Biden’s historic 2022 climate law, the Inflation Reduction Act – what does it mean?
Key Points
- Largest U.S. Climate Investment: Congress passes a nearly $375 billion bill to accelerate clean energy adoption—the biggest single-nation climate spending effort ever.
- Incentives Over Regulations: The bill primarily uses tax credits and rebates to boost renewables, EVs, energy efficiency, and battery storage, rather than imposing new emissions regulations.
- Projected Emission Cuts: Experts estimate the bill could reduce U.S. carbon emissions by up to 44% by 2030, though it falls short of Biden’s 50% reduction goal.
- Economic & Industry Impact: The legislation is expected to spur billions in private investment, lower consumer energy costs, and strengthen U.S. clean energy manufacturing.
- Fossil Fuel Concessions: While renewables get a major boost, the bill includes some benefits for oil and gas, such as continued leasing on federal lands.
- Global Influence: Analysts say U.S. action may encourage China, India, and other nations to increase their climate efforts, potentially driving down renewable energy costs worldwide.
- Mixed Reactions: Climate advocates call it a historic step, while critics argue it doesn’t do enough or gives too many concessions to the fossil fuel industry.
On August 16, 2022, President Biden signed the Inflation Reduction Act (IRA) into law, marking one of the largest investments in the American economy, energy security, and climate that Congress has made in the nation’s history.
Congress hopes to make clean energy so cheap in all aspects of life that it’s nearly irresistible. The House passed a transformative bill that would provide the most spending to fight climate change by any one nation ever in a single push.
The crux of the long-delayed bill is to use incentives to spur investors to accelerate the expansion of clean energy such as wind and solar power, speeding the transition away from the oil, coal and gas that largely cause climate change.
The United States has put the most heat-trapping gases into the air, burning more inexpensive dirty fuels than any other country. But the nearly $375 billion in climate incentives in the Inflation Reduction Act are designed to make the already plummeting costs of renewable energy substantially lower at home, on the highways and in the factory. Together these could help shrink U.S. carbon emissions by about two-fifths by 2030 and should chop emissions from electricity by as much as 80%.
Experts say it isn’t enough, but it’s a big start.
“This legislation is a true game-changer. It will create jobs, lower costs, increase U.S. competitiveness, reduce air pollution,” said former Vice President Al Gore, who held his first global warming hearing 40 years ago. “The momentum that will come out of this legislation, cannot be underestimated.”
The U.S. action could spur other nations to do more — especially China and India, the two largest carbon emitters along with the U.S. That in turn could lower prices for renewable energy globally, experts said.
Because of the specific legislative process in which this compromise was formed, which limits it to budget-related actions, the bill does not regulate greenhouse gas emissions, but deals mainly in spending, most of it through tax credits as well as rebates to industry, consumers and utilities.
Investments work better at fostering clean energy than regulations, said Leah Stokes, an environmental policy professor at the University of California, Santa Barbara. The climate bill is likely to spur billions in private investment, she said: “That’s what’s going to be so transformative.”
The bill promotes vital technologies such as battery storage. Clean energy manufacturing gets a big boost. It will be cheaper for consumers to make climate-friendly purchasing decisions. There are tax credits to make electric cars more affordable, help for low-income people making energy-efficiency upgrades and incentives for rooftop solar and heat pumps.
There are also incentives for nuclear power and projects that aim to capture and remove carbon from the atmosphere.
The bill moves to ensure that poor and minority communities that have borne the brunt of pollution benefit from climate spending. Farmers will receive help switching to climate-friendly practices and there’s money for energy research and to encourage electric heavy-duty trucks in place of diesel.
The Superfund program, used to pay for cleanup of the nation’s most heavily-polluted industrial sites, will receive more revenue from a bigger tax on oil.
The Rhodium Group research firm estimates the bill would dramatically change the arc of future U.S. greenhouse gas emissions, cutting them by 31% to 44% in 2030, compared to what had been shaping up to be 24% to 35% by 2005 without the bill, said Rhodium partner John Larsen. Clean power on the grid, an upcoming Rhodium report says, would jump from under 40% now to between 60% and 81% by 2030, he said.
“It’s not as big as I want, but it’s also bigger than anything we’ve ever done,″ said Sen. Brian Schatz, a Hawaii Democrat who leads the Senate climate caucus. “A 40% emissions reduction is nothing the U.S. has ever come close to before.″
As decisive a change as it is for U.S. policy and emissions, it still does not reach the official U.S. goal of cutting carbon pollution roughly in half by 2030 to achieve net-zero carbon emissions across the economy by 2050.
When U.S. historic carbon emissions are factored in, U.S. spending still lags behind Italy, France, South Korea, Japan and Canada, according to Brian O’Callaghan, lead researcher at the Oxford Economic Recovery Project at the University of Oxford.
Rhodium’s Larsen, who crunched the numbers in the bill, said it would lead to consumers paying up to $112 less a year in energy costs.
The result is a 730-page bill that spends money without directly taking on fossil fuels. Gore said the fossil fuel industry ran a decades-long “deeply unethical campaign to deceive people around the world,” casting doubt on climate change science.
The fossil fuel industry will face higher royalties and new fees for certain excess methane emissions, a potent greenhouse gas — a rare stick amid carrots. But the fossil fuel industry will remain a powerful force and have guaranteed opportunities to expand on federal lands and off the coast before renewables can be built in those places.
Nevertheless, “the undeniable outcome of this will be a real expansion of wind and solar,” said Harrison Fell, a professor focused on energy policy at North Carolina State University.
Source: Associated Press, Michael Phillis reported from St. Louis.
