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On August 16, 2022, President Biden signed into law the Inflation Reduction Act (IRA), the most ambitious and potentially impactful climate policy in US history. It sets the country’s emissions on a trajectory toward meeting its climate commitment to cut greenhouse gases (GHG) emissions in half by 2030, below 2005 levels, but more action is required to get there.
The IRA marks a radical shift in US climate action and, by putting emissions firmly on a downward trajectory, it sends a global signal that the world’s largest historical emitter is now beginning to meets its responsibilities.
The CAT estimates that implementation of IRA will accelerate the decline in US GHG emissions but the US will need to implement additional policies to reach its proposed 50-52% reduction target (including LULUCF). If no further policies are implemented, we project that in 2030, US emissions will decline to 26-42% below 2005 levels (incl. LULUCF), which is still a distance from its 2030 target of 50-52% below 2005 levels. As a consequence, US domestic action is now rated on the border between “Insufficient” and “Almost sufficient”.
Less encouraging, the US Congress approved USD 1bn for international climate finance for 2022, falling far short of President Biden’s pledge to provide USD 11.4bn a year by 2024, announced in September 2021. The low climate finance provision is not enough to make up its fair share contribution and undermines the credibility of stated US intentions to line up as a global leader on climate change.
Taking this into account the Overall CAT rating for all US policies – domestic action, 2030 target and international climate finance is “Insufficient”.
The ambitious bill injects USD 369bn to develop and deploy the clean energy technologies and investments essential to decarbonising the economy in the medium and long term. The IRA is a toned-down version of a more ambitious USD 1.75tn bill (“Build Back Better”), which stalled in the US Senate.
However, while the largest share of the IRA is directed to clean technologies, it also includes several concessions for the fossil fuel industry such as requiring minimum acreages of public lands for drilling leases. These concessions contradict President Biden’s promise on his first day in office to ban new oil and gas drilling on federal lands.
Prior to the IRA, President Biden’s actions to address inflation and other effects of high oil and gas prices in the short term may compromise his long-term climate goals. The US banned imports of Russian oil and gas in response to Russia’s invasion of Ukraine. In order to compensate for the loss of Russian oil supply, President Biden is releasing a million barrels of oil per day from the nation’s strategic reserves for six months, announced plans to hold his first oil and gas leasing since he took office, and is encouraging oil and gas producers to drill and increase production.
Following a steep decrease in emissions in 2020 as a result of the COVID 19 pandemic, emissions bounced back as the US economy recovered in 2021. The CAT estimates that US GHG emissions in 2021 increased by 6% above 2020 levels (excl. LULUCF), returning to pre-pandemic levels. The effects of COVID-19 induced a drop in emissions that helped the US meet its 2020 targets under the Copenhagen Accord.
The Biden administration submitted an updated long-term strategy to the UNFCCC in November 2021, officially committing the US to net zero emissions by 2050 at the latest. The CAT evaluates the net zero target as ‘Average’ given several needs for improvement to enhance the target’s scope, architecture and transparency.
The “Infrastructure Investment and Jobs Act”, signed into law in November 2021 with bipartisan support, aims to spur economic recovery and update the country’s infrastructure while accelerating climate action. The USD 1.2tn act, the largest federal investment into infrastructure projects in more than a decade, comprises investments in a wide range of areas that can indirectly enable the transition to a low-carbon economy, including the development of EV charging infrastructure, upgrading the power grid, and improving energy efficiency and electrification in buildings.
In June 2022, the US Supreme Court ruled to limit the EPA’s ability to regulate carbon emissions from power plants. However, cheaper renewables are decarbonising the US power sector, driving coal out of the electricity market, and the ruling is unlikely to change that. This brings President Biden's 2035 100% emissions free electricity sector target even further into question. The decision also sets a worrying precedent for more cases coming through the courts that could affect other aspects of future climate action.
In the last year, the US took important measures to reduce GHG emissions in different sectors. In the transport sector, the Biden administration reversed one of the most detrimental rollbacks from the Trump-era and set stricter fuel economy and GHG emissions standards for passenger vehicles for model years 2023-2026. In the industry sector, the administration enacted a bill to phase down the production and consumption of hydrofluorocarbons (HFCs) over the next 15 years.