It has been a year since the passage of the Inflation Reduction Act (IRA), which marked a milestone in the US climate policy landscape. Although the full effects of the IRA are not yet visible, the first year of its implementation has shown promising signs. Notably, the Act is mobilising historic investments in clean energy solutions, driving a wave of clean projects across the country, fostering the creation of hundreds of thousands of new jobs, mobilising private sector investment, and accelerating state and local action. By boosting private sector confidence to pursue a transition to decarbonisation, the IRA is firmly rooting this momentum in the market, leaving a lasting impact beyond the duration of this administration.
While it is a major step forward, it is imperative that the US adopts equally bold policy packages at the sectoral level and shifts away from the increasing reliance on fossil fuels to achieve the pace and scale of emission reductions needed to meet its NDC target. Without additional, drastic emission reductions measures, the US will still be far from meeting its domestic climate target, let alone get its emissions onto a 1.5°C trajectory. Overall, the CAT rates the US climate targets, action and climate finance as “Insufficient”.
As of 2022, the US has achieved about one third of its 2030 emissions reduction target. CAT current policies projections, which include the IRA, show a more pronounced reduction in emissions until 2030. Although CAT projections suggest that the US will close the gap by an additional 30%–44% by 2030, it is still 23%–37% short of meeting the required 2030 emissions reductions, evidence that further action is critically needed. The current US target of 50–52% reductions below 2005 by 2030 is not 1.5˚C compatible.
If the US were to enact recently-proposed rules, such as stricter emission standards for vehicles and emissions limits on some fossil fuel-fired power plants, it would put itself on a firm trajectory towards achieving its 2030 targets. However, these rules face considerable legislative challenges to passage.
Recent developments in the oil and gas industry undermine the credibility the US achieved in passing the IRA. As the world’s largest oil and gas producer, the US should show the way beyond fossil fuel extraction — but unfortunately it is now doing exactly the opposite.
In 2022, the US continued to reach record highs in oil and gas production and exports and it is planning to increase its LNG export capacity by more than 40% by 2026. Despite campaign promises to halt new oil and gas drilling on public lands and waters, in March 2023, the Biden administration approved a major oil drilling project on federal land (the Willow project in Alaska). In July, the Supreme Court authorised the construction of the Mountain Valley Pipeline – a 500-km-long project to transport gas from West Virginia to Virginia. CAT analysis in 2022 shows the US is moving in the wrong direction regarding its domestic and international support for fossil fuels, compromising the achievement of its NDC and the global goal of limiting temperature rise to 1.5°C.
To strengthen climate action and ambition, the US could:
- Enact recently-proposed policies. The proposed rules target the largest-emitting sectors in the US: the transport and power sectors. The implementation of the rules, as proposed, are key to accelerating the transformation of these sectors and closing the emissions gap between current policies and domestic climate targets.
- Stop expanding the exploration and exports of oil and natural gas. Biden has reneged on his campaign promise to halt new oil drilling on federal lands. The Administration’s approval of the Willow Project and new offshore oil and gas auctions in the Gulf of Mexico show that the industry is heading in the wrong direction and compromising the achievement of domestic and global climate goals.
- Increase international climate finance contributions and cease funding fossil fuels abroad. President Biden is still far from reaching his pledge of USD 11.4bn/year. In fiscal year 2023, only around USD 1bn was appropriated for climate finance by Congress. The US has also broken its commitment to stop financing fossil fuels abroad as the American Export-Import Bank lent USD 100mn to Indonesia to expand an oil refinery in May 2023.
- Increase the ambition of its NDC. The US has not strengthened its climate target despite the commitment countries made at COP26 (2021) to update it. For the US climate target to be compatible with a 1.5°C trajectory, it must reduce its emissions by at least 62%–65% below 2005 levels by 2030 (incl. LULUCF) and provide more support to other countries.
In summary, the US has experienced notable developments in its climate and energy policies. The passage of the IRA has garnered international attention as a substantial climate policy, prompting other nations to consider similar measures to enhance their climate actions. Notably, the European Union's Green Deal Industrial Plan emerged partly in response to the IRA's influence.
There has also been a significant transformation in the energy sector, as renewable sources overtook coal and nuclear power in electricity generation during 2022. This shift, driven by market dynamics and the IRA, underscores the growing importance of renewables in the quest to reduce emissions and transition away from fossil fuels.
These developments indicate a shifting landscape in the transition to decarbonisation, which continues to evolve with a clear direction. However, the pace and depth of decarbonisation will hinge on the outcomes of the 2024 presidential election.
The CAT rates the combination of the US 2030 climate targets, policies, and climate finance as “Insufficient”. The “Insufficient” rating indicates that the totality of the US policies and proposals need substantial improvements to be consistent with the Paris Agreement’s 1.5°C temperature limit.
The US 2030 domestic emissions reduction target (NDC) is consistent with 2°C of warming when compared to modelled domestic emissions pathways, but not yet consistent with the Paris Agreement’s 1.5°C temperature limit. US policies and action lead to falling emissions in 2030 but not by enough to meet its targets or the 1.5°C limit.
The US is also not meeting its fair-share contributions to climate change and in addition to strengthening its targets and policies needs to provide additional support to others.
The US will need to implement additional policies to reach its targets. The CAT projects US GHG emissions in 2030 to be 28%–34% below 2005 levels (excl. LULUCF), falling short of the 2030 NDC target (44%–49% excl. LULUCF). The US was only able to meet its 2020 targets under the Copenhagen Accord due to the effects of the COVID-19 pandemic that induced a temporary drop in emissions.
On August 16, 2022, President Biden signed the Inflation Reduction Act (IRA) into law. Although the IRA included several concessions to the fossil fuel industry, it is the most ambitious and impactful climate policy in US history and brings the country closer to meet its 2030 target, though additional policy action is still needed.
Although the IRA is a major step towards achieving its NDC, the US still needs additional policies and action to achieve its domestic emissions reduction target. The ambitious stimulus package in the IRA should be matched with equally ambitious climate policies on the federal and state levels.
The projected emissions trajectory range in this update is narrower than the previous one, thanks to more refined baseline projections that better capture the implications of the IRA. The range of policy projections for the US falls into the “Insufficient” category.
The “Insufficient” rating indicates that the US’ climate policies and action in 2030 need substantial improvements to be consistent with the 1.5°C temperature limit. If all countries were to follow the US approach, warming would reach over 2°C and up to 3°C.
See full summary of policies and actions here.
We rate the US domestic target of reducing emissions by 50%–52% (or 44%–49% excluding emissions from land-use, land-use change and forestry) below 2005 levels by 2030 as “Almost sufficient” when compared to modelled domestic emissions pathways. The “Almost sufficient” rating indicates that the US domestic target in 2030 is not yet consistent with the 1.5°C temperature limit but could be, with moderate improvements. If all countries were to follow the US approach, warming could be held at—but not well below—2°C.
We rate the US target of reducing emissions by 50%–52% (or 44%–49% excluding emissions from land-use, land-use change and forestry) below 2005 levels by 2030 as “Insufficient” when compared with its fair-share emissions allocation.
The CAT’s assessment of the US’ total fair share contribution takes into account its emissions reduction target and its climate finance.
The “Insufficient” rating indicates that the US 2030 target needs substantial improvements to be consistent with the 1.5°C temperature limit. Some of these improvements should be made to the domestic emissions target itself, others could come in the form of additional financial support for emissions reductions achieved in developing countries. If all countries were to follow the US approach, warming would reach up to 3°C.
We rate the United States’ international public climate finance contributions as “Critically Insufficient”. The Biden Administration has committed to increase its climate finance but contributions until 2023 have been low compared to its fair share. In fiscal year 2023, only around USD 1bn was appropriated for climate finance by Congress. To improve its rating the US needs to ramp up the level of its international climate finance contributions in the period post-2020 and stop supporting fossil fuels abroad.
The US’s climate finance is not sufficient to improve the rating of its NDC against its fair share, and the CAT rates the US’s overall fair share contribution as “Insufficient”.
We evaluate the US net zero target as: Average. The Biden administration submitted an updated long-term strategy to the UNFCCC in November 2021 (U.S. Department of State, 2021), officially committing the US to net zero emissions by 2050 latest.
The net zero target covers all GHG emissions, makes transparent assumptions on CO2 removal by nature-based and technology-based solutions, and specifies several key components for comprehensive planning.
The US government has several avenues to improve the scope, target architecture and transparency of its net zero target, such as including international aviation and shipping in its target coverage, and explicitly committing to reach net zero emissions within its own borders without any use of international offsets.