From landfills to clean energy: How the Inflation Reduction Act empowers food waste diversion projects

The passage of the Inflation Reduction Act (IRA) in 2022, alongside the Bipartisan Infrastructure Law, signifies that, for the first time in the United States’ history, the full financial power of the federal government is aligned with the clean energy transition. The IRA is a major piece of legislation that is projected to raise nearly $800 billion in revenue over the next 10 years, with at least $400 billion allocated to spending. Nearly 90 percent of this will be directed toward energy and climate-related activity.

Now, significant federal funding will help the U.S. reduce greenhouse gas (GHG) emissions by 40 percent over the next decade and reach the national goal of net-zero emissions by 2050. Though not primarily aimed at waste reduction, the IRA plays an essential role in food waste landfill diversion projects. The act caters to three primary categories:

• Expansion of qualified biogas-generating anaerobic digestion (AD) systems – The IRA funding likely will bolster the development and implementation of AD systems that turn organic waste into biogas.
• Reduction of methane emissions from landfill food waste – Given methane’s potent GHG effects, the IRA offers resources to mitigate emissions from food waste, contributing to broader climate change mitigation efforts.
• Promotion of on-farm food waste prevention efforts – By funding measures to prevent food waste at the farm level, the IRA also encourages sustainable farming practices, linking agriculture to larger waste and climate strategies.

To access IRA resources, waste management initiatives must demonstrate alignment with goals to reduce GHG emissions, promote carbon sequestration or advance broader climate action.

The IRA employs an array of funding mechanisms to facilitate these goals, including grants, loans, loan guarantees and tax credits. Within the IRA’s 89 climate change-related provisions, several present viable funding opportunities for food waste reduction projects. A highlight is the allocation of $27 billion to the Environmental Protection Agency (EPA) to create a national green bank under Section 60103 (Greenhouse Gas Reduction Fund). This green bank will provide long-term, low-interest loans to zero-emission projects, stimulating environmentally friendly initiatives across the country.

Updated tax credits within the IRA represent another boon for waste management initiatives. Two of the most powerful tax credits are the Renewable Electricity Production Tax Credit (PTC) and the Business Energy Investment Tax Credit (ITC). Neither is new, but both have been updated in ways that have major implications for the financial viability of certain food waste recovery projects.

The PTC has been around since 1992. To take advantage of this tax credit, a business must build a facility and begin producing electricity to earn a tax credit every time a kilowatt hour of electricity is produced. The ITC, enacted almost 15 years ago, is based not on production but on the value of dollars invested in a facility. The IRA extends these tax credits; expands the projects that are eligible, including biogas projects that do not generate electricity; and increases the amount of money available. There is a base tax credit amount if the project meets certain labor requirements, and projects receive additional bonus credits for using domestic materials and for siting in a disadvantaged or pollution-burdened community, such as at a brownfield or a former fossil fuel extraction site. A new and noteworthy addition is the direct-pay option, enabling nontax-paying entities to convert tax credits into cash payments. This development furnishes local jurisdictions with robust incentives to divert food waste from landfills.

In addition to generating financial resources, the IRA is deeply cognizant of social justice. It aligns with the Justice40 initiative, which stipulates that 40 percent of federal investments’ overall benefits should flow to marginalized and pollution-burdened communities. This emphasis underscores the IRA’s focus on equitability and sustainability.

The IRA presents us with a once-in-a-generation investment in rebuilding the energy infrastructure of our economy, and food waste landfill diversion projects absolutely can take advantage of these sizable resources. With its alignment with the principles of the Justice40 initiative, the IRA helps ensure that the pathway to a sustainable future is not only greener but also socially equitable.