What the Inflation Reduction Act Does for Climate Goals
On August 16th, President Joe Biden signed the Inflation Reduction Act of 2022 after its passage in the House of Representatives and the Senate. A significant piece of this legislation is almost $370 billion dedicated to addressing climate change outcomes and bringing further energy security to millions of citizens. It aims to do this by raising revenues through a series of tax adjustments that would tax corporations at a higher rate, crack down on tax fraud, and encourage tax stock buybacks.
The single largest investment in the environment by the US government in its history
The White House said about the Inflation Reduction Act:
This bill would make the single largest investment in climate and energy in American history, enabling America to tackle the climate crisis, advancing environmental justice, securing America’s position as a world leader in domestic clean energy manufacturing and supply chains, creating and sustaining good-paying union jobs in construction and manufacturing, including in rural communities, and lowering energy costs for Americans.
Cuts greenhouse gas emissions down to around 40% of 2005’s levels
Estimates from independent research groups, as well as the bill’s authors, indicate that the Act could reduce greenhouse gas emissions by 31%-44% of 2005’s levels by 2030. In that year, greenhouse gas emissions were generally lower due to lower overall levels of production compared to today’s levels. This would constitute a remarkable decrease in overall emissions, compared to the current policy which only reduces greenhouse gasses by a marginal amount. While there is still more that could be done to further reduce these levels, it is extremely significant that this is estimated to be achievable in just over seven years.
Reduces consumer cost of energy
The Inflation Reduction Act is expected to reduce the cost of electricity for the average consumer by up to 6.7% over the next ten years—up to a $220 per year decrease in annual costs per household. More importantly, the bill will protect consumers from fluctuations in energy costs.
Creates millions of energy-related jobs
Energy Innovation, a non-partisan energy and climate policy think tank, estimates that up to 1.5 million jobs could be added as a result of the act, representing a 0.88% increase in gross domestic product (GDP).
Investments in transportation and clean energy
The Act sets aside $60 billion for the development of more renewable infrastructure, including solar, wind, and battery storage resources to create power for manufacturing. Individuals can also benefit from tax credits for electric cars and making their homes more energy efficient.
Shortfalls of the bill
Environmental groups originally called for $555 billion in climate provisions to be made in the Inflation Reduction Act, far above the $369 billion that was ultimately allocated. While significant, the smaller amount will not go as far to make the massive impact on climate change goals that will be needed.
The bill also contains language about continued fossil fuel extraction expansion, which runs counter to the main goal of reducing the US’s climate impact. Interestingly, the CEO of the oil corporation ExxonMobil signaled approval of the bill, indicating that there could be positive provisions for oil giants in the legislation.
The estimated impact will therefore not meet President Biden’s climate goal of reducing greenhouse gas emissions by 50% by 2030, instead reaching only as high as 44%. This does not, however, mean that other combined initiatives will be barred from picking up the slack – additional policy, as well as non-governmental organization work, can also make a significant impact in reducing climate change outcomes.
