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9 August 2022updated 12 Oct 2023 11:34am

Biden’s Inflation Reduction Act is the biggest climate victory since the Paris Agreement

The President's climate and healthcare bill could put US climate ambition back on track.

By India Bourke

“You must take action. You must do the impossible,” Greta Thunberg urged the US Congress in 2019. Almost three years later, that impossible legislative journey has finally begun.

On passing President Joe Biden’s climate and healthcare bill on 7 August, the US Senate achieved a “game-changing” political breakthrough, according to its majority leader Chuck Schumer. Known as the Inflation Reduction Act, the bill, if signed into law (it needs to pass through the House of Representatives, which it likely will because of the Democrats’ majority), will be the largest climate spending package in US history. Around $369bn (£305bn) could now be put towards powering a green transition – via tax credits for clean energy and electric vehicles, investment in clean technologies and compensation for communities who have been hit hardest by fossil fuel pollution, among other initiatives.

One Democratic senator, Brian Schatz, was seen choking back tears after the act passed. “I can look my kids in the eye and say we’re really doing something about climate,” he told reporters. Varun Sivaram, a senior adviser to the US climate envoy, John Kerry, described it as “the boldest climate package in US history – maybe most consequential climate step in history, period”.

The bill will likely have a large, if still limited, impact on America’s ability to meet the goals it signed up to in the 2015 Paris Agreement. Under the deal, the US committed to cutting its 2005 level of emissions in half by 2030. The Rhodium Group, a clean energy consultancy, estimates the extra support under the new legislation could reduce emissions by 31-44 per cent – at best, putting the country just 6 percentage points away from the target UN experts urge must be met if the worst effects of climate change are to be avoided. (Without the legislation, US emissions are only projected to fall by 24-35 per cent.)

On a more conceptual front, however, the act’s influence could be immeasurable. “We’re back” on climate, Biden announced when he took office in 2021 and returned the US to the Paris accord; that claim now has real weight.

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[See also: Towards a unified theory of Joe Biden’s climate deal]

The potential to galvanise international action is huge. There are two countries that arguably matter above all others when it comes to reducing global emissions: China and the US. Yet, until now, China has been able to point to America’s lack of legislative ambition as justification for resisting calls to move faster. The newly passed act means this mutual climate blame game now has more reason to end.

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Brian O’Callaghan, a researcher at Oxford University’s Smith School of Enterprise and Environment, told the New Statesman that boosting demand for clean technology should incentivise even more private investment, and lower costs globally too.

All this may now be achieved because the Democrats have broken what seemed like a legislative deadlock. When Barack Obama first committed the US to the Paris Agreement, a politically antagonistic Senate meant he was only able to act on his pledge through executive orders. His resulting Clean Power Plan – which established emissions controls on existing power plants – was repealed under Donald Trump and further quashed this July by a Supreme Court ruling that restricted executive power over climate regulation.

The Democrats only hold 50 out of 100 Senate seats, meaning they must secure every one of their party’s senators and rely on the vice-president, Kamala Harris, to cast her tie-breaking vote, as well as prove, via the parliamentary “reconciliation process”, that any bill is fiscally responsible. With Joe Manchin – a centre-right Democratic senator from West Virginia who has made millions from coal – seemingly intractably opposed to climate spending, any hope of significant climate legislation was considered painfully thin. But in a surprise turnaround last month, Manchin became a key architect of the Inflation Reduction Act’s major climate provisions.

There are, of course, important caveats. The legislation is only a watered-down version of Biden’s earlier, and far more ambitious, Build Back Better Act, and is still far from the action needed to comprehensively secure a safe climate future. Its tools for change rely primarily on the “carrots” of investment and tax breaks rather than the “sticks”, such as introducing a carbon price. Furthermore, it also includes provisions to support the further development of oil and gas production – leading the Democratic senator Bernie Sanders to lambast the bill as “climate suicide”.

Meanwhile, it remains to be seen whether other nations will follow the US’s bold example by making similar links between renewable energy investment and inflation reduction. Already in the UK there has been a backlash among right-wing outlets such as the Telegraph, with comment pieces arguing that the act will fail to reduce inflation.

Still, the impossible has now become possible again in US politics – or at least, it has brought climate goals within reach, both inside America and beyond. As the Nasa climatologist Gavin Schmidt put it, for the US “finally the global embarrassment is over”.

[See also: Don’t listen to the climate doomists]