Dive Brief:
- The Inflation Reduction Act would cut annual U.S. greenhouse gas emissions by about 1 billion metric tons by 2030, helping drive down carbon emissions by about 42% from 2005 levels, while also lowering U.S. energy expenditures by at least 4% in 2030, according to preliminary analysis released Thursday by the Princeton University-led REPEAT Project.
- The legislation cuts U.S. carbon emissions mainly by speeding up the deployment of clean electricity and electric vehicles, reducing 2030 emissions from those sources by about 360 million metric tons (MMT) and 280 MMT, respectively, according to the report.
- “By driving down the cost of adopting clean energy and other climate solutions across the nation, the Act also makes it easier for executive agencies, state and local governments, and private sector leaders to increase their ambitions and help close the remaining 0.5 billion ton gap left” to reach a 50% carbon emissions reduction goal by the end of this decade, REPEAT Project researchers said in the report.
Dive Insight:
Senate Democrats last week released the Inflation Reduction Act, a budget reconciliation bill that includes $369 billion in energy security and climate spending over the next 10 years, as well as tax and healthcare provisions.
In a procedural step, the bill on Wednesday cleared the Senate Rule 14 process, which allows it to bypass committee votes and move straight to the Senate calendar for action.
The REPEAT Project analysis found the bill would cut energy costs by nearly $50 billion in 2030. By reducing fossil fuel use, the legislation could cut crude oil prices by about 5% and reduce U.S. natural gas prices by about 10% to 20% in the 2030 to 2035 time frame, the group said. REPEAT, which stands for Rapid Energy Policy Evaluation and Analysis Toolkit, provides analysis on federal energy and climate policy.
Under the bill, annual utility-scale solar installations could jump to 49 GW a year, on average, in the 2024 to 2026 period, up from 10 GW in 2020. Wind installations could increase to 39 GW a year from 15 GW in 2020, according to the analysis.
REPEAT Project researchers warned, however, that factors like permitting, transmission development, carbon transport development and labor issues could limit that potential growth.
The REPEAT project carbon reduction estimate is similar to other assessments of the Inflation Reduction Act.
Energy Innovation estimated the bill would reduce carbon emissions 37% to 41% below 2005 levels by 2030.
The Rhodium Group said the bill would cut emissions 31% to 44% in the same period.
And Moody’s Analytics estimated it would cut greenhouse gas emissions 30% by 2050 compared with taking no action.
“Broadly, the legislation will nudge the economy and inflation in the right direction, while meaningfully addressing climate change and reducing the government’s budget deficits,” Moody’s said in a note Monday.
The bill directs about $370 billion over 10 years toward promoting clean energy and climate resilience, with about two-thirds of the money coming in the form of tax credits for producing electricity from clean energy sources, investing in renewable energy technologies and addressing climate change through carbon sequestration, renewable fuel production, and clean energy manufacturing, Moody’s said.
Compared with taking no climate action, Moody’s estimated the bill would increase real gross domestic product by 0.1% in a decade and 0.6% by 2050.
“The clear lesson is that upfront investments in addressing climate change reap substantial long-term economic benefits,” Moody’s said.
If the bill passes, the United States can “realistically achieve” its commitment under the Paris Agreement to cut carbon emissions by 50% to 52% by 2030, assuming there is additional executive office and state action, according to Energy Innovation.
Measures in the bill aimed at increasing oil and natural gas production would increase carbon emissions by about 50 MMT in 2030, compared with 870 MMT to 1,150 MMT of overall greenhouse gas reductions in the same year, according to Energy innovation analysts.
The bill would create at least 1.4 million jobs in 2030, and the reduction of air pollution that would result from more green energy could avoid more than 3,600 deaths that year, Energy Innovation said, noting the avoided deaths and public health benefits disproportionately benefit low-income communities of color.
In a change from the Build Back Better legislation that passed the House but died in the Senate due to opposition by Sen. Joe Manchin, D-W.Va., the IRA bill would only allow government and nonprofit entities such as rural cooperatives to opt for direct payment of most tax credits, Rhodium Group analysts said in a report Friday.
Under the Build Back Better bill, all market participants could have opted for direct payment. However, the latest bill authorizes clean energy project developers to transfer the credits to an unrelated third party that has tax liability and can monetize the credits.
“Our initial assessment is that transferability may be sufficient to avoid financing bottlenecks that we previously noted could constrain clean energy deployment, though it may have implications for the cost of capital these developers face,” Rhodium Group analysts said.
The Inflation Reduction Act could be the biggest climate action ever taken by Congress, according to the consulting firm.
“However, 2030 is not too far off on the horizon. Swift action in the Senate to enact the package, along with additional accelerated action across all levels of government, can help put the US that much closer to the 2030 target,” Rhodium Group analysts said.
