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In News
- Recently, the U.S. Senate approved a Bill titled the Inflation Reduction Act (IRA) 2022.
Key Highlights
- About:
- IRA has a special focus on climate, healthcare, and tax provisions to address inflation.
- Aim:
- The Bill marks the largest American investment aimed toward making the U.S. a leader in clean energy.
- To bolster the domestic production of heat pumps and critical minerals.
- More investments in fossil fuels.
Climate change provisions
- It includes packages worth $369 billion for the clean energy transition.
- It provides a tax deduction to low and middle-income households to go electric and seeks to lower the energy bills of American households.
- For disadvantaged low-income communities and tribal communities, the Bill provides funding to benefit from zero-emission technologies which reduce greenhouse gas emissions, enhance climate resilience, and mitigate risks from extreme heat.
- Significant investment in renewable energy through heavy tax credits for wind and solar energy projects and electric vehicles.
- The Bill imposes a tax on the largest and most profitable companies in order that they pay their fair share, without levying any taxes on households with income less than $40,000 per annum.
- It also imposes a fee on methane leaks from oil and gas drilling.
- It seeks to expand oil and gas drilling, with the federal government offering land for onshore and offshore drilling as a prerequisite for developing renewable energy. Thus, it handcuffs the expansion of oil and gas with renewable energy development.
Reason for US to invest in addressing climate change
- The U.S is currently facing extreme climate threats.
- This includes heatwaves, wildfires, cyclones, floods, and hurricanes that have become frequent and intense in the past few years.
- The ongoing floods in Kentucky triggered by heavy rainfall and the wildfires in California induced by dry lightning have become a major concern for the country.
- There is a link between extreme weather events and climate change.
- President Joe Biden has also undertaken certain climate commitments.
- In 2021, he committed to the new ambitious target of cutting emissions by 50-52% below 2005 levels by 2030 and signed a new methane deal to curb methane emissions from the oil and gas industry.
- The previously proposed Build Back Better plan was a multi-trillion deal with key provisions for climate change.
- In May 2022, the Biden administration revoked the Alaska oil and gas drilling lease sales in the backdrop of soaring fuel prices, a move that is consistent with its climate commitment.
- The U.S. aims to achieve its climate targets through the Bill:
- It will help the nation get closer to its climate target of reducing 50-52% emissions below 2005 levels by 2030.
- The investments in the Bill could reduce greenhouse gas emissions by 31 to 44% by 2030.
- The Bill can help the U.S. compete with China in terms of renewable production as China is a leading producer of solar energy.
- It can also facilitate the creation of domestic jobs.
- Issues in the Bill:
- It does not address any issues of global climate finance which is a major impediment to global climate action.
- It is a mere step toward achieving the climate target agreed upon in the Paris Agreement, where Article 2 states global temperature should be limited below 2°C.
Similar Climate Package by other Countries
- In May 2022, Japan announced its ‘Invest in Kisida’ plan which aims for a $1.1 trillion investment to bolster the Japanese economy.
- As part of the plan, the country aims to transition to clean energy and achieve 46% reduction in greenhouse gas emissions by 2030.
- In June 2021, the European Union (EU) proposed a similar ‘Fit for 55’ plan to reduce emissions by 55% by 2030.
- The plan is expected to become law soon. Being the largest emitters, both the U.S. and the EU can play a significant role in taking responsibility for historical emissions.
Way Ahead
- The Bill can prove to be a turning point for global climate action as the U.S. is one of the largest emitters of greenhouse gases globally.
- Even though the Bill is not enough to address the climate crisis, such historic initiatives by global leaders in greenhouse gas emissions can be a benchmark for other large emitters to push their climate action programmes.
Source: TH
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