Impact of Inflation Reduction Act on Buildings and Construction Industry

In what has been characterized by the American Institute of Architects (AIA) as the U.S.’s most comprehensive response to the climate crisis to date, the newly ratified Inflation Reduction Act of 2022 (IRA), which aims to fight climate change and address record inflation, will have far reaching implications for the design and construction industry. The IRA includes policies that will invest in U.S. energy production, reduce carbon emissions and ensure American infrastructure is affordable, reliable, clean and secure. Included in the agreement are policies that aim to drive aggressive emissions reductions by 2030 within the building sector and drive low-carbon procurement.

A consortium of green building leaders and advocacy organizations, including Building Transparency and Third Way, provided insight and analysis that informed the legislation, including potential emissions reductions that could be realized by incentivizing the use of low-carbon, clean materials for public infrastructure projects. Combined with direct investments and tax credits to facilitate deep industrial decarbonization, these organizations estimate that the agreement has the potential to reduce over 200 million metric tons of carbon dioxide emissions annually by 2030.

Investments in Clean Carbon Procurement

The IRA includes the following investments in clean procurement, among other environmental initiatives that span active transportation projects and recreational trails, to nature-based water infrastructure, community tree planting, ecosystem restoration, and environmental and climate justice:

$250 Million for Environmental Product Declarations Assistance (SEC. 60112), which provides funding to support the development and standardization of EPDs for construction materials by providing grants and technical assistance to manufacturers to produce EPDs and invest in transparency. EPDs are documents that disclose the carbon impact of a product’s materials and manufacturing processes.
$100 Million for Low-Embodied Carbon Labeling for Construction Materials (SEC. 60116), to identify and label low-carbon materials and products for use in federally funded transportation and building projects based on data available via EPDs.
$2.15 Billion for Use of Low-Carbon Buildings (SEC. 60503), to be used to specify and install low-embodied carbon materials and products for use in General Services Administration-owned buildings.
$2 Billion for Low-Carbon Transportation Grants (SEC. 60506), which reimburses and incentivizes the use of low-carbon materials and products for Federal Highway Administration projects.
$4 Billion for Improving Climate Resilience of Affordable Housing (SEC. 30002), which will provide funding to improve the energy or water efficiency, indoor air quality and/or sustainability of projects, and implement low-carbon technologies, materials, and products to improve the climate resiliency of affordable housing.
FEMA Building Materials Program (SEC. 70006), which provides financial assistance for the use of low-carbon materials and incentives that encourage low-carbon and net-zero energy projects.

“This agreement marks a milestone in driving decarbonization and sustainable infrastructure development, which underscores the importance of providing funding for low-carbon procurement if we’re going to make real progress in reversing climate change,” said Stacy Smedley, executive director of building transparency. “The emission reductions that could be realized by this legislation in just one year is the equivalent of taking 51 million gasoline-powered cars off the road for the same time or consuming 26 billion gallons of gasoline. The U.S. has huge purchasing power when it comes to low-carbon procurement, and this effort will also drive demand and urge manufacturers and suppliers to lower the carbon emissions of their products.”

7 Impacts on the Building Sector

Global design firm HOK also hosted a LinkedIn Live conversation on the day the legislation was signed into law (Aug. 16) to explore its impact on the building sector. The panel discussion with Smart Surfaces Coalition’s Greg Kats and HOK’s Anica Landreneau and Stephanie Miller (moderator) revealed seven ways the IRA will benefit the built environment, including:

By modernizing codes and improving both new and existing buildings.
By eliminating any remaining green building “excuses.”
By creating a federal proving ground for green building technology.
By jump-starting private investment and development in green technologies.
By improving conditions in low-income neighborhoods, including the built environment.
By promoting “Made in America.”
By reducing energy bills.

Watch the video below to hear more about how these benefits will play out in the design and construction of the built environment.

To learn more about the potential impact of low-carbon procurement legislation, visit ThirdWay.org. For more information about EPDs and tools available to drive green procurement, visit BuildingTransparency.org.