The US Senate has approved a bill that includes $369bn (£305bn) for climate action – the largest investment in America’s history.
The authors of the Inflation Reduction Act say it will cut the country’s carbon emissions by 40% by 2030.
Some households could receive up to $7,500 in tax credit to buy an electric car and $4,000 for a used car.
The bill – a key plank of President Joe Biden’s agenda – will now be sent to the Democrat-controlled House.
It is expected to be backed there as soon as this week, before it can be signed into law by Mr Biden.
With the US mid-term elections just three months away, the bill’s passage will be seen as a boost for the Democrats, the BBC’s North America correspondent Peter Bowes says.
Climate change increases the risk of the hot, dry weather that is likely to fuel wildfires.
The world has already warmed by about 1.1C since the industrial era began and temperatures will keep rising unless governments around the world make steep cuts to emissions.
After a marathon overnight session, Democrats cried with joy and pumped their fists in the air after the bill – a product of 18 months of intense wrangling – was passed in the Senate.
It envisages raising corporate taxes and lowering healthcare costs as part of a package surpassing $700bn (£580bn), which the White House says will pay for itself.
IMAGE SOURCE,GETTY IMAGES Image caption, Democratic Senate majority leader Chuck Schumer said lawmakers were “making history”Democrats negotiated among themselves for months to ensure the bill received the support of every one of the party’s 50 senators, which it required – alongside Vice-President Kamala Harris’s tie-breaking vote – to pass the Senate.
Democratic Senate majority leader Chuck Schumer said: “After more than a year of hard work, the Senate is making history.
“To Americans who’ve lost faith that Congress can do big things, this bill is for you,” he added.
Senator Brian Schatz, a Democrat from Hawaii, reportedly cried tears of joy as he left the chamber.
“Now I can look my kid in the eye and say we’re really doing something about the climate,” he said, according to the New York Times.
Some Republicans have said they will try to stall or block the progress of the bill, which also includes $64bn (£53bn) for healthcare.
On Saturday, Congress debated a revised version of the bill, after compromises on the more ambitious original plan were agreed with two key Democratic holdouts, Senators Joe Manchin of West Virginia and Kyrsten Sinema of Arizona.
Mr Manchin had feared the original bill would have exacerbated inflation.
Industry measures in the bill include tax credits for clean energy development that will help with the high upfront costs. A new $27bn “clean energy technology accelerator” will be created to help advance renewable technologies.
There will also be $60bn given to communities that have suffered the most from fossil fuel pollution.
President Biden – who has called the bill “historic” – has pledged to return the US to the international stage on climate action. In April last year, he pledged to slash US greenhouse gas emissions by at least 50% by 2030.
Last month, he announced $2.2bn to help build infrastructure that can withstand extreme weather and natural disasters.
