Solar panel farm with assembly technician. Prelude to a plethora of clean energy projects and employment enabled by the IRA.
credit: Oregon Dept of Transportation, via Flickr CC license

How the Inflation Reduction Act in the United States Will Impact International Climate Diplomacy

On August 16, President Biden signed the Inflation Reduction Act into law. This legislation is a $750 billion dollar health, tax and climate bill. Indeed, the Inflation Reduction Act is the single most significant climate legislation ever passed in the United States.

So what impact will this legislation have internationally, including in ongoing international climate diplomacy?

In this episode, we are joined by Casey Katims, executive director of the US Climate Alliance, a coalition of US Governors representing states that account for over half the US population.

We kick off by discussing several of the key climate related provisioning included in the Inflation Reduction Act. We then discuss how this new legislation may impact diplomacy, including at a key international climate summit, known as COP27, which is being held in Egypt in November. We also discuss the unique roll that US states can play on climate related issues–something that was underscored recently when California announced that it would be phasing out the sale of gasoline powered cars.

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Transcript slightly edited for clarity

What is the Inflation Reduction Act?

Casey Katims [00:00:00] I think that the Inflation Reduction Act really allows the United States to walk onto the global stage at COP27 with an air of credibility. The Inflation Reduction Act is a really significant investment in transitioning our economy to a clean energy economy and accelerating action across the United States in tackling and confronting the climate crisis. It is the single largest investment in climate action that the United States has ever made and it’s really an investment in our future. It includes $369 billion in climate provisions and modelers suggest that it will reduce emissions by around 40% by 2030 and curb climate damages by around $1.9 trillion. So, the package is really nothing short of historic and really significant. And there’s going to be a lot of positive outcomes from the Climate Provisions of the Inflation Reduction Act, both on a macro level and on a micro level. Some of the key investments in the Inflation Reduction Act for climate includes expanded access to clean energy by making a number of clean energy tax credits more accessible and extending them by ten years. It includes $315 million for air monitoring so that communities know what’s in the air that they breathe. It includes 30% tax credit for installing solar panels on residences. It helps consumers purchase electric vehicles and decarbonize transportation, and that includes a tax credit for both new electric vehicles and used electric vehicles. It provides up to $14,000 for homeowners to make their homes more energy efficient, including up to $8,000 for them to install a heat pump. It provides billions of dollars for the US Postal Service to electrify its fleet, which is the largest government fleet in the nation. It includes $1,000,000,000 for clean school and transit busses, garbage trucks and other heavy-duty vehicles, which is a really critical investment in supporting communities that are overburdened and underserved. And it includes $60 billion for manufacturing solar panels, batteries, and other clean energy technologies in the US, which we know are going to create jobs and increase our country’s energy security.

Does the Inflation Reduction Act get the United States close to its pledged amount of carbon emission reduction?

Mark L. Goldberg [00:05:08] And you mentioned that taken together, modelers suggest that the climate provisions included in the Inflation Reduction Act would reduce emissions from the United States by 40% by 2030. How does that compare to agreements or pledges made under the Paris Agreement and other previous pledges made by the US government in the past?

Casey Katims [00:05:37] So the Biden administration has made a commitment under its NDC or nationally determined contribution to reduce emissions by 2030 by 50 to 52%.

Mark L. Goldberg [00:05:49] The NDC, the nationally determined contribution, is what under the Paris Agreement, each individual country pledges to bring to the table to do their own part based on their own national contexts, to take on the climate crisis.

Casey Katims [00:06:04] Absolutely, and so the Biden administration is committed to reducing its emissions by 50 to 52% by 2030. That’s not sort of the full commitment of how we get to full decarbonization by mid-century, but it’s a near-term target by the end of the decade that we need to halve our emissions in order to make sure that we’re on path to reaching net zero by mid-century. And so, what this package does is it provides us a pathway for that target to be within striking distance. It’s not all of the way there. There’s still that additional 10 to 12% that we can expect that we’re going to need to close that gap in order to meet that contribution of 50 to 52% by 2030. And it’s also not assured, right? That is what modelers are predicting, but what we have to do is really capitalize on the promise of the Inflation Reduction Act and all sort of roll up our sleeves together, and so that means local governments, state governments and the federal government in the United States all working together in order to really maximize the emissions reduction potential of the package. You know, the modelers suggest that 40% is sort of roughly the number that folks are using, but if you look at the modelers, they’re predicting it could be somewhere between 37 and 44%. And so, there’s a lot of unpredictability in what those models account for and what we know at the US Climate Alliance is the work that state, local and federal leaders do over the next few years are going to be really critical to really maximizing the emissions reduction potential of the package. So, I think that it’s a really significant package in that it puts that target within striking distance. Without it, we would have been in a really challenging way to really reach that 50 to 52% mark. I think we’ve got our work cut out for us in terms of both closing the remaining gap that we’ve got and maximizing the potential of the package.

What is COP27?

Mark L. Goldberg [00:07:59] So the Inflation Reduction Act comes at a potentially opportune time. In just a few months from now, in early November, the world will gather in Sharm el-Sheikh for the latest round of high stakes, high level international climate diplomacy in what is known as the Conference of Party COP27. For those who don’t follow this quite as closely as you or even I, can you explain what is COP27? Why is it significant? And then I’ll ask you about the implications of this new U.S. climate initiative to the diplomacy that will unfold in Egypt in early November. But first, what is COP27?

Casey Katims [00:08:46] COP is really important as a stage for nations to come together and influence the actions that we’re taking at home and in partnership with our fellow nations to confront the climate crisis. Obviously, COP21 back in 2015 is where the Paris Agreement was first developed and provided the framework that sort of underpins what the US Climate Alliance is. And so, it is a really critical venue on the international stage. COP27 will be in Sharm el-Sheikh, Egypt. It’s going to be focused on a few important themes, including mitigation, adaptation, financing, collaboration, under sort of this collective banner of implementation, focusing on how we are actually doing the work to reach the targets that all of our governments have set out to meet. It’s going to be a really critical opportunity for the United States to show up on the international stage, for the Biden administration and their sort of fellow national partners from countries around the world to report in on the steps that they’ve taken in the previous year and what steps are going to be taken in the years to come to reach the targets that we’ve all set out together.

What is the importance of the United States government passing the Inflation Reduction Act right before COP27?

Mark L. Goldberg [00:09:55] So what impact do you foresee this new U.S. climate legislation having, if any, on the contours of diplomacy at COP27 in early November?

Casey Katims [00:10:09] I think that the Inflation Reduction Act really allows the United States to walk onto the global stage at COP27 with an air of credibility that we have set out really ambitious targets for reducing our emissions and cutting them in half by the end of the decade. And I think what the Inflation Reduction Act does is it allows the Biden administration and it allows governors and mayors and other subnational actors to walk onto that global stage with a very clear picture about the new tools, the new resources that we’ve got at our disposal in order to do the work of getting to that 2030 target and really making sure that our international partners understand that we are serious about the work that we’re doing and that we’ve got this new modeling and this new analysis to suggest that we are putting ourselves on a pathway to reaching that target by 2030. And so, I think that you’re absolutely right that it comes at a critical moment for the United States. I think that it comes at a critical moment for the global community, and it enables the United States to both demonstrate the credibility of the commitment that President Biden has made. And it enables us to speak with credibility when we are asking and urging our fellow international partners to do their part as well. You know, that’s one of the things that the president and the Biden administration have really focused on is raising the ambition of our international partners, making sure that everyone is coming to the table to confront the crisis that we believe poses an existential threat to humanity, and to demonstrate that we’re doing our part and to ask our fellow partners around the world to do their part as well.

Does the Inflation Reduction Act include plans for climate financing and mitigation?

Mark L. Goldberg [00:11:52] You mentioned earlier that some of the key themes at COP27 are going to be things like mitigation or financing, which, necessarily in the realm of American politics requires less of a wholesale domestic investment in the U.S. energy transition, which the Inflation Reduction Act does, and more a sort of foreign aid, helping other countries manage their own transitions. Is there anything in the Inflation Reduction Act that speaks to financing or mitigation, or are we going to have to wait for other announcements from the Biden administration to that end?

Casey Katims [00:12:35] You know, one of the key provisions in the Inflation Reduction Act is this $27 billion pot of money that is commonly referred to as a green bank, but it provides $27 billion for states and other entities to deploy zero emission technologies and reduce climate pollution in disadvantaged communities through this new greenhouse gas reduction fund. And so, the Green Bank financing provided through the Inflation Reduction Act is actually a really critical tool that will enable state, local and other leaders across the country to leverage federal funding to secure additional financing on top of what is provided in the bill. And so, I actually think that there’s a very novel concept and a really important pot of money in the Inflation Reduction Act that demonstrates the role of financing and the role of deployment for these zero emission technologies with obviously a very important focus on justice and equity and serving those communities that have been overburdened and underserved. There is that $27 billion pot of money that I think demonstrates on the international stage the work and the role that financing can play in confronting the climate crisis.

Mark L. Goldberg [00:13:43] But it’s not like additional international financing. It’s more of a novel model for doing climate financing, though, applied here in the United States, correct?

Casey Katims [00:13:53] Yeah, it’s a $27 billion pot of money that is deployed domestically.

How important are US states at COP27?

Mark L. Goldberg [00:13:57] That actually leads me nicely into my next set of questions. I was interested in speaking with you specifically because you lead a coalition of U.S. states that are committed to climate action to the Paris Agreement, even as under the previous administration, the U.S. federal government opted out. What role do states play in international forums such as COP27 specifically or more broadly in international climate diplomacy?

Casey Katims [00:14:30] So the U.S. Climate Alliance is a coalition of US governors who came together in the face of the Trump administration announcing its intent to withdraw from the Paris climate agreement, to send an important signal to the global community that states and governors were going to continue to push forward and stay committed to the goals of the Paris climate agreement in reducing our emissions and confronting the climate crisis despite what was happening at the federal level at the time. And during the Trump administration, the Climate Alliance played a really important role of demonstrating durability and sustainability of U.S. climate action in the face of significant uncertainty at the federal level. We are obviously in a very different position right now where we’ve got President Biden, who is committed to confronting the climate crisis, ran on confronting the climate crisis and has delivered the single largest investment in climate action in US history, but governors and states still have a really important role in delivering on our emissions reduction goals here in the United States because of the unique system of federalism that we have in the United States, where the US Constitution delegated some powers to the federal government, but a significant number of powers that are vested at the state level and states and governors continue to have primacy over a number of really critical climate areas like transportation and the power sector. And so, on the international stage, our governors come to COP27 and other international forums to demonstrate that we’re going to continue to use our authority that we have vested at the state level in decarbonizing our economies across sectors in partnership and collaboration with the Biden administration. And it’s been really wonderful to see that the Biden administration shares that sort of commitment to collaboration and partnership in their national climate strategy that they present on the international stage. The Biden administration themselves speak to the critical role that governors and states will play in reaching our 2030 targets and beyond. And so, on the international stage, what we will present is a united front, governors, and the Biden administration, standing together with this really strong, durable, interconnected national climate framework, demonstrating that you’ve got all levels of government in the United States committed to working together to meet our goals.

What is the international impact of California committing to phase out the sale of gasoline cars by 2035?

Mark L. Goldberg [00:16:56] Yeah, I think the role of states was underscored really dramatically recently with California announcing that it is phasing out the sale of gasoline cars by something like 2035. And, you know, California ever since Brexit has an economy larger than the United Kingdom. So, this is like a big deal and something that is hugely, I think, significant overall, but I often wonder if in international forums it’s appreciated the degree to which power is delegated to states in the United States.

Casey Katims [00:17:36] Yeah. I mean, I think we share the belief that there is more education to do on the international stage about how critical it is for states to continue pushing the ball forward and the example you pointed out is exactly right. You know, California adopting their sort of latest targets for decarbonizing transportation is a really fabulous example of the significant impact that state climate action has in the United States.

Mark L. Goldberg [00:18:00] And this is California, they have like 12 lane highways.

Casey Katims [00:18:04] But importantly, they also have authority under the Clean Air Act that is embedded in statute at the federal level that enables them to set more stringent requirements than the federal government. And that same provision of the Clean Air Act in the United States allows other states to follow California’s lead rather than the federal government’s lead. And so, California’s impact is not only vested in the size of their own population and the size of their own economy, but in their legal authority to lead the way in partnership with other states. And so, in our alliance, we have 17 governors in the alliance who have already adopted all or parts of California’s last Clean Cars program. Six have adopted their advanced clean trucks rule and we’ve already seen a number of states announce their intent to follow California’s latest step. And so, again, the impact of states in confronting the climate crisis, using the tools that they have at the state level cannot be understated.

What impact has the US Climate Alliance had on state-by-state climate action?

Mark L. Goldberg [00:19:00] I guess, lastly, are there any other examples of actions taken at the state level that you think deserve broader international recognition?

Casey Katims [00:19:10] I have probably more examples than we’ll have time for on this podcast, but I’ll name just a few. So, in Washington State, they are moving forward with updating their energy code to restrict natural gas use in heating commercial buildings, which is a pretty novel step. In just the last few weeks, we’ve seen states putting forward ambitious goals and standards that advance climate action across several sectors and Massachusetts is one of those. Massachusetts just signed into law a bill that looks at renewable energy, transportation, and buildings, and of particular note, it shows how states can empower other levels of government to enact their own actions. And what Massachusetts’s bill does is it allows cities and localities in the state to remove fossil fuels from construction projects. Again, a pretty novel step that they took. Louisiana, among other states, has advanced climate provisions through executive order, so demonstrating what governors can do on their own. And in 2020, Governor Edwards in Louisiana created their Climate Initiatives Task Force through executive order, and the same task force has now unanimously approved the Gulf South’s first state climate action plan, setting Louisiana on a path towards net zero by 2050, which is significant because Louisiana is in a region where there are a lot of states that are not necessarily taking those kinds of actions. Those are honestly just a few examples, but across our huge coalition, we’ve got 23 states who have set economy wide greenhouse gas goals. We have 14 states that have net zero greenhouse gas emission goals. We’ve got 22 states with renewable portfolio standards, we have 18 states that have set 100% clean electricity goals and the list goes on. So, you know, the ways that states can move forward are innumerable and our governors really are leading the way.

Mark L. Goldberg [00:20:56] Casey, we’ll have to leave it there. Thank you so much for your time.

Casey Katims [00:20:59] Thank you so much. I appreciate it.

Mark L. Goldberg [00:21:08] Thank you for listening to Global Dispatches. Our show is produced by me, Mark Leon Goldberg, and edited and mixed by Levi Sharp.