US Speaker of the House Nancy Pelosi (D-CA) poses with lawmakers after signing the Inflation ... [+] Reduction Act after the House of Representatives voted 220-207 to pass it at the US Capitol in Washington, DC, on August 12, 2022. - US lawmakers on August 12 adopted US President Joe Biden's sprawling climate, tax, and health care plan which is a major win for Biden that includes the biggest ever American investment in the battle against global warming. (Photo by OLIVIER DOULIERY / AFP) (Photo by OLIVIER DOULIERY/AFP via Getty Images)

Last week Congress passed the Inflation Reduction Act, which now heads to President Biden's desk to be signed into law. The bill has been championed as a "climate change bill", but it also allocates hundreds of billions of dollars over the next decade to several programs designed to reduce inflation.

Let's discuss the energy provisions in the bill. (You can see the full text of the 730 page bill here).

The combined investments are aimed at putting the U.S. on a path to roughly 40% emissions reduction by 2030. They represent the single biggest climate investment in U.S. history.

Before reading through the bill, I like to get a feel for the kinds of energy programs it addresses. For example, a big part of our energy policy over the past decade has been ramping up the nation's biofuel programs. But in this particular bill, the word "ethanol" only appears three times. "Biofuel" appears 11 times.

"Hydrogen", on the other hand, appears 65 times in the bill, and "clean vehicle" appears 31 times. "Carbon capture" appears 28 times. "Nuclear" appears 25 times.

That gives a high-level idea of the kinds of programs the bill targets. Here are some specifics.

The bill provides direct consumer incentives to buy energy efficient and electric appliances, clean vehicles, rooftop-solar systems, and invests in home energy efficiency. These investments include:

The bill includes over $60 billion to maintain clean energy manufacturing to the U.S. across the full supply chain of clean energy and transportation technologies. Provisions include:

The bill will target investments at reducing emissions in every sector of the economy, including electricity production, transportation, industrial manufacturing, buildings, and agriculture.

This package includes over $60 billion in environmental justice priorities to drive investments into disadvantaged communities, including:

The bill also makes significant investments in clean energy development in rural communities, such as:

Although this is being touted as a historic climate bill, some climate activists are upset at provisions aimed at the fossil fuel industry. Some of those were aimed at swaying Senator Joe Manchin, but the overall bill was still opposed by Republicans. On the other hand, some of the fossil fuel provisions are punitive, as they attempt to get fossil fuel companies to change certain practices. Some of the fossil fuel provisions include:

Thus, even though the fossil fuel provisions were a mixed bag for the oil industry, they are finding general support from the industry. ExxonMobil XOM CEO Darren Woods called the bill “a step in the right direction” in part because “This policy could include regular and predictable lease sales, as well as streamlined regulatory approvals and support for infrastructure such as pipelines.”

The biggest winners from this legislation should be:

Within the oil and gas industry, the benefits skew more toward the biggest companies that can 1). Afford to invest in new carbon and methane capture technologies; and 2). Spend billions developing new offshore leases. Smaller oil and gas companies may simply find an increase in their cost of doing business.

Losers will be those who have relied heavily on stock buybacks. But another loser may be the coal industry. Incentives are skewed strongly in the direction of building out new renewable power capacity, and that will likely further marginalize coal as an energy source. Natural gas should continue to fare well as a firm source of power, which meshes well with new renewable capacity.