The Inflation Reduction Act was officially signed into law on August 16th 2022 by President Biden, and it includes historic steps in the fight against climate change. Does this bill do enough to address climate change? No, but it is a significant step closer to where we need to be if we are to achieve net-zero by 2050.
Although this bill does not require companies to disclose reporting on carbon footprints and climate risk (we are still eagerly awaiting the results of the SEC ruling for that), it creates momentum and an enabling environment for the private sector to achieve carbon reduction targets while setting the United States on the right path.
In short, the Inflation Reduction Act aims to lower energy costs for Americans, increase American energy security, invest in the decarbonization of all sectors of the economy, and support resilient rural communities.
Given our extensive experience in areas such as setting science-based targets (we’ve set over 50 for our clients, including both short-term reduction targets and long-term net-zero targets), we believe that the federal support brought by this bill will accelerate the number of American private sector companies in setting ambitious carbon reduction targets. While there is much more work and innovation needed to get to the 50% reduction target by 2030 in the US, at least this bill provides a clear signal that the path is now more achievable.
Here we highlight some of the reasons to be excited about this bill:
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It puts the US on a better climate pathway:
- Aligned with Paris Agreement objectives
- Puts the US on track for emissions reduction of 40% by 2030
- It also puts the US on the path to net-zero by 2050
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It invests in secure and renewable energy:
- The largest investment in renewable energy in US history
- Includes over $60 billion to encourage onshore clean energy manufacturing in the US across the full supply chain of clean energy and transportation technologies
- Incentivizes the private sector to produce more renewable energy
- Increases American energy security through policies to support energy reliability and cleaner production coupled with historic investments in American clean energy manufacturing to lessen our reliance on other nations, ensuring that the transition to a clean economy creates millions of American manufacturing jobs, and is powered by American-made clean technologies.
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It provides industry with investment and incentive to decarbonize:
- $6 billion for a new Advanced Industrial Facilities Deployment Program to reduce emissions from the largest industrial emitters (Including chemical, steel and cement plants
- $9 billion for Federal procurement of American-made clean technologies supporting the creation of a stable market for clean products. Including $3 billion for United States Postal Service to acquire zero-emission vehicles
- Includes a methane emission reduction program to reduce leaks from production/distribution of natural gas
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It accelerates progress on biofuels:
- Tax credits and grants to support the domestic production of biofuels
- Supports building infrastructure for sustainable aviation fuel and other biofuels
- Increases demand for airlines to consider more sustainable fuels
There is still a lot left to be done if we are to reach net-zero by 2050 and we believe that more specific requirements for companies to disclose their climate impacts and commitments is essential (as the saying goes, “you can only manage what you measure”).
That said, we applaud the significant step that the Inflation Reduction Act takes in terms of fighting climate change. We look forward to seeing the positive impacts as we continue to support our partners along the net-zero journey.
