What The Inflation Reduction Act Says About Climate Action

On the campaign trail, then-candidate Joe Biden’s Build Back Better plan served as the centerpiece of what he promised would be a robust climate agenda. But, despite the potentially civilization-saving significance of the proposal, Biden spoke more about an immediate effect on Americans’ day-to-day lives: creating jobs. “When I think of climate change,” as he has often said before and after being elected president, “I think of jobs.”

It was clear that the approach followed a political logic. The country was currently in a period of unpredicted uncertainty and unemployment had briefly reached 15%. Americans were worried about their ability make ends meets. Two years on, the economic woes of many remain front-of-mind for voters. It was this year that the largest inflation in decades has occurred. The Inflation Reduction Act is your solution. The bill, negotiated behind the scenes by West Virginia Senator Joe Manchin and Senate Majority Leader Chuck Schumer, has many of the same planks and aims as Build Back Better—namely to slash U.S. carbon emissions—but with a new, more timely name slapped on it.

There has been much written on whether or not the Inflation Reduction Act actually will reduce inflation. (Hint: analysts and economists say it will—even if it will take a few years to kick in). But beyond the policy implications it’s worth considering the significant narrative shift from “job creating” to “inflation busting.” In rebranding Biden’s most significant climate policy as an inflation reduction bill, Democrats have underscored that “climate is everything.” The political rhetoric is finally catching up to reality.

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Learn how we got here, it’s helpful to look back in time at two pieces of legislation crafted at the peak of the Great Recession: the American Recovery and Reinvestment Act (ARRA) and the American Clean Energy and Security Act (ACES). I know the acronyms sound a bit strange, but bear with me. ACES, a climate bill pure and simple, was presented in 2009 as the country’s opportunity to finally tackle climate change. The bill would have established a limit on carbon emissions, and permitted companies to purchase and sell pollution credits. The system was confusing and difficult to comprehend, which is why it didn’t get popular support. The bill was never passed into law. ARRA, on the other hand, wasn’t intended to be a climate bill at all. It was enacted in 2005 and injected nearly $800 billion worth of federal money into the economy, for everything from roads to broadband internet. Importantly, the bill included $90 Billion in federal funding to support clean technology. Many policymakers learned a valuable lesson: spending large to fund climate-related projects is politically possible and popular, while complex regulatory systems are difficult. This belief is firmly rooted in the grassroots support for programs like Green New Deal.

Biden came to Washington last year with the intent to follow the same path as his vice president. The Build Back Better Plan, which he proposed to spend a few billion dollars in an economic recession, was stalled. There are many factors to blame—not least of which is Manchin’s fickleness—but it’s worth pointing out that the jobs narrative may have been less convincing as unemployment declined quickly after Biden took office to around 3.6% today.

The bill was stalled and politicians began to look for more hot-button topics to link to it. Some suggested framing the push as a response to the Russian invasion of Ukraine—cutting reliance on fossil fuels could reduce Russia’s influence. Manchin had the better idea of the political winds, though.

Repositioning an enormous spending bill to try and address inflation was politically sensible, given that voters rank it as one of their most important concerns. That’s not to say that the connection is all rhetoric designed to serve the polls. Analyses from places like Moody’s show the legislation driving a modest decrease in inflation in the medium term.

There are many connections between energy and climate and inflation. The economy runs on fossil energy, and volatile prices can play a key role in inflation—as we’ve seen with the war in Ukraine. The inflationary effect of extreme weather events can also disrupt supply chains, and increase insurance costs. In my contributions to this newsletter, I often try to draw connections between climate change and the world around us that aren’t necessarily straightforward or widely understood. It was a pleasant surprise to find Joe Manchin doing it this week.

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