Last Wednesday Senate Democrats announced a surprise deal (about f*cking time Joe Manchin (D-WV) ). The bill is titled the “Inflation Reduction Act of 2022.”

This deal includes hundreds of billions of dollars for energy and climate programs, as well as tax increases that would provide financial support for health care, and lower the cost of prescription drugs. This news comes on the heels of Manchin squashing all hope for such an agreement to go through anytime this summer. 

This package would designate $369 billion in funding for climate and energy proposals. Should it go through, it would be the most ambitious climate action ever taken by Congress, and would lead to nearly $451 billion in new tax revenue over a 10 year period. 

Chuck Schumer (D-NY, Senate Majority Leader), made a statement declaring “By a wide margin, this legislation will be the greatest pro-climate legislation that has ever been passed by Congress.”

So why did Manchin change his mind? That’s the million dollar question (well $369 billion actually). His sudden change of heart is likely connected to a separate measure to address permitting of energy infrastructure before the end of the fiscal year on September 30th. This would make way for the Mountain Valley Pipeline—a project that Manchin is personally invested in and would transport Appalachian shale gas from West Virginia to Virginia. 

So why did Manchin change his mind? That’s the million dollar question (well $369 billion actually).

What happens next? Democrats say the Senate could take up the legislation by next week, but as usual, there are numerous procedural roadblocks that could get in the way. Republicans are strongly opposed to the Democrats’ plan, but with a split senate and Manchin’s support, Vice President Kamala Harris can submit a tie breaking vote to pass the plan and prevent a filibuster. 

This legislation will create most of its new tax revenue (nearly $313 billion) through a minimum tax on “book income” of large corporations like FedEx and Amazon, who currently use tax credits to finagle their way below the 21% corporate income tax rate. 

This deal will raise an additional $14 billion by decreasing preferential tax treatment for income earned by venture capitalists and private equity firms. 

It invests $30 billion in production tax credits for solar panels, wind turbines, batteries, and critical minerals processing. Another $10 billion in tax credits for manufacturing facilities to build clean technology, and $500 million to be used through the Defense Production Act for heat pumps and critical minerals processing. 

The deal will work to make new electric vehicles more affordable, and includes a tax credit for used electric vehicles. The legislation additionally includes a “methane fee” to begin in 2025. 

Finally, the deal includes $60 billion for the “disproportionate burden of pollution on low-income communities and communities of color,” $27 billion for a “green bank” meant to deliver financial support to clean energy projects, and $20 billion for programs to cut emissions in the agriculture sector. 

As of August 3rd, Senator Krysten Sinema (D-AZ) emerged as the new barrier to passing the historic legislation. Sinema has not made any comments on her stance, and her silence puts Democrats in a tough spot, as moving the legislation forward becomes increasingly tedious.