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Inflation Reduction Act accelerates efforts to decarbonize the economy and address climate change


If enacted in the coming days, the recently announced Inflation Reduction Act (IRA) could be the most significant step the U.S. has taken to mitigate the worst effects of climate change.  In a joint statement, Senators Joe Manchin and Majority Leader Charles Schumer claimed the IRA would “fight inflation, invest in domestic energy production and manufacturing, and reduce carbon emissions by roughly 40 percent by 2030.”  The IRA’s primary mechanism for achieving this goal is the allocation of $369 billion to support energy production and reduce greenhouse gas emissions. 

A recent analysis by the Rhodium Group largely confirms the claims of Senators Manchin and Schumer, noting that the law “can cut US net greenhouse gas emissions down to 31% to 44% below 2005 levels in 2030 compared to 24% to 35% under current policy.”  If these projections hold, the IRA would constitute a sizable down payment towards meeting the United States nationally determined contributions (“NDCs”) under the Paris Agreement, pushing the country much closer to meeting President Biden’s goal of cutting greenhouse gas emissions 50-52 percent from 2005 levels by 2030. 

To put the significance of the Rhodium Group’s findings in context, the IRA would ensure that even under worst-case background scenarios, the U.S. would reduce emissions at levels comparable to the best-case alternatives on the countries current trajectory.  This legislative development, and the resulting emissions reductions, would be a welcome development for global climate policy in a time of growing obstacles to progress.  In 2021, the International Energy Agency found that global carbon dioxide emissions hit their highest level in record history as coal use-increased during economic recoveries from the Covid-19 pandemic.  And, in 2022, with the Russian invasion of Ukraine, Europe is increasingly turning to coal to counter natural gas shortages caused by the war.  With this backdrop, the U.S. Supreme Court in late June announced a decision that limited the tools available to the U.S. Environmental Protection Agency to regulate greenhouse gases from electric power plants, which in turn put in question the viability of other regulatory options to reduce carbon emissions.  See W. Virginia v. Env’t Prot. Agency, 142 S. Ct. 2587 (2022).  In this environment, the IRA is a notable counterweight by enabling a serious reduction in domestic greenhouse gas emissions.  

So what is actually in the IRA? A summary released by Senate Democrats segments the energy and climate provisions into five key sections: (1) provisions to lower energy costs through consumer rebates, tax credits and grants; (2) financial assistances in the form of loans, tax credits and grants to promote domestic energy production and advanced manufacturing; (3) investments to reduce emissions from a host of high-emitting sectors, with a particular focus on electricity production, transportation, industrial manufacturing, buildings, and agriculture; (4) promoting equity and environmental justice by targeting emissions-reducing investments in historically disadvantaged communities; and (5) investments in rural communities to promote climate-smart agricultural practices, wildfire resilient forests, and sustainable biofuels.

We are analyzing the over 700 pages of legislative text in detail, and have provided additional information on key sections in the following blog posts:


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