The Inflation Reduction Act (IRA), passed earlier this year, is one of the most significant congressional actions to address climate change in our lifetimes and could potentially help the U.S. reduce emissions by 40 percent or more by 2030. Several provisions in the IRA are applicable to the U.S. health care sector, which contributes 8.5 percent of overall greenhouse gas (GHG) emissions nationally, including emissions directly from health care facilities and indirectly from the sector’s supply chain of goods and services.
The health care industry has expressed growing interest in reducing greenhouse gases. In April, the U.S. Department of Health and Human Services launched an initiative to encourage hospitals and other health care organizations to commit to reductions in GHG emissions of 50 percent by 2030 and net zero by 2050. In June, 61 of the largest hospital and health care companies committed to meeting these targets.
The Georgetown Climate Center, in partnership with the Commonwealth Fund, is assessing policies that can drive comprehensive and equitable GHG emissions reductions in health care. In this blog post, we outline provisions in the IRA that may be of interest to health care organizations.
Implications of the IRA for Health Care Sites and Suppliers
Energy and electricity at health care sites. There are several provisions that hospitals and large health organizations could deploy to reduce direct on-site emissions and electricity at their facilities. These include new or expanded tax credits (with a workaround for organizations not eligible for tax credits) for energy efficiency in commercial buildings, and incentives for solar panels, battery storage, and microgrids, which can be used by hospitals for renewable energy and resilience. More generally, the IRA has a variety of tax credits and other incentives for electric power companies that will significantly reduce carbon dioxide emissions from the U.S. electricity system. As more electricity is generated by wind, solar, and other low-carbon sources, the electricity used by hospitals will get cleaner.
Transportation emissions. New tax credits for electric vehicles in commercial fleets could help health care organizations that operate vehicles for patient transport or other purposes. The IRA’s expanded electric vehicle tax credits for consumers will result in more staff and patients driving electric vehicles, which also will help reduce the system’s overall emissions.
Upstream health care product manufacturing and freight transport. Additional provisions in the IRA will help reduce carbon dioxide emissions from the production of primary materials — such as plastic, paper, steel, and cement — used to manufacture medical supplies and in the construction of health care facilities. These include:
- incentives to build demand and industrial capacity for lower-carbon cement and steel through government procurement, including funding for low-carbon materials in federally owned buildings and grants to states that use low-carbon cement and steel in highway projects; as markets and capacity for these products grow, these materials can be used for hospital and health care construction projects
- investments and tax credits in new manufacturing methods for low-carbon production of plastics, paper, and other primary materials used in hundreds of medical supplies (e.g., surgical gowns) and other products (e.g., computer equipment); a substantial portion of the sector’s indirect emissions comes from the electricity used in manufacturing upstream materials and by trucks used to transport these products.
New financing approaches. The IRA has innovative financing approaches, including tax credits with a “direct pay” option, which would allow nonprofit hospitals with no tax liability to participate. Previously, these organizations were not eligible for tax credits because they pay no taxes. Through the direct pay option, nonprofit entities can receive a direct payment from the federal government for the value of the credit. An additional provision, the Greenhouse Gas Reduction Fund, provides funding for “green banks,” which use public funds to lower the costs and risks for private investments in climate-friendly projects that might not otherwise attract financing. This innovative approach might be used to fund measures to reduce carbon dioxide emissions at certain hospitals. Projects funded by green banks could provide multiple benefits for communities, including reductions of greenhouse gases and conventional pollution and increased ability of health care facilities to prepare for and respond to climate events. The Greenhouse Gas Reduction Fund prioritizes underserved communities and could help hospitals that serve low-income populations.
As federal agencies flesh out implementation details, health care delivery organizations and the broader sector will have opportunities to contribute input and insights on a range of important issues. For example, the health care sector could provide valuable input on additional government policies that could complement or expand incentives in the IRA. Similarly, it will be critical for health care leaders to highlight existing regulatory barriers that need to be addressed for health care institutions to benefit fully from the IRA and other policies. Finally, implementation of the Inflation Reduction Act may provide significant new opportunities for health care institutions to support underserved communities, for example, by serving as anchor institutions that strengthen communities’ resilience in the face of disruption caused by climate change.