With the signing of the Inflation Reduction Act (IRA) on Tuesday Aug 16, the most significant climate legislation in US federal history (so far) became law.
Despite the odd name (and greatly overused TLA), the IRA contains a huge number of elements, totalling roughly $350 billion of investment, in climate solutions over the next ten years. This is an historic effort though it falls short of the broader ‘Green New Deal‘ goals that were proposed in 2019, and doesn’t include all of the elements that were in the proposed 2021 reconcilliation package (the American Jobs Plan in “Build Back Better“) that ultimately floundered.
As befitting an omnibus reconciliation package (of which there can only be one in each Congressional session), there are many different elements that have various pedigrees, magnitudes and likely impacts. There have been a number of good explainers about what is in the IRA, and what is not, and discussions about those climate impacts:
- The RepeatProject’s detailed analysis by Jesse Jenkins et al
- The David Roberts Volts podcasts here, and here with Jesse Jenkins and Leah Stokes, and again.
- Paul Krugman on why it doesn’t include a carbon price (though there is a methane fee)
- The New York Times visualization of the spending and revenue elements in the bill is useful:
As you can see there are tax credits and subsidies for electric vehicles, renewable energy, nuclear energy, transmission, hydrogen, air pollution reduction, energy infrastructure, climate resilience, rural development, residential buildings, etc. etc…. On the revenue side, the largest element is the proposed methane fee, followed by the reinstatement of the Superfund, a renewed tax on coal mining for the Black Lung Disability Trust Fund, and controversially, $0.5bn in anticipated revenue for oil and gas leases.
Modeling the impacts of all this is hard. The net effects will depend on how people and enterprise respond to these incentives, what technological improvements occur, how fast we learn to do better etc. and so it’s not sensible to expect too much precision. Nonetheless, the projections from the ReadyProject (linked above), or the Rhodium Group suggest that the impacts on US net GHG emissions will be substantial:
It’s not enough to meet the US Nationally Determined Contributions for 2030 under the UNFCCC or the Paris Agreement goals, but it definitely accelerates progress compared to the current trajectory.
The biggest unknowns are the geopolitical implications. Now that the US federal government is finally acting on climate, what impact does that have on the eagerness of China or India to fulfill their pledges or even increase their ambition? How much global technological innovation will be spurred by these investments? Historically, these estimates have tended to be conservative (i.e. the indirect impacts have generally proven to be much larger than anticipated). Thus predicting the eventual impacts on temperatures and other climate variables is fraught with uncertainty – not that that will prevent some folks from making all the minimizing assumptions and ignoring any follow-ons and international impacts…
However, the key point to remember is that global warming will only stop once we get to global net zero CO2 emissions (with minor caveats related to methane and aerosol levels). So estimated changes in US emissions on the order of 40% is very significant and, for the first time, commensurate with the size of the problem. To paraphrase Winston Churchill, this might not be the beginning of the end for climate policy, but it is likely to be the end of the beginning – at least at the federal US level.