The US Inflation Reduction Act an historic moment in global efforts to halt global warming

By Bill Hare and Niklas Höhne

This week is an historic week in the history of action on climate change, with the passing of the US Inflation Reduction Act that commits nearly $370 billion to climate action: the biggest piece of climate legislation in US history.

Other countries have gone further and faster in their actions and way earlier. But the past 30 years have seen an episodic intransigence from the US in the face of the climate denialist war waged by its major fossil fuel companies against climate action.

Over this time, we have witnessed a serial inability of successive administrations to get ambitious climate legislation adopted, and the negative overflow from this situation on many other countries and their climate politics. This is why the passing of this legislation is especially important.

It was in February 1990 when global efforts to prevent dangerous climate change began at Chantilly in Washington DC, with the first negotiating session of what became the UNFCCC, and this was where we first saw the US climate intransigence - or lack of full sustained engagement - which has characterised these past 30 years.

Meanwhile the EU moved ahead, so that by 2021 EU-27 emissions were 40% lower than in 1990, while the US emissions continued to increase, before finally, slowly, beginning to decrease, reaching close to 1990 levels in 2021. Every American still emits, on average, twice as much as each European or Chinese person.

The Biden Administration’s 50%/52% emissions reduction target for 2030 and his 2050 net zero target were a step change in ambition, but until the passage of this legislation they were very much just that: ambition not yet backed by hard policy action sufficient to come anywhere near the targets.

The new law means that for the first time in history, US emissions will begin to substantially bend downward, the country can begin, in parallel, the progress that has been made in the European Union.

Our analysis shows that the IRA Act will make a big impact on US emissions: it will accelerate the decline in US GHG emissions and reduce the gap in 2030 between current policy projections and the target by around two thirds (22%-45% of the gap remains).

If no further policies are implemented, the CAT projects that by 2030, US emissions will reach 26%-42% below 2005 levels (between 4.7-5.6 GtCO2e/year; 13%–27% below 1990), including LULUCF, which is still short of the 50-52% target. While there is still work to be done to get those emissions down, this is a huge step.

Overall, the CAT still rates the entirety of US policies taking into account its current policies, its 2030 target and international climate finance as “Insufficient”.

How does this compare with the European Union?

One should not forget that the European Union is at least a decade ahead on climate policy in so many respects, and it has pioneered many of the major legislative instruments and policies needed by governments around the world.

The EU has a complex legislative system and regulatory impact assessment process as it seeks to bind together 27 different nation states, and is now tantalisingly close to having a 1.5˚C consistent 2030 domestic emission reduction target. The new policy measures put in place in the last six to nine months seem likely to put it ahead of its 55% target by 2030 below 1990 (not 2005, the US target’s baseline).

The EU goal is accompanied by numerous policies, especially the EU ETS with an absolute cap on emissions that will get slightly stronger (not weaker) according to the current EU ETS reform, emissions standards for the vehicles, binding national emissions reduction targets for the non-EU ETS sector. This is clear now as the EU is in the process of adapting its climate and energy policy framework to the new target.

Contrary to the USA, unwinding climate legislation in the EU is much more difficult. Even if elections in a single member state results in a climate denialist government coming to power, this would weaken - but not significantly change - the already binding legislation.

In the EU, large portions of the society stand behind climate action, perceiving it as contributing to strengthening the union’s energy security. With the very much-needed sanctions on fossil fuels from Russia and nuclear failing in France, the EU is accelerating renewables and efficiency.

… and China?

China is a very different economy: it is still a developing country in growth mode, and building new infrastructure (power plants, industrial plants, houses, streets), a completely different situation to EU and USA.

Renewables are expanding at an accelerating rate (because they are cheaper) and will begin to replace coal over the next decade, electric mobility is expanding fast, supported by government policies, and the government has plans to peak CO2 emissions from heavy industry in the second part of this decade. On present trends it will have emissions beginning to go down by 2030, but this is still not enough by any means. It has more work to do.

Taking all this into account, this major step forward by the United States will likely have significant positive impact internationally. We are aware of a number of countries that have been holding back on further announcements for greater ambition or more action to see where the US is going.

That the US actually putting in serious resources to rapidly reduce its emissions for the first time in history is a very positive message for those who have been sitting on the sidelines waiting.

As we see from the explosion of climate impacts globally this last year, whether it is the extraordinary heat in South Asia, the unprecedented floods in South Africa and Australia, extreme heat in China and the USA, the unprecedented drought and heat waves in Europe desiccating the continent we are beyond time for urgent action.