With the Senate passing the Inflation Reduction Act of 2022 last night, and House passage later this week all but assured, it’s likely that the U.S. will be taking significant — though not comprehensive — congressional action on climate change.
The bill is expected to trim U.S. carbon emissions to 40% below 2005 levels by the end of the decade. That’s short of President Joe Biden’s target of 50%, and not quite enough to help put the world on the preferred path of warming no more than 1.5 degrees Celsius. But it’s still a major step, one that could restore confidence in global climate agreements.
It’ll also give a big boost to climate tech, a sector that’s been red hot and seemingly immune to cooling sentiment.
The new version, which passed after negotiations with Senator Kyrsten Sinema, a Democrat from Arizona, has a few changes. The corporate minimum tax reportedly has been tweaked to be more lenient on manufacturers, and the changes to tax on carried interest are out, though it’s not clear whether investors were all that concerned with them anyway. It’s been replaced with a 1% excise tax on stock buybacks that goes into effect next year. Sinema also successfully lobbied for $4 billion for Western states to fight the megadrought they’re currently experiencing.
The rest of the massive bill, which we’ve covered in detail, remains largely the same. That means enticements to get people to buy EVs and heat pumps; carrots for companies to set up domestic supply chains for batteries, solar panels and wind turbines; and $20 billion to help agriculture overhaul itself with an eye toward trimming emissions.
But will the bill be enough? Among realists, there’s largely agreement that the Inflation Reduction Act is better than nothing. It may not be perfect, but there’s still time to improve on it, right?
When it comes to climate, policy wonks and researchers have gone back and forth on whether incrementalism is net positive or negative. Detractors say that incrementalism can create a hodgepodge of laws and incentives that don’t substantively address climate change, or that the time spent crafting those laws would be better spent working on an omnibus approach that doesn’t require later revisions. Incrementalism in domestic policy, especially for large polluters like the U.S., also opens the door for other countries to take similar approaches, slowing progress globally.
But proponents say that we shouldn’t let the perfect be the enemy of the good, and that incrementalism is a more politically savvy approach, especially in countries like the U.S., where legislative change is more often incremental than monumental. The Inflation Reduction Act may not be the Green New Deal, but it’s certainly not business as usual. And once people start seeing the benefits of electrification and other climate-friendly measures, they’ll be inclined to move even farther in that direction.
Incremental national legislation reaps benefits in international agreements. “National measures are often a prelude to international negotiations. This truth is particularly salient when addressing global public goods” like climate, legal scholar Rachel Brewster wrote in a widely cited paper from 2009.
Yet whether national legislation leads to an international agreement depends on the circumstances, she pointed out. Today, they’re mixed. In the wake of House Speaker Nancy Pelosi’s trip to Taiwan, China decided to turn its back on climate cooperation with the U.S. But other major players like the EU are moving more aggressively, and positive signals from the U.S. will probably embolden them to go even further. A U.S.-EU agreement on climate has never been more possible.
Climate agreements take years to hash out, and absent a significant shift in the balance of the U.S. Senate, it’s unlikely that anything binding will go into effect. But this bill has shown that legislative action on climate isn’t impossible, and it would be premature to rule anything out, especially as the effects of climate change intensify.