The most awaited Climate Change Bill 2022 with the U.S. House is expected to pass Friday. Climate scientists have been warning the world regarding the consequences of emissions by 2050.
The Inflation Reduction Act of 2022 is a clear environmental victory, with America’s biggest ever investment in clean air and energy, at nearly $400 billion. However, it is not yet clear how much money will be spent on reducing carbon emissions, and the results are less certain than some claim.
Estimates show that proposed tax credits, grants, and loans could reduce emissions by up to 1 billion tons per year by 2030. Numerous studies show that the United States could reduce its electricity emissions in greenhouses up to 40% compared to the peak of 2005.
The model aggregated this 40% reduction into a general estimate, but some researchers said the tax credit could have an uncertain impact and predict the future. The emission reduction front is difficult. One of the reasons for the uncertainty is that, because the law is based on financial incentives rather than rights or obligations, its effect depends on consumer choice and judgment. Both are unpredictable.
Most of the reduction in emissions is expected to come from the energy industry, for example, as the law incentivizes companies to produce more renewable energy. However, regional opposition to innovation and other clean energy challenges such as solar and wind power plants have stalled progress, which could hamper investment and delivery is slow.
Tax credits are the foundation of the Inflation Reduction Act’s strategy to reduce greenhouse gas emissions. Some tax credits included in the index are intended for individuals. There are approximately $35 billion in deductions for those looking to upgrade and power their homes, a $7,500 deduction for buying a new electric vehicle, and a $4,000 deduction for a used vehicle. . But the number of people who decide to buy this car will depend on the health of the company, the quality of the product and what they think about it.
Companies looking to produce clean energy can choose between production and investment tax credits. Tax-free startups can still get their tax credits because they can sell their tax credits to other companies that have them.
Other tax credits are intended for companies and public services that produce clean energy. That’s an impressive $160 billion, including services designed to keep nuclear power plants running.
These scores come in two forms. The capital tax credit is calculated as part of the initial investment to build the project, starting at 30%. If the plant costs $1 billion, the builder gets a credit of $300 million. The production tax, on the other hand, is based on the amount of electricity produced and pays two cents per kilowatt hour of electricity produced.
The Brilliant $500 billion + U.S. Climate Change Plan
Karen Palmer, energy finance expert, Resource for the Future, said energy tax credits were a long-standing concept. Wind and solar projects have been eligible for credit for years, and funding has been provided to help these technologies succeed. . The new law expands these credits to include other clean technologies.
The logic of the tax deduction is simple. “If we make clean energy cheaper, people will create more of it.
Will it reduce Emission
Economists agree that the new tax will reduce emissions. The question is how much. Initial estimates come from three major modeling groups: Princeton’s Project REPEAT, Rhodium Group, and Energy Innovation. Everyone agrees that the new law should help the United States reduce its emissions by 40% by 2030.
According to estimates by the REPEAT group, almost 40% of the reduction in emissions resulting from this measure will come from electricity, which is fueled by a large clean energy tax. The group estimates an additional 30% for transport and 15% for heavy industry.
Not all increases in demand are due to legal reasons. The United States now emits approximately 15% less than in 2005, and with the passage of pre-clearance laws, the United States is already on track to reduce its 2005 levels by 25% by the end of the decade. And economists are quick to point out that while the model can provide a general indication of how policies will alter emissions in the future, there are ways the situation could change.
In a report released last year, the Rhodium Group said the United States wanted to reduce emissions by 17-30% by 2030. In a report released in June this year, estimates rose by about 24-35%.
This is a common problem with consumer tax credits such as electric vehicles or home electric upgrades. Most people don’t have the information or the money they need to take advantage of tax credits.
Likewise, there is no guarantee that electronic devices will have the desired effect on the model. Finding a new energy source and obtaining a license can be difficult and can affect success. Some of that friction is reflected in the model, Orvis says. However, there are always more potential problems than the standards require.
The difference in the pattern is not happening because of the new laws in particular, but because of the increase in fossil fuel prices after Russia’s attack on Ukraine and how the US government started to address concerns about finances, said Ben King, managing director of Rhodium. . Security and power of the group. Anything that changes the price of fossil fuels will affect our emissions forecast. Human judgment can also lead to biases between norms and reality. “People don’t necessarily do the cheapest thing on paper,” said Robbie Orvis, director of the Energy Policy Solutions program at Energy Innovation.
Additional Climate Change Act Protection
Giving too much weight to model results can be problematic, says James Bushnell, an economist at the University of California, Davis. For example, the model may overestimate the change in behavior resulting from the tax reduction. Bushnell said some of the projects requiring taxpayer money will also be built. In particular, solar and wind installations are becoming more widespread and cheaper to build.
However, whether or not the bill meets the required standards, it is a step in providing climate incentives as it replaces solar and wind credits with clean scores that will be easily modified so that producers choose to continue. technology to deploy.
Another advantage of this measure is the long-term investment that it cannot completely affect in the business model. This measure includes funding for research and development of new technologies such as direct air capture and clean hydrogen. The technology is not yet proven, but if it proves to be good and practical, it could have a big impact on emissions for years to come.
Regardless of laws to reduce inflation, it is clear that additional climate protection is still needed to meet the emissions target in 2030 and beyond. Indeed, even if the model estimates are correct, the measure is still not enough to meet the goals of the Paris Agreement, which sets the United States to reduce its carbon emissions by half compared to the levels of 2005 by 2030.
The path forward for US security action is not as clear as some had expected. But the law to reduce inflation was a big step for the country. How big it is still an open question