addition, low-cost financing will enable households to amortize the costs across affordable monthly payments and makes the math work for landlords to invest in these machines at the time of replacement.

In short, we need to do all of these things -- together and with ambition -- to transform the market and meet the moment on climate. These proposed enhancements will work alongside critical programs included in the BBB and the bipartisan Infrastructure Investment and Jobs Act: the Greenhouse Gas Reduction Fund, incentives for EVs, rooftop and community solar, and battery storage, and critical investments in weatherization and mitigation. For low-income households, these are often the necessary and peremptory step for these homes to realize the energy burden relief and health benefits of electrification: the Weatherization Assistance Program, Direct Loans and Grants for Energy or Water Efficiency or Climate Resilience of Affordable Housing, and the Lead-Based Paint Hazard Control and Housing Related Health and Safety Hazard Mitigation in Housing of Families with Low Incomes. All of these investments need to be fully funded.

Conclusion

We have a chance to address our climate crisis in a way that helps American families directly, in every zip code. This set of proposals will put money back into the pockets of ordinary Americans immediately and drive meaningful investment in local economies across the country. These are also popular ideas. In a recent poll, 59 percent of Americans underestimated by at least half how much their household spending decisions contributed to carbon emissions in a recent poll. And, 71 percent support federal rebates to help them afford zero-emission and energy-efficient appliances to combat climate change in their own lives -- including 60 percent of Republicans surveyed.

When it comes to climate, American households have not had their own lobby looking out for them. Congress has the opportunity to be the voice for American families today and for generations to come. It should take it.

Table 1. Recommendations to the Build Back Better Act with modeled emissions impacts in 2030.

Rebates

PolicyRecommendationsImpactStatus
High-Efficiency Electric Home Rebates / Home Energy Performance-Based, Whole-House Rebates and Training GrantsIncrease program funding to $40B
  • 16 M LMI households benefiting
  • 2030 reductions(2): 20 MMT(3)
  • Unlocks opportunity for LMI households to electrify and weatherize, saving money on energy bills and health costs through cleaner indoor air
  • Dedicated workforce training for jobs that cannot be automated or offshored
🟡

Tax Credits

PolicyRecommendationsImpactStatus
25C: Nonbusiness Energy Property Tax CreditIncrease annual credit cap to $3K; include efficient, electric appliances and increase performance standards of qualifying appliances
  • 23 M households benefiting
  • 2030 reductions: 30 MMT
  • Incentivizes electrification of heating and cooling systems, lowering project costs by up to 30%
  • Making upgraded breaker boxes more affordable, removing key barrier to electrification
🟡
New: Energy Efficient Appliance Credit (“45M”)Provide tax credit to distributors and contractors, incentivizing the stocking and sale of efficient electric appliances “mid-stream”
  • 170 K businesses benefiting
  • Incentivizes distributors and contractors to carry or sell key appliances for electrification
  • Reduces financial risk for predominantly small businesses
  • Unlocks an essential piece to market catalyzation
🔴
179D: Energy efficient Commercial Buildings DeductionIncrease performance standards of qualifying appliances
  • 1.1 M businesses benefiting
  • 2030 reductions: 39 MMT
  • Encourages commercial building developers to install high-efficiency appliances, reducing energy use and costs
🟡

Low-Cost Financing

PolicyRecommendationsImpactStatus
Loan Programs Office - new authorization$12B of total funding to facilitate $200B in low-cost financing for residential electrification by providing credit subsidies to support lending to a broader number of households
  • 14 M households benefiting
  • 2030 reductions: 37 MMT
  • Significantly expands low-cost financing options for residential electrification.
  • Works in conjunction with rebates to lower monthly costs of appliance replacements / upgrades
🔴

Weatherization and Health and Safety Repairs

PolicyRecommendationsImpactStatus
Lead-Based Paint Hazard Control and Housing Related Health and Safety Hazard Mitigation in Housing of Families with Low IncomesIncrease funding for health and safety provisions to $45B, matching the Environmental Justice Legacy Pollution Cleanup Act
  • 3.75 M LMI households benefiting
  • Improves health outcomes for LMI families by remediating harmful indoor air pollutants
  • Makes the necessary improvements to ready low-income homes to benefit from the cost and health benefits of electrification
🟡
Key
🟡Included in BBB but without recommendations
🔴Policy not included

Table 2. Primary beneficiaries, including American households (HHs), of proposed adjustments to the Build Back Better Act.

American HHs - LMIAmerican HHs - Non-LMIDevelopers - Single- and Multi-Family BuildingsDevelopers - Commercial BuildingsLocal Contractors, Distributors and Other Third Parties
RebatesZEHA / H4H (4)ZEHA / H4H (2)
Tax Credits25C45L179D45M (new)
FinancingGHG Reduction Fund; LPO (5)GHG Reduction Fund; LPOGHG Reduction Fund; LPO

Notes

  1. Incentives for electric vehicles, rooftop and community solar, and programs such as the Greenhouse Gas Reduction Fund are not included because no changes to the current proposed policies are recommended here.
  2. “2030 reductions” refer to reductions of carbon emissions in million metric tons (MMT) projected for the year 2030, i.e., these figures are not cumulative emissions reductions by 2030, the number of which is roughly five fold larger.
  3. At the currently proposed funding level of $18B, emissions reductions in 2030 are 9 MMT.
  4. Acronyms stand for the Zero-Emission Homes Act and the HOPE for HOMES Act, respectively. These were re-named the High-Efficiency Electric Home Rebates and the Home Energy Performance-Based, Whole-House Rebates and Training Grants in the latest House of Representative drafts of the Build Back Better Act.
  5. The Greenhouse Gas Reduction Fund and LPO are best understood as complementary tools, with the LPO supporting larger, scaled originators and the Fund able to scale community- and regional-based efforts. They will work together to create a scaled injection of low-cost financing into the market and help catalyze the overall market transition.