The Atlantic has a wonderful story up about the historic Inflation Reduction Act (IRA) – the remnants of President Biden's Build Back Better (BBB) agenda. While the climate investments aren't nearly as large in the IRA as the original BBB, they're still extremely significant and will do more to reach U.S. climate targets than any other piece of legislation offered by either party in the 246 year history of the country.
But on climate and energy in particular, the bill is a landmark. It authorizes $369 billion of new climate spending, the largest investment in emissions reduction in American history—and, more important, the biggest blow against climate change ever struck by the U.S. government. “This is it. This is the real victory,” Sam Ricketts, a co-founder of Evergreen Action, a climate think tank, and a former adviser to Governor Jay Inslee of Washington State, told me. “I struggle to find enough superlatives to describe this deal.”
Why is this such - as Biden put it once - a Big Fucking Deal? Economists weigh in:
When economists at the University of Chicago and the Rhodium Group analyzed an earlier version of this proposal last year, they found that these technology-neutral tax credits were strikingly efficient, creating $1.5 trillion in economic surplus while eliminating more than 5 billion tons of carbon pollution. The tax credits had a benefit-to-cost ratio of about 3 to 1, Michael Greenstone, the Milton Friedman Distinguished Service Professor in Economics at the University of Chicago, told me. “It’s very rare that we get opportunities to have policies with a benefit-to-cost ratio of 3 or 4 to 1. Normally it’s, like, 1.3 to 1, and we economists get very excited,” he said.
Just to recap:
- Massive payback via benefit-to-cost ratio.
- Loads of new clean technology jobs.
- Electric Vehicle point-of-sale rebates for domestically produced/sourced vehicles and batteries from North American-aligned strategic partners. The sales cap is lifted, so that's a $7,500 credit for Tesla and Chevrolet.
- Used electric vehicle rebates of $4,000.
- The bill’s tax credits and incentives will help nurture domestic clean-hydrogen, direct-air-capture, and advanced-nuclear industries.
“It looks like the estimate from Senator Schumer’s office that this will take U.S. [emissions] to about 40 percent below 2005 levels is accurate,” Jesse Jenkins, a Princeton engineering professor who runs a team that estimates the emissions effects of climate policy, told me in an email. “That’s huge.”