The Inflation Reduction Act Is a Huge Win for Climate But Still Falls Short

The Inflation Reduction Act (IRA) has been hailed as the most significant climate legislation ever passed in the U.S. but its many caveats could allow the fossil fuel industry to continue thriving.

The legislation enacted by President Joe Biden on Aug. 16 includes funding for the construction of nearly 1 billion solar panels, 120,000 wind turbines, and 2,300 large-scale battery plants to help stabilize a cleaner grid.

Altogether, it will channel nearly $370 billion toward efforts to help decarbonize the U.S. economy through subsidies, loans, grants, and tax credits. This funding will help reduce greenhouse gas emissions by about 1 gigaton in 2030, “10 times more climate impact than any other single piece of legislation ever enacted,” the White House said.

Environmental and renewable energy industry groups celebrated the passage of the IRA. Earth Justice described it as “a huge step forward in the fight to preserve a livable planet” and the American Council of Renewable Energy said it will “help deploy thousands of megawatts of new renewable power [and] create hundreds of thousands of good-paying jobs.” 

According to an estimate by the Rhodium Group, the legislation will allow the U.S. to slash carbon emissions by 40% from 2005 levels, compared to about 30% under current policy.

The Inflation Reduction Act will also lower fuel and electricity costs, helping homeowners save hundreds of dollars a year in energy and transportation by 2030. It includes clean energy tax credits, such as a 30% tax credit for solar roofs, and rebates to help families retrofit their homes and buy energy-efficient appliances, including heat pumps.

It also includes $4 billion to increase “drought resiliency” in Western states, measures to protect nearly 2 million acres of national forests and $60 billion for communities that are disproportionally affected by the climate crisis.

There are major caveats

Although the Inflation Reduction Act contains important measures to decarbonize the power sector, much more will be needed in order to tackle the ongoing climate crisis.

In a New York Times opinion piece, Jody Freeman, who teaches environmental and administrative law at Harvard, wrote that in addition to funding green energy, the U.S. government could “have placed caps on the amount of greenhouse gases industries can emit or taxed carbon dioxide emissions by the ton.”

But with the Senate divided 50/50, Democrats needed the backing of all their senators, as well as a tie-breaking vote from Vice President Kamala Harris. In order to win support from West Virginia Senator Joe Manchin—a Democrat with strong ties to coal companies—Democrats had to agree to some big concessions for the fossil fuel industry. Chief among them is that the legislation provides fossil fuel companies with increased access to public lands and waters.

It also includes measures to curb emissions of methane (a gas that has 25-times the warming effect of carbon dioxide) but analysts have warned that it is unclear how effective these policies will be because they contain a number of exemptions and caveats. It also includes tax credits to boost the adoption of electric vehicles but cars made abroad are exempt, which could lead to fewer choices for drivers and production bottlenecks in the U.S.

In addition, the package paves the way for the construction of the Mountain Valley Pipeline, mandates the federal government to offer up parts of the Gulf of Mexico and Alaska’s Cook Inlet for oil and gas development, and includes tax credits for carbon capture and sequestration, an unproven technology that could extend the life of dirty coal plants and increase the country’s energy burden.

These concessions mean that the legislation will effectively allow the U.S. fossil fuel industry to continue thriving. This year, oil company profits skyrocketed, the U.S. became the world’s top exporter of liquified natural gas, and only days after the Inflation Reduction Act was enacted, the country’s crude exports reached 5 million barrels per day, an all-time record. 

“Much more is needed, specifically to restrict any and all new fossil fuel projects. Unfortunately, the bill aims to actually promote additional drilling and fracking, an unconscionable trade-off that will increase pollution in frontline and environmental justice communities,” said Food & Water Watch Executive Director Wenonah Hauter. 

The New York Times last weekend reported that the Biden administration is planning executive actions to curtail the development of new fossil fuel projects and decarbonize the power sector, moves that could help the U.S. to reduce emissions by 50% in 2030. Gina McCarthy, the White House climate adviser, told the Times that the IRA is just “a starting point.” 

“We’ll keep moving forward on this the best we can,” she added.