When US President Joe Biden launched the $369bn Inflation Reduction Act in 2022, it left the rest of the world blinking in surprise. Never mind that the acronym IRA is the same as that used (separately) for an Irish terrorist group and a popular type of American investment fund. And ignore the fact that the bill has little to do with inflation.
What really caused shock — and anger — was that the president’s flagship climate law appeared out of the blue and seemed unfriendly to America’s allies. Most notably, the subsidies it offers for green energy exclude some of America’s “friends” such as the EU and South Korea.
Fast forward two years, however, and the IRA has become a symbol of both the best and worst of American climate policy — and the uncertainties that lie ahead given the victory of Donald Trump in this year’s election and his pledge to roll back parts of the bill.
On the positive side of the ledger, these subsidies have unleashed an astonishing boom in investment in green technologies. Indeed, Heather Boushey, a member of the Biden administration’s Economic Council of Advisers, says the surge in manufacturing investment is the most dramatic seen for at least four decades.
And the majority of this investment is now occurring in red — not blue — states, ie those that might be expected to be sceptical about climate change policies and have just voted for Trump. Some of those states often have looser building and employment regulations, making it easier to start investment projects there.
The other factor, Boushey notes, is that the IRA was deliberately designed to incentivise green investment in areas that were deindustrialising and/or deprived — and those areas tend to lean more towards Trump.
Better still, the IRA has also unleashed private capital fundraising, and thrown down the gauntlet to other regions of the world. The EU has been scrambling to deliver investment incentives of its own, mindful that it risks losing private investment to America. So, too, has South Korea.
However, the bad news about the IRA is that its arrival has intensified a right-wing backlash against climate policies, as epitomised by the rhetoric about the loss of jobs in legacy industries that has emanated from the Trump campaign. And, while the red state investment boom leaves many Republican governors determined to protect the IRA programme, those right-wing forces are swelling in confidence.
Meanwhile, irrespective of Biden’s climate goals, he has presided over a continued expansion of the fossil fuel industry. More permits for the development of oil and gasfields have been granted during the Biden era than during the previous Trump administration.
Many people, myself included, used to assume that climate policy would be an opportunity for geopolitical collaboration. But, during the Biden administration, it has turned into an area of increasing geostrategic competition, instead. Most notably, the Chinese government has seized effective control over the processing of key minerals needed for green technology, and grabbed a lead in the production of items such as solar panels and electric vehicles.
The Trump administration is threatening to take a tough line on this, slapping tariffs on Chinese imports. But China is so far ahead of the curve that America seems unlikely to catch up anytime soon. Washington now faces a nasty choice: it can either go green rapidly and cheaply by using Chinese tech, or it can forge its own path with more cost and delay. Either way, the political mood has become poisonous, and unlikely to deliver the emissions reduction that the world so badly needs.
An optimist might argue that these have been merely small setbacks on a path towards progress. After all, the IRA has demonstrated that climate policy is now at the centre of the Washington debate, arguably for the first time in American history.
Even with Trump as president, it will be very hard for right-wing forces to put this genie back in the bottle anytime soon, given private sector activity. Elon Musk, for example — a key Trump supporter — is unlikely to stop making electric cars.
Also, during the first Trump presidency, many companies and municipal governments forged ahead with their own climate change plans, irrespective of federal policymaking. This is likely to continue, especially as changes to accounting systems, such as those in Europe and California, are forcing large companies to report their emissions footprint, regardless of what the US Securities and Exchange Commission might (or might not) do.
But a pessimist would say that simply moving forward is not enough; the climate is changing so rapidly — as shown by recent extreme weather events — that policymaking needs to move at lightning speed to keep global warming in check. The most frustrating thing about the debate in the US, to non-American eyes, is that the level of climate scepticism among right-wing voters does not seem to be declining, even following recent weather disasters. Florida, for instance, has recently been battered by typhoons but is one of the most climate-sceptical regions.
Thus, the best forecast for American policymaking around the climate is that it will remain deeply contradictory — if not perverse. Maybe this is just another case where, to cite the adage often attributed to Winston Churchill, America always does the right thing, after trying everything else. But, if it doesn’t, the planet will suffer; there is little time to waste.
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