- Aug 17, 2022 5:32 pm GMT
The new Inflation Reduction Act (IRA), signed by President Biden this week, is a grand bargain between emissions reduction and economic growth – and new Energy Innovation modeling shows it will be the most significant climate action legislation in U.S. history.
If passed, the IRA’s $369 billion in funding for climate and clean energy provisions could cut national greenhouse gas emissions 37%-41% by 2030 compared to 2003 levels, putting the U.S. within reach of its nationally determined commitment to the Paris Agreement. The IRA provisions will also spur an economic boom, boosting GDP nearly 1% in 2030.
The IRA provisions do require auctions for oil and gas on federal lands, as well as completing several 2022 lease auctions that were previously cancelled, prior to auctions for renewable energy projects on federal lands and water, but these provisions are far outweighed by benefits to the climate. For every ton of new emissions generated by the IRA oil and gas provisions, at least 24 tons of emissions will be prevented by the legislation’s clean energy provisions.
From Stalled Legislation To A Climate Breakthrough
Negotiations for a comprehensive federal climate bill have been ongoing since early 2020, when President Biden first revealed his plan for a historic investment package to stimulate economic growth after the COVID-induced economic recession. Biden’s goal was to bring U.S. infrastructure into the 21st century while expanding our clean energy economy with new domestic manufacturing jobs.
Congress passed the historic bipartisan Infrastructure and Investment Jobs Act in 2021, promising a separate reconciliation package that addressed climate change with federal action. But negotiations between Biden and Senator Joe Manchin on the reconciliation package stalled at the end of last year, and Manchin stated he would not vote yes until he saw new inflation numbers from July.
Then just last week Senator Chuck Schumer and Manchin unexpectedly announced a breakthrough deal had been reached, surprising advocates and insiders alike.
The Inflation Reduction Act Would Cut U.S. Emissions Up To 41% By 2030
Energy Innovation modeled the IRA to estimate its impact on emissions reductions, economic growth, and public health using our free and open-source U.S. Energy Policy Simulator. The IRA’s emissions-reducing provisions include clean energy and electric vehicle tax credits, large-scale investments in domestic clean tech manufacturing, and environmental justice measure.
While Energy Innovation’s analysis covers most IRA’s climate and energy provisions, including all those that could significantly reduce emissions, it is not entirely comprehensive. Some provisions or funding mechanisms were excluded from modeling due to difficulty translating spending categories or incentives into emissions reductions. These programs could likely yield small additional emissions reductions.
Energy Innovation modeling finds the IRA’s climate and clean energy provisions would reduce U.S. GHG emissions 37-41% below 2005 in 2030. In absolute terms, U.S. emissions in 2030 are projected to be 2,500 million metric tons (MMT) to 2,800 MMT lower than 2005 due to the IRA.
This is compared to a business-as-usual scenario which includes all enacted federal and state policies, but would only reduce emissions 24% by 2030 compared to 2005, falling far short of the 50-52% emissions reduction pledged in the U.S. NDC.
In other words, the IRA would enable the U.S. to close 50-66% of the emissions gap between BAU and the NDC in 2030. With additional executive federal, state, and local climate policies, the U.S. could realistically meet its NDC.
Passing the IRA could also bolster global climate negotiations, showing the U.S. is indeed “back” as Biden has asserted to the world. U.S. leadership could provide confidence to other major emitters that they should move forward implementing their own NDCs.
Clean Energy Boosts GDP, Creates New Jobs, Improves Public Health
The IRA earmarks billions in funding for climate and energy provisions, which could generate significant economic growth. Based on the IRA text, modeling assumes these provisions are paid for through corporate taxes.
Energy Innovation modeling finds the provisions could create 1.4 million to 1.5 million additional jobs in 2030 concentrated in the manufacturing, construction, and service industries. The bill’s provisions also greatly encourage domestic manufacturing of clean energy technologies that need to be deployed at a rapid rate across the economy, helping to onshore jobs, helping to increase GDP by 0.84-0.88% in 2030.
Reducing particulate emissions from burning fossil fuels could also prevent negative health outcomes. Air pollution from burning fossil fuels causes asthma, heart disease, lung disease, premature death, and other conditions that disproportionately burden communities of color due to legacy siting of fossil fuel infrastructure and freeways.
Energy Innovation modeling shows the IRA provisions could avoid up to 3,900 premature deaths, up to 100,000 asthma attacks, and up to 417,000 lost workdays, all in 2030. As a percentage decrease, avoided deaths are greater for people of color, which have historically experienced the most harm from air pollution. These benefits accrue despite an increase of 50 MMT in oil and gas production emissions in 2030 from the new oil and gas leasing requirements.
The Inflation Reduction Act Is An Investment In Our Economy And Climate
Congress last considered major climate legislation more than a decade ago, but the cost of delaying climate action for far too long is already being borne by our communities and our economy.
We’re all feeling the sting of worsening extreme weather as climate change accelerates – whether in the form of another record-setting hot July, the Southeast U.S. megadrought, or raging wildfires from California to Texas. Between 1980–2021, the U.S. experienced an annual average of 7.7 billion-dollar climate or weather events, but that number nearly tripled between 2017-2021 to 17.8 events. These events cost the U.S. $2.275 trillion dollars.
Meanwhile, volatile oil and gas prices spurred by Russia’s invasion of Ukraine are hammering consumers, and causing more than 40% of the inflation Americans are having to pay. Climate change and volatile fossil fuels will continue to cost our country dearly without this bill.
The only way to fight the climate crisis, protect our economy, and protect consumers is through a rapid transition to clean energy. If the U.S. Senate passes the IRA, it will be taking the most important climate action in U.S. history and making a down payment on a safe climate future and clean economic growth for decades to come.
Energy Innovation Deputy Communications Director Sarah Spengeman contributed to this column
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