We’ve all heard: “You can’t judge a book by its cover.” In the U.S. it’s also true that you can’t judge legislation based on its name. The Inflation Reduction Act of 2022 offers an example. Though its name provides no indication, the legislation represents a major development in the U.S. effort to combat global warming.
When the bill entered the legislative process, the Senate vote loomed as the biggest hurdle for the bill, given the Senate’s even split between both parties. The U.S. vice president’s tie-breaking vote in favor of the bill moves it to the House of Representatives. If passed in the House, it then moves to the White House for the president’s signature.
How Will the Inflation Reduction Act of 2022 Benefit the Climate?
If passed, the bill will direct approximately $370 billion to climate and energy-focused initiatives over the course of 10 years, representing the largest federal clean energy investment in U.S. history. It offers an approach based on investment and innovation, as opposed to regulation. Which isn’t to say that climate-related regulation won’t be deployed later to further curb emissions. In fact, it may well be needed.
It’s estimated that the bill’s investments and incentives will cut U.S. greenhouse gas (GHG) emissions by roughly 40% from 2005 levels by the end of the decade. The projected cut in GHG emissions falls short of the administration’s goal of a 50% reduction, but regulatory activity (beyond the Securities and Exchange Commission’s proposed climate-related disclosure rules) may help close the gap. At the very least, the bill puts the U.S. on a more well-defined path to GHG emissions reduction.
What’s Included in the Inflation Reduction Act?
Among other things, the bill’s climate-related measures include steps intended to:
- Lower the cost of renewable energy solutions, such as wind and solar, for American consumers
- Extend the tax credit for electric vehicles
- Develop decarbonization solutions for industry
- Develop domestic clean energy manufacturing capacity
- Invest in initiatives that promote climate resilience and climate change mitigation in disadvantaged communities
Advancing the U.S. Effort to Address Climate Change
While the bill’s climate-related components differ from those of its predecessor—the Build Back Better Act—the Inflation Reduction Act opens the door to investments that will advance the U.S. effort to address climate change. It also enables the U.S. to demonstrate greater action in support of the Paris Agreement goals as it prepares for COP27 in November.