How The Inflation Reduction Act Will Impact The Built Environment

The Inflation Reduction Act of 2022 is funding and incentivizing a more sustainable approach to constructing our built environment.

Inflation Reduction Act
Adobe Stock/ Andrey

By Tommy Linstroth

As the impact of climate change manifests in many ways, Americans are increasingly worried about the impact it will have on their lives. According to one survey, 64 percent of Americans are “somewhat” or “very concerned” about climate change, prompting countries, communities, and individuals to take action.

The built environment, a catchall term for the man-made spaces and infrastructure we live and work in, has a significant impact on the environment, including energy use and greenhouse gas emissions, accounting for 40 percent of annual CO2 emissions. More specifically, 27 percent of emissions are attributable to building operations, and 13 percent are caused by building and infrastructure materials and construction.

The Inflation Reduction Act of 2022, the largest climate investment in U.S. history, is attempting to address this problem and enable significant transformation at scale by allocating more than $300 billion to climate-related initiatives through grants, tax credits, and other incentives intended to help companies and consumers adopt more sustainable products, processes, and practices.

Taken together, the law will have an immediate impact on the way structures are built today with long-term repercussions on our built and natural environments.

Changing The Way We Build

The Inflation Reduction Act of 2022 is funding and incentivizing a more sustainable approach to constructing our built environment, enabling engineers, designers, builders, and buyers to better align their facilities with needed environmental outcomes.

Here are three ways this change will manifest in the year ahead.

#1 Modernizing Building Codes

The 2009 stimulus bill, also known as the American Recovery and Reinvestment Act (ARRA), included a significant investment in updating building codes. The ARRA allocated $3.4 billion in grants to states and localities to update their building codes to be more energy efficient.

The ARRA also provided funding for training and education programs to help building code officials, design professionals, and contractors learn about and implement the updated building codes.

More than a decade later, The Inflation Reduction Act allocates funding to update local energy codes once again, making it less expensive for developers to implement sustainable products into their projects.

Many organizations, like the American Institute of Architects, are celebrating this investment, recognizing that updating codes is critical to expanding green building standards across the industry.

Specifically, the Inflation Reduction Act provides $330 million in grants to states and local governments to incorporate the most recent energy codes that meet or exceed the 2021 International Energy Conservation Code (IECC) and/or ASHRAE 90.1-2019. Additionally, the law dispurses $670 million to states and localities implementing zero-energy stretch codes.

Updating building codes will enable architects, designers, and builders to better integrate green technologies and other building solutions into new construction in the months and years ahead.

#2 Improving Building Materials

The production of building materials like steel and concrete is energy-intensive, emitting greenhouse gasses in the process. For example, eight percent of global emissions are linked to cement production, and non-recycled steel accounts for an additional eight percent.

A McKinsey & Company report identifies several possible cement enhancements that would reduce the product’s climate impact, including replacing the clinker with ground-granulated blast furnace slag, silica fume, or natural pozzolanic, which could “mitigate up to 90 percent of cement’s carbon footprint.”

The Inflation Reduction Act will accelerate the upfront R&D and long-term implementation, helping ensure that the next generation of buildings minimizes harm to the environment while maintaining value for buyers.

#3 Increasing Demand

While people often support green building initiatives, many lack the financial resources to build new or retrofit existing buildings to meet this criteria.

The Inflation Reduction Act helps offset some of the costs associated with green building, prompting people to pursue everything from solar panels to sustainably built buildings. By increasing demand for green buildings, the law is enabling outsized results with long-term benefits. One analysis found that the law could produce:

  • 2.4 million electrification upgrades in LMI communities
  • 1.2 million home energy retrofits
  • 7.2 million heat pump installations
  • 650,000 newly constructed efficient homes
  • 115 million square feet of retrofitted commercial space.

This is a serious uptick in demand that will reshape the built environment for generations.

Assessing the Long-Term Impact

By reducing the energy demand and carbon footprint of the built environment, we can mitigate the negative impacts of climate change and work towards a more sustainable future.

Since our homes, office buildings, and recreation centers last for decades, making green investments today will pay long-term dividends that help countries meet climate goals, communities operate more effectively, and individuals live more sustainably.

Moreover, with the global building flood area expected to double by 2060, even small changes can make an outsized impact.

Reorienting an established industry around new priorities can be challenging, but the Inflation Reduction Act provides significant enticements to make a change, investing in modern codes and better materials while offering incentives that heighten demand. Together, these factors will change how structures are built in 2023 and beyond.

Linstroth is the Founder and CEO of Green Badger, a leading SaaS provider simplifying sustainability and ESG in the built industry.

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