The Inflation Reduction Act Is About to Change the World
Itn July, a pair of Senators gathered reporters in the U.S. Capitol Building to deliver a message to President Joe Biden: it’s time to declare a climate emergency. This was, undoubtedly, an act of Hail Mary. Two Democrats, desperate to see major climate legislation, realized that it was unlikely Congress would be able to tackle climate change effectively in the coming years. “Am I concerned that it will be a decade before we have a climate majority?” said Sen. Jeff Merkley of Oregon, alongside Sen. Sheldon Whitehouse of Rhode Island. “I am damn concerned.”
Three weeks later, Democratic Senators marched off the Senate’s floor to celebrate passing the Inflation Reduction Act. This was the largest climate bill in American history. The House of Representative will likely follow their lead and send the bill to Biden. He will then sign the bill, thereby launching a new age in American climate policy.
Experts say the legislation will dramatically accelerate the decline in U.S. emissions, putting the country within reach of the Biden Administration’s goal of slashing emissions in half by 2030 when compared to 2005 levels. This goal is a gauge of the extent of climate-related pain and destruction that the world can prevent and serves as an indicator of U.S. climate policy. Inflation Reduction Act provides a blueprint for the U.S. approach to climate change over the next eight years and beyond. The bill invests over $360 billion in climate and energy programs for the next ten years, with huge tax incentives that encourage electric cars and renewable energy. While the bill leaves much to be resolved, there are still many issues to resolve. There is already conflict over where fossil fuel production will go and what steps to take to ensure environmental justice.
The bill, regardless of the outcome of these fights, will provide the U.S. with new credibility on the international climate stage. It will also convince other nations that the energy transition cannot be reversed. It’s impossible to know exactly how well every climate provision of the Inflation Reduction Act will work, but what is clear is that once signed into law, it will jumpstart an economic transformation and rejigger international climate politics—with ripple effects that will shape communities large and small, and affect the way Americans live.
The bill’s ripple effects
The Inflation Reduction Act’s approach to cutting U.S. emissions is the result of decades of trial and error. Although President Bill Clinton was able to pass an energy tax, it failed. The climate activists learned that disrupting big business can be dangerous and could endanger legislation. Barack Obama supported the efforts of Congress to pass cap-and trade legislation, which was endorsed big business. When the legislation failed in the Senate, climate activists learned that they had to rally grassroots support for legislation to be passed.
Both of these lessons—and many others—paved the way for the Inflation Reduction Act. It relies largely on carrots over sticks—incentivizing businesses to decarbonize rather than penalizing them for not doing so. And it promises to create jobs and investment in Americans’ communities, making it more politically palatable for broad swaths of the voting public.
The legislation’s core is based on tax credits that are available to companies who build solar and wind power, as well as other renewable energy technologies. These credits, which last for ten years, will catalyze the creation of a decarbonized energy system and serve as the driving force behind the bill’s emissions reduction. A wide range of industries will also be encouraged to decarbonize. For purchasing lower-carbon fuel, airlines will be eligible for credit. Incentives for industrial firms to store and capture carbon dioxide will be offered. “This legislation truly is transformative,” says Dan Lashof, a director at the World Resources Institute. It “gives long-term investment certainty, which will really mobilize capital and transform our energy system.”
This may sound distant and wonky, but these changes will ripple across the economy—and into your backyard. Nascent technologies—from battery storage to hydrogen power—will get a boost, creating new jobs and inspiring new companies. It gives the Department of Energy authority to extend loans to private firms up to $250 million to help advance clean energy initiatives. The same program gave Tesla a loan ten years ago to help it grow its manufacturing. A similar loan could be available to the next big clean tech company, even if there are other provisions within the Inflation Reduction Act.
You’ll notice the bill’s effects as a consumer, too. Americans will have new options to improve their energy efficiency by taking advantage of tax incentives on home renovations. According to analysts, efficiency combined with lower costs of renewable energy will result in lower consumer energy prices. The incentives available for electric cars include a $7,500 tax credit. With such incentives, many consumers who aren’t even currently thinking of buying an electric car may find that their next vehicle will be one.
Democrats and climate activists didn’t get every provision they wanted in the bill, and they had to strike compromises to keep their caucus together. This legislation provides incentives to deploy carbon capture technology. It would permit a continuation of reliance on fossil fuels as long as the companies are capturing carbon emissions. These technologies won’t help underserved communities, which are the most affected by environmental pollution due to fossil fuels. Environmental justice activists claim that they will not do much to improve their lives. Climate advocates refer to this legislation as a poison pill. It requires the federal government’s auction of federal land in order for federal oil and gas drilling. Although the Inflation Reduction Act might help the U.S. to confidently state that energy transition has begun, there is still much work needed to make sure that it is just.
We are still in a new phase of the fight against climate changes, which opens with the Inflation Reduction Act.
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