The United States Senate passed the Inflation Reduction Act yesterday (August 7), the most ambitious climate bill ever adopted in the country.
The bill, which is expected to be signed into law in the coming weeks, allocates US$349B to climate and green energy projects, and could lead to an estimated 40% reduction in the country’s greenhouse gas emissions by 2030 (from a 2005 baseline).
Climate budget distribution
According to Moody’s Analytics, two-thirds of the US$349B will be distributed in the form of federal tax credits that create incentives to produce electricity from clean energy sources, invest in renewable energy technologies, and address climate change through carbon sequestration, renewable fuel production, and clean energy manufacturing. The other one-third includes government funds to support conservation practices that help to mitigate GHG emissions, particularly from agriculture and forestry, and adopt clean energy technologies and energy efficiency in housing.
In reaction to the passing of the bill in the Senate, Francisco Benedito, CEO of ClimateTrade, comments: “The Inflation Reduction Act is a historic opportunity both for the United States and the world. The bill will have a tremendous impact in tackling the climate crisis. It will put the U.S. in a leadership position by taking action and reducing emissions up to 41% and generating over a million additional jobs by 2030. We at ClimateTrade are very excited about this bill and look forward to putting climate front and center for our business community.”
Reducing electricity costs
The bill also aims to reduce the cost of electricity and make the U.S. energy self-sufficient: in the first half of 2022, the rise in gas prices that resulted from the Ukraine-Russia war led to a dramatic increase in electricity prices throughout the U.S., between 13% (in the Southwest region) and 135% (in the New York region), according to the Energy Information Administration.
In total, the bill sets aside US$739B of tax money to make life more affordable for Americans through energy investments and healthcare cost reduction measures. Much of the budget for this reform is expected to come from higher taxes on corporations. The Inflation Reduction Act was supported by all 51 Democrats and opposed by all 50 Republicans in the Senate.
Climate regulations in the U.S.
This is the latest in a series of attempts to regulate climate action in the United States. In March 2022, the Securities and Exchange Commission (SEC) published proposed rules for climate-related risk and greenhouse gas disclosure for listed companies in the country. It then opened a period of public consultation that was due to end in June, and expects to finalize the regulation by the end of this year. The proposed rules include the mandatory reporting of Scope 1, 2 and 3 emissions, as well as any material impacts climate-related risks can have on the company’s business, strategy and outlook, such as physical and regulatory exposures.
ClimateTrade can help you navigate these regulatory changes and support your company’s transition to Net Zero. Get in touch with our experts to discuss your needs.
