Climate bill cuts carbon emissions and inflation while boosting economy, studies say
Energize Weekly, August 10, 2022
The climate, healthcare and budget bill passed by the U.S. Senate Aug. 7 will help curb both greenhouse gas emissions and inflation while providing a modest boost to the economy, according to three analyses of the legislation.
The bill is projected to raise real gross domestic product 0.6 percent by 2050 and provide a modest downward pressure on inflation by the end of 2031, according to an evaluation by Moody’s Analytics.
“The clear lesson is that upfront investments in addressing climate change reap substantial long-term economic benefits,” Moody’s Analytics said.
Other analyses indicate that the bill will spur clean energy investment, get the U.S. closer to its greenhouse gas emission reduction targets and lower electricity bills.
The Inflation Reduction Act – a reduced version of Biden administration climate legislation – was passed by Senate Democrats on a straight partly-line vote and now heads to the House of Representatives.
The legislative package would raise $750 billion over the next decade through higher taxes on big corporations and wealthy individuals, as well as lowering Medicare prescription costs – with $450 billion going to climate and health care programs and $300 billion to deficit reduction.
The climate provision in the act will get the country about two-thirds of the way to meeting the climate goal of reducing U.S. emissions 50 percent from 2005 levels by 2030, according to modeling by the Rapid Energy Policy Evaluation and Analysis Toolkit (REPEAT).
REPEAT was created by a consortium of universities and energy think tanks.
REPEAT forecasts the legislation will cut greenhouse gas emissions by an additional 1 billion tons, over current policies and programs, by 2030.
“By driving down the cost of adopting clean energy and other climate solutions across the nation, the Act also makes it easier for executive agencies, state and local governments, and private sector leaders to increase their ambitions and help close the remaining 0.5-billion-ton gap left,” the analysis said.
The legislation would drive nearly $3.5 trillion in capital investment in new energy supply infrastructure over the next decade, REPEAT estimates. The greatest impact is on investments in wind power and photovoltaic solar, which nearly doubles to $321 billion, compared to expenditures under current policies.
The shift in energy sources would lower U.S. energy expenditures by at least 4 percent in 2030, a savings of $50 billion a year, according to the REPEAT modeling.
An evaluation by Resources for the Future (RFF), a nonprofit energy and environmental think tank, calculated that as the legislation shifts electricity generation to renewable sources, it will trim retail electricity costs by as much as 6.7 percent over the next decade for a $278 billion saving, given expected natural gas prices.
The average household would see $170 to $220 in annual savings from smaller electricity bills and reductions in the costs of goods and services over the next decade, the analysis estimated. “Ratepayers are insulated from volatility in natural gas prices, with electricity rates projected to decrease even under a high natural gas price scenario,” RFF said.
In addition to the climate provisions, the bill would also keep in place expanded Affordable Care Act tax credits and premium subsidies – steps that will enable three million people to keep their health insurance, according to an Urban Institute study.
It also allows Medicare to negotiate with drug companies for lower prices and requires drug companies that raise prices for Medicare more quickly than inflation to pay rebates to the federal government.
“Broadly, the legislation will nudge the economy and inflation in the right direction, while meaningfully addressing climate change and reducing the government’s budget deficits,” Moody’s Analytics said.