How the New Climate Bill Would Reduce Emissions
A major climate and energy package passed by Congress on Friday would put the United States much closer to its goal of cutting global warming pollution in half by 2030, several independent analyses have concluded.
U.S. net greenhouse gas emissions
6 billion
Projected
Current Policies
–27%
4 billion
New Climate Bill
–42%
2030 Goal
50% below 2005 levels
2 billion
metric tons CO2-eq.
1990
2000
2010
2020
2030
Current Policies
U.S. net greenhouse gas emissions
–27%
New Climate Bill
–42%
6 billion
Projected
4 billion
2030 Goal
50% below 2005 levels
2 billion
metric tons CO2-eq.
1990
2000
2010
2020
2030
U.S. net greenhouse gas emissions
6 billion
Projected
Current Policies
–27%
4 billion
New Climate Bill
–42%
2030 Goal
50% below 2005 levels
2 billion
metric tons CO2-eq.
1990
2000
2010
2020
2030
The legislation, which President Biden is expected to sign within days, provides hefty tax incentives for low-carbon technologies that could enable the country to reduce its greenhouse gas emissions by roughly 40 percent below 2005 levels by the end of this decade, according to estimates by the Princeton-led REPEAT Project. While that falls short of President Biden’s goal to cut U.S. emissions by at least 50 percent below 2005 levels by 2030, experts said that additional policies like new federal regulations or more aggressive state and local climate action could help close the gap.
“This bill does about two-thirds of the work we need to do to hit our climate goals, which for a single piece of legislation is a really big deal,” said Jesse Jenkins, an energy systems engineer at Princeton who helped lead the modeling effort. “And by driving down the cost of clean energy, it can make it easier for states or cities or companies to take further climate actions on their own.”
Without the bill, emissions in the United States were already on track to fall roughly 27 percent from their peak in 2005 by the end of this decade, the researchers found. That’s partly because electric utilities have been closing coal-fired power plants in favor of cheaper and cleaner natural gas, wind and solar power, and because Americans are starting to buy more electric vehicles, which typically create fewer emissions than gasoline-powered models.
The bill is designed to help accelerate the trend toward lower emissions in electricity and transportation, expanding tax credits for new wind turbines, solar panels, batteries and electric vehicles. But it also invests billions in technologies like advanced nuclear reactors, clean-burning hydrogen fuels, carbon capture and storage and electric heat pumps that could help curb emissions from heavy industry and buildings, two areas where the country has made little progress to date.
The REPEAT Project analysis is broadly in line with early estimates from analysts at Rhodium Group and Energy Innovation, two nonpartisan research groups.
Mr. Biden set a goal last year of cutting U.S. emissions in half by the end of this decade, which is roughly the pace scientists say the whole world must follow to limit global warming to 1.5 degrees Celsius (2.7 degrees Fahrenheit) above preindustrial levels in order to minimize the risk of catastrophic heat waves, wildfires, floods and droughts. Earth has already warmed roughly 1.1 degrees Celsius (2.7 degrees Fahrenheit) over the past century.
For the past two years, however, Democrats have struggled to get major climate legislation through the evenly divided Senate, where no Republicans support such a measure. One of the key Democratic holdouts, Senator Joe Manchin III of West Virginia, had said he could not vote for a fresh spending bill if it aggravated inflation, which hit a 40-year high in March.
A breakthrough appeared to come last month, when Mr. Manchin announced his support for a compromise measure he dubbed the Inflation Reduction Act of 2022. It includes roughly $490 billion in new spending and tax breaks — most of that toward climate and energy programs, as well as smaller amounts for health care — which is offset by roughly $765 billion of tax increases and other savings, according to recent estimates by tax and policy experts.
Savings +$765 billion
Spending –$489 billion
Corporate Taxes and
Enforcement
IRS tax enforcement
Energy and Climate Programs
Clean energy
incentives
for individuals
Clean manufacturing
tax credits
+$124 billion
Clean electricity
–$39 billion
15 percent corporate minimum tax
–$161 billion
–$37 billion
+$222 billion
Clean fuel and vehicle
tax credits
–$36 billion
Conservation, forestry
and rural development
Other climate
and energy
spending
Extend active
loss limitation
for 2 years
Excise tax on corporate
stock buybacks
–$35 billion
+$74 billion
–$35 billion
+$54 billion
Building efficiency
Air pollution mitigation
–$20 billion
–$28 billion
Health Care Benefits
Medicaid prescrip. drug
benefits and other spending
Extension of expanded ACA subsidies for 3 years
–$34 billion
–$64 billion
+$7 billion
Other
Prescription Drug
Pricing Reform
Negotiation of certain drug prices
Unspent: $276 billion
+$99 billion
Toward paying down the federal deficit
Repeal Tump-era drug
rebate rule
$122 billion
Drug price inflation cap
+$62 billion
Savings +$765 billion
Spending –$489 billion
Corporate Taxes and
Enforcement
IRS tax enforcement
Clean manufact.
tax credits
Energy and Climate
Consumer
incentives
+$124 billion
Clean electricity
–$37 b
–$39 billion
–$161 billion
15 percent corporate
minimum tax
+$222 billion
Clean fuel and
vehicle tax credits
–$36 billion
Conservation,
forestry, rural
development
Other
climate
and energy
spending
Excise tax on
corporate
stock buybacks
Active loss
limitation
+$54 b
–$35 billion
+$74 billion
–$35 billion
Building efficiency
Air pollution mitigation
–$20 billion
–$28 billion
Health Care
Medicaid drug
benefits and other
spending
Extension of expanded ACA subsidies
for 3 years
–$64 billion
+$7 billion
Other
–$34 billion
Prescription Drug
Pricing Reform
Negotiation of certain drug prices
Unspent: $276 billion
+$99 billion
Toward paying down the federal deficit
Repeal Tump-era drug
rebate rule
$122 billion
Drug price inflation cap
+$62 billion
Savings +$765 billion
Corporate Taxes
and Enforcement
IRS tax enforcement
+$124 billion
15 percent corporate
minimum tax
+$222 billion
Active loss
limitation
Excise tax on
corporate
stock buybacks
+$54 b
+$74 billion
Negotiation of certain
drug prices
Prescription Drug
Pricing Reform
+$99 billion
Repeal Tump-era drug
rebate rule
$122 billion
Drug price inflation cap
+$62 billion
Spending –$489 billion
Clean manufact.
tax credits
Consumer
incentives
Energy and Climate
Clean electricity
–$37 b
–$39 billion
–$161 billion
Clean fuel and
vehicle tax credits
–$36 billion
Conservation,
forestry, rural dev.
Other
–$35 b
–$35 billion
Medicaid drug
benefits and other
Health Care
–$64 billion
Expanded ACA subsidies
–$34 billion
Unspent: $276 billion
Toward paying down the federal deficit
Savings +$765 billion
Corporate Taxes and
Enforcement
IRS tax enforcement
+$124 billion
15 percent corporate minimum tax
+$222 billion
Extend active
loss limitation
for 2 years
Excise tax on corporate
stock buybacks
+$74 billion
+$54 billion
+$7 billion
Other
Prescription Drug
Pricing Reform
Negotiation of certain drug prices
+$99 billion
Repeal Tump-era drug
rebate rule
$122 billion
Drug price inflation cap
+$62 billion
Spending –$489 billion
Energy and Climate Programs
Clean manufacturing
tax credits
Clean energy
incentives
for individuals
Clean electricity
–$39 billion
–$161 billion
–$37 billion
Clean fuel and vehicle
tax credits
–$36 billion
Conservation, forestry
and rural development
Other climate
and energy
spending
–$35 billion
–$35 billion
Building efficiency
Air pollution mitigation
–$20 billion
–$28 billion
Health Care Benefits
Medicaid prescription
drug benefits and other
spending
Extension of expanded ACA subsidies for 3 years
–$64 billion
–$34 billion
Unspent: $276 billion
Toward paying down the federal deficit
“Rather than risking more inflation with trillions in new spending, this bill will cut the inflation taxes Americans are paying, lower the cost of health insurance and prescription drugs, and ensure our country invests in the energy security and climate change solutions we need to remain a global superpower,” Mr. Manchin said.
Economists and policy experts largely agree the bill could help mitigate inflation, although they cautioned that its effects may be moderate. They also noted that the roughly $300 billion in deficit payments over the next decade would put a relatively small dent in the overall debt of the United States.
Still, the new legislation is the largest climate investment ever made by Congress, amounting to roughly $390 billion over 10 years. Experts said the measure could provide fresh momentum to international climate talks and prod other nations to do more. It could also help reduce the cost of various clean-energy technologies, potentially making it easier for other countries to transition away from fossil fuels.
The bill will not solve global warming on its own. A United Nations report last year estimated that humanity will likely need to cut greenhouse gas emissions by an additional 15 to 30 billion tons by 2030, compared with its current trajectory, to avert the worst impacts of climate change. Mr. Jenkins’s analysis suggested the new Senate bill would supply about one billion tons of additional cuts.
“I think this clearly strengthens U.S. influence in the international talks and will spur further action by other major emitters,” said Dan Lashof of the World Resources Institute. “I think the history of climate action shows that when the United States makes a significant investment in clean energy technology, countries like China and India don’t want to be left behind.”
The legislation could transform nearly every aspect of American energy production. Mr. Jenkins’s analysis estimates that companies would install twice as much solar and wind power per year by 2030 as they would have without the bill. The bill also offers incentives for utilities to keep open their nuclear plants. Without that provision, as much as one-third of the nuclear fleet, still the nation’s largest source of low-carbon energy, is at risk of closing by 2030, Rhodium Group has estimated.
The bill also gives companies incentives to install devices to capture carbon dioxide from industrial facilities and bury it underground before the gas can escape into the atmosphere and heat the planet. While this technology has struggled to gain traction because of high costs, Mr. Jenkins’s modeling suggests that new tax credits could help spur the capture of roughly 200 million tons of carbon dioxide per year by 2030.
Calpine Corporation, a Houston-based firm that owns the nation’s largest fleet of natural gas power plants, has identified 11 facilities that are good candidates for retrofitting with carbon capture technology. The expanded tax credits could offer a significant boost in helping to get the first few projects up and running this decade, said Caleb Stephenson, Calpine’s executive vice president of commercial operations.
There are major uncertainties around the bill’s precise effects, however, in part because it does not require companies to cut their emissions. Much will depend on how quickly new low-emission energy sources displace coal, oil and natural gas, the major drivers of global warming. For example, if oil prices stay high, the tax credits for electric vehicles could spur consumers to ditch their gasoline-powered cars more quickly. But if gasoline gets cheap again, the transition might unfold more slowly.
And clean energy could face other hurdles: While the bill offers rewards to companies that build more wind and solar power, such projects could be hobbled by local opposition or a lack of new transmission lines. The availability of tax credits for electric vehicles will depend on whether automakers can source their battery materials from the United States or its free-trade partners, which could be a difficult hurdle to clear.
The legislation also has several provisions that could increase emissions in some places. To secure the support of Mr. Manchin, the bill mandates lease sales for new oil and gas exploration in the Gulf of Mexico and the Cook Inlet in Alaska. And requires the Interior Department to hold auctions for fossil fuel leases if it plans to approve new wind or solar projects on federal lands.
But the impact of those measures is likely to be small. Analysts at Energy Innovation calculated that for each ton of emissions created by the leasing provisions, “at least 24 tons of emissions are avoided by the other provisions.”