Experts Break Down Historic Climate Bill

August 8, 2022

Dana Nuccitelli in Yale Climate Connections:

Three energy modeling groups have examined the effects of the climate provisions in the Inflation Reduction Act: Princeton REPEATEnergy Innovation, and the Rhodium Group. The first two of those groups estimate that the package will curb U.S. greenhouse gas emissions by around one-billion tons by 2030; Rhodium’s analysis is a bit more bearish, with a central estimate of 650 million tons of carbon dioxide equivalent reduced by the bill. On average, the groups estimate that the bill – if, as expected, passed by the House and enacted – would curb U.S. greenhouse gas emissions by about 900 million tons in 2030, bringing the country 13% closer to meeting its Paris commitment.

From the standpoint of reducing climate pollution, the bill’s extension of production and investment tax credits for clean electricity projects is its most consequential provision. Those tax incentives have helped spur the rapid growth of wind and solar energy in the U.S. and their displacement of coal power over the past decade.

But that domestic clean electricity growth had begun to stall, in part because the tax credits were beginning to expire, and there was uncertainty about whether they would be extended. Their 10-year extension in the pending Inflation Reduction Act would give clean energy companies and investors needed confidence to resume the accelerated deployment of renewable projects, as the chart below from the Princeton REPEAT report illustrates. These provisions would account for about 360 million tons of emissions reductions in 2030, or about 36% of the total cuts, according to the Princeton group.

Tax credits and other incentives for electric vehicle (EV) purchases are the second most effective carbon-reducing measures in the bill. (The bill passed by the Senate has non-climate-related provisions not addressed in this feature.) 

The bill would provide a $7,500 tax credit for an individual earning less than $150,000 per year to purchase a new electric SUV or truck or van costing less than $80,000, or a new electric car costing less than $55,000, or a $4,000 tax credit for an individual earning less than $75,000 per year to purchase any used EV costing less than $25,000. The Senate bill also includes plug-in hybrids (PHEVs) with battery capacity of 7 kWh or larger. But there is an important caveat here: The majority of an EV’s or PHEV’s batteries and minerals would need to be sourced from the U.S. or its free trade partnersto qualify, and those supply chains don’t yet exist. According to the Princeton group’s analysis, the EV provisions would account for about 280 million tons of emissions reductions in 2030, or about 28% of the bill’s total cuts.

The Inflation Reduction Act also includes a fee for methane leakage from oil and gas facilities and infrastructure, although they are exempt from the charge if in compliance with Environmental Protection Agency (EPA) methane regulations, which the agency expects to soon strengthen. The EPA estimates that those regulations will reduce emissions by about 140 million tons of carbon dioxide-equivalent, or about 14% of the bill’s total cuts (although Princeton counts some of these in the current policy baseline scenario). The methane fee, rising to $60 per ton of carbon dioxide-equivalent (CO2e) within a few years, is expected to provide a strong financial incentive for oil and gas facilities to comply with the EPA regulations. Energy Innovation estimates that 95% of domestic methane leakage could be abated at a cost of less than $40 per ton of CO2e. The bill also calls for providing $1.5 billion in grants to assist oil and gas companies in repairing, monitoring, and reporting their methane leakage.

The Princeton group also envisions about 130 million tons of emissions reduced in 2030 (13% of the total) through the implementation of carbon capture and storage. The Inflation Reduction Act, if passed as the Senate approved it, extends the 45Q tax credit for carbon sequestration, providing $85 per ton of carbon permanently stored, or $60 per ton used for enhanced oil recovery.

(Comment: I’d like to hear more about the carbon sequestration technologies contemplated here. Also need to be convinced that enhanced oil recovery is a net gain for the climate)

Another 100 million tons of carbon dioxide (10% of the total) are projected to be removed from the atmosphere through natural processes funded in the package. The Senate-passed bill would provide $5 billion for forestry measures, including $2 billion for wildfire prevention, $1.5 billion for urban and community forestry grants, and $1 billion for forest conservation. Another $20 billion is slated for programs that can fund climate-smart agricultural methods like cover cropping and silvopasture.

The package also includes $10 billion in consumer home energy rebate programs to provide financial assistance for homeowners to purchase heat pump space and water heaters and clothes dryers, electric stoves, improved insulation and windows, and wiring upgrades that may be needed for home electrification. Another $200 million is slated to train contractors in building electrification and efficiency measures. The Princeton team estimates that these building improvements could curb emissions by about 50 million tons, or 5% of the total.

Other climate investments in the comprehensive Inflation Reduction Act include: $60 billion in environmental justice priorities to invest in disadvantaged communities; $60 billion for domestic clean energy manufacturing; $27 billion for a national green bank; and $3 billion for the U.S. Postal Service (which has the nation’s second-largest vehicle fleet, after the Department of Defense) to purchase more EVs. Separate from its $385 billion in climate investments, the legislation also provides $250 billion in loan authority to the Department of Energy for lending to clean technology startups.

Senator Manchin additionally secured some provisions requiring that the government offer onshore and offshore oil and gas land leases in exchange for offering similar wind and solar land leases. This compromise has drawn heavy criticism from some environmental advocates, but the analyses by Energy Innovation and Princeton REPEAT conclude that those leases would result in an emissions increase of less than 50 million tons of carbon dioxide, or roughly 25 times less than the emissions reductions from the climate provisions in the rest of the package. By accelerating the transition away from fossil fuels and toward electric technologies like EVs and heat pumps, the bill is expected to reduce overall oil and gas demand, and thus the incentive for companies to lease and develop more lands for drilling.

more at the link


4 Responses to “Experts Break Down Historic Climate Bill”

  1. neilrieck Says:

    I am generally an optimist about most things except anything involving politicians or big companies manipulating politicians through PACs. If the scientists would have been allowed to repeat their 1987 success (Montreal Protocol) during the Rio Climate summit in 1991, I doubt humanity would be at this point. But my intuition tells me that American companies are going to do nothing while they shift the blame to China or India.

    • jimbills Says:

      The two big differences between the Montreal Protocol and carbon emissions is that CFCs affected a tiny part of the market (refrigerants) that could be replaced quickly, fairly easily, and without great economic cost, and the ozone depletion was happening suddenly and dramatically – therefore it was clear to everyone that something had to be done immediately.

      Fossil fuels are the ENTIRE economy, or are virtually so, at least in 1991 if not today, and climate change is a much slower process than ozone depletion.

      I don’t think the scientists ever had a shot.

      It won’t be ‘nothing’ that American companies do. They’ll do something, and they’ll market the heck out of what they do. But, it should be obvious to anyone watching that it won’t be nearly enough – and that any blaming of China or India will just be deflection.

      • rhymeswithgoalie Says:

        I don’t think the scientists ever had a shot.

        I’d be hard-pressed to come up with a problem as politically unmanageable as the added human emissions of CO2 causing a planet-wide problem. Without a direct connection between individual CO2 contribution and long-term effects, it pretty much hits all of our psychological vulnerabilities.

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