The inflation reduction act clean energy transition: Supporting businesses navigate rising fossil fuel energy costs

The inflation reduction act clean energy transition comes at a time where rising fossil fuel energy costs are hitting businesses hard.

36% of small business owners have seen their energy bills spike in 2021; with one in five experiencing a 15% surge, and one in ten reporting a hike of 20%.

This exponential rise in the cost of fossil-fuel-powered energy has aggravated inflation. Inflation rates in the U.S. have risen from 1.23% in 2019 to 6% for the 12 months at the end of February 2023.

Yet, with these financial challenges of today, there comes opportunity. High fossil fuel energy costs and the consequential spikes in inflation have only accelerated the clean energy transition. And leading this transition in the U.S. is President Joe Biden’s Inflation Reduction Act (IRA), passed into law in August 2022. The IRA aims to help businesses navigate today’s financial challenges, while also helping the U.S. meet net-zero goals. With this in mind, in this Green Business Bureau article, we detail how the IRA can support your organization’s transition to clean energy, helping you save money on your energy bills, to reframe today’s challenges as opportunities.

What is the Inflation Reduction Act?

The Inflation Reduction Act contains approximately $500 billion in new federal spending with aim of reducing healthcare costs, increasing tax revenues, funding the Internal Revenue Service, and chiefly, powering the U.S. on clean energy.

With the latter in mind, the IRA addresses the challenge of surging fossil fuel energy costs (and the consequential soaring inflation rates). Below you’ll learn what subsidies and incentives are available to help your business transition to clean energy and cut fossil-fuel energy demand and the costs associated.

The inflation reduction clean energy transition

The Inflation Reduction Act supports the installation of onsite alternative energy systems

The IRA includes tax incentives (approximately worth $10 billion) for small businesses to invest in onsite sustainable energy sources, such as solar panels, wind turbines, or geothermal energy. The incentives will help offset the costs of installation and maintenance of such systems, which, in turn, will reduce electricity and heating bills – a significant business expense, especially today. These incentives are set to launch on 31st May 2023.

The Inflation Reduction Act provides tax credits to support clean energy investments and projects

The IRA offers a tax credit of up to 30% for the installation of solar PV systems, as well as a 10% credit for clean energy projects in underserved communities, which, according to the White House, must have previously relied on the extraction, storage, and use of coal, oil or natural gas.

In turn, the IRA’s tax credits and deductions propel growth and reinvestment allowing businesses to develop and scale key areas. Of relevance here is the investment help given to businesses in improve infrastructure, to reduce energy costs.


The Methane Emissions Reduction Action Plan will aim to reduce leaks from natural gas production and distribution, streamlining operations and energy use while also reducing harmful emissions of potent greenhouse gas.

Fossil fuel operations generate over one-third of all methane emissions from human activity. The IRA reports that methane emissions from oil and gas must exponentially decrease if we are to meet Net Zero Emission 2050 targets. The Methane Emissions Reduction Action Plan serves to help organizations significantly reduce their reliance on fossil fuels.

Under the policies of the Action Plan, the government will provide $1.55 billion in financial and technical assistance, $700 million of which will be earmarked for pollution reduction activities at marginal convention wells. The government will also implement a waste emissions charge per ton of methane in oil and gas facilities, once thresholds are exceeded. In addition, the budget will be utilized for research and development funding and new safety and modernization programs. It’s hoped that this extensive investment will open the doors for alternative sources of fuel for businesses that currently rely on fossil fuels.


For construction and manufacturing projects, the Environmental Product Declaration Program will provide $250 million to support the development and optimization of environmentally-approved construction materials and products. This includes materials and products that have a lower carbon footprint, and demand less energy during manufacturing processes.

The government will also provide businesses with an additional $250,000 of refundable Research and Development (R&D) tax credits, which business owners can utilize towards transitioning to clean energy and lowering business costs. In times when energy costs and inflation is soaring, instant working capital can give businesses a much-needed operational boost while still progressing toward clean energy targets.

The IRA has also added a new loan program known as the Energy Infrastructure Reinvestment (EIR) Program to help retool, repower, repurpose, or replace dormant energy infrastructure, or to optimize the efficiency of infrastructure that is currently running. $5 billion will be allocated to carry out EIR through September 2026.

Using the inflation reduction clean energy transition to support a green economy

The U.S. Energy Information Administration (EIA) estimates that energy-related carbon-dioxide emissions will drop more than originally forecast by 2030 compared to 2005 (by 33% compared to previous estimates of 23%), a decline that’s attributed to the Inflation Reduction Act. (2005 is used as a baseline because of the Paris Agreement targets that year).

The IRA offers $369 billion of government incentives for energy and climate-related programs for over 10 years. Such an investment is expected to increase solar panel, wind turbine, and battery production while facilitating the creation of new, eco-friendly factories and facilities, not to mention creating millions of new green jobs, transportation, manufacturing, etc. In doing, the IRA is expected to reduce U.S. net greenhouse gas emissions down to 40% below 2005 levels.

In addition, the IRA as a piece of legislation will aim to push U.S. producers to reposition their supply chains and establish an urgency for clean energy material and technology production locally. In doing, the IRA seeks to help the U.S. economy be self-sufficient in producing its own, renewable source of energy.

This Green Business Bureau article has given you the information you need to utilize the help available from the IRA, to propel your business forward along your sustainability journey, and to reduce your organization’s carbon footprint and energy-related costs.

Annie is a freelance writer who has written for various online and print publications specializing in lifestyle, business, branding, and career development.

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