President Biden's Inflation Reduction Act

The Inflation Reduction Act of 2022 aims to raise $740 billion to curb inflation by reducing the deficit, lowering prescription drug prices, and promoting clean energy. The bill, passed on August 16, 2022, was an amendment to the Build Back Better Act.

The law will authorize nearly $375 billion in spending on energy and climate change, $300 billion in deficit reduction, three years of Affordable Care Act subsidies, and reformed prescribed drugs at lower prices.

President Biden had a challenging start, plagued by the chaotic withdrawal of US troops from Afghanistan, stubborn COVID-19, and the highest inflation in more than 40 years. Aside from these issues, President Biden must deal with the ongoing battle against climate change, like everyone else.

Inflation Reduction Act

Climate Crisis: The proposed bill would devote around $375 billion over ten years to reducing global warming, including funding research on environmentally friendly jet fuel through a competitive grant scheme and an allocation of $60 billion in subsidies for clean energy projects.

Tax credits are available for solar, wind energy, and electric vehicles (EVs) purchases. Other projects include reducing the costs of floating offshore wind by at least 70% by 2035, Cleaner Industry & Construction Materials, and Climate-Smart Agriculture to support projects and farms and eliminate over 50 million metric tons worth of greenhouse gas (GHG) emissions. Similar support will be available for energy-efficient home improvements.

Medical Drugs: The legislation would bargain with drug firms over the cost of prescribed medications, saving the federal government $288 billion over the next ten years. This includes bargaining lower prices for some prescriptions through its Medicare health insurance program for people over the age of 65.

Health Insurance: Americans who buy health insurance on their own would be allowed to continue receiving the subsidies that were introduced during the COVID pandemic, and were scheduled to expire this year. The new proposal would extend the support for a further three years.

Effectiveness of the Act

Biden plans to invest in smart infrastructure to rebuild the country and guarantee that buildings, water, transportation, and energy infrastructure can endure the effects of climate change. According to the Congressional Budget Office, this will save hundreds of billions of dollars over the next decade. Each of these dollars can be used to prevent, reduce, and withstand the effects of climate change.

Biden’s plan will be paid for by reversing the excesses of Trump's corporate tax cuts, lowering benefits for tax havens, evasion, and outsourcing, trying to ensure corporations pay their fair share, breaking other vulnerabilities in the US tax code that reward wealth rather than work, and eliminating fossil fuel subsidies.

Biden has referred to his bill as a Clean Energy Revolution, to make the US the leader in addressing the climate emergency by linking the relationship between the environment and the economy.

People are assuming that this is the same as the Paris Agreement, to which Biden has responded by saying that this bill will take things much further than the Paris Agreement. Biden's bill ensures that the US achieves a 100% clean energy economy by making a historic investment in clean energy research and innovation.

The climate bill is estimated to reduce the US's GHG by approximately 1.1 billion tons by 2030. By the end of the decade, the country will have produced approximately 1.26 billion tons less carbon pollution than it otherwise would have with no climate change law. According to the Energy Department's analysis, with the new law in place by 2030, the US's GHG emissions would be approximately 40% lower than in 2005. However, it is still not on track to meet the country's target of reducing GHG emissions by 50-52% by that time.

Under the new scheme, very few EVs will be eligible for the full $7,500 subsidy right away, as it will only be available for vehicles whose batteries are primarily manufactured in North America and where a certain percentage of minerals are mined and processed in the US or one of its allies. However, the idea is that by increasing domestic EVs production, batteries will become abundant and less expensive.

While the bill is a fraction of the massive package Biden tried and failed to get through Congress, it was envisioned as a success that Democrats now presume will fuel a comeback at the polls later this year.

As one of the world's economic leaders, the US has a responsibility and economic interest to devise a strategy to prepare for, confront, and combat climate change. President Biden will surely not step back from wanting to do everything in his power to tackle climate change urgently.

Besides, Biden has previously stated that he will not accept contributions from corporations or executives in the oil, gas, and coal industries. That must be seen, though. For now, his administration has recently launched CleanEnergy.gov— a website that helps families learn how the Inflation Reduction Act can save them money on more energy-efficient appliances.

Summary

• This week, at the 77th General Assembly of the United Nations, President Biden said, "We don't have much time."
• Last week, he welcomed thousands of guests to the White House to celebrate the passage of the Inflation Reduction Act
• The bill was introduced as an amendment to the Build Back Better Act
• New Act plans to build a clean energy future, lower energy costs, and address the climate crisis